As COVID-19 spreads across the globe, many employees are working remotely to maintain social distancing. However, remote work can present many challenges for the financial close process.
Finance team members need to be equipped with remote work capabilities (laptops, VPNs, video conferencing, etc.) and provided secure access to systems. The dispersion of teams during the pandemic makes close coordination, collaboration, sequencing, and oversight more difficult. Fragmented, highly manual close processes and the rampant use of spreadsheets and other end-user computing (EUC) tools (already an issue before the COVID-19 outbreak), exacerbate the process.
These factors increase the complexity of the financial close process in a remote working environment, reducing the likelihood of completing the close on time and with accuracy. The lack of visibility and transparency into the close ─ dependencies, hand-offs, bottlenecks, and issues ─ will only worsen during this crisis.
Navigating the first virtual close during COVID-19 will require extensive planning to ensure operational continuity. Some considerations include not only equipment provisioning and system access, but also adequate coverage of the close from a capacity and capability standpoint (in the event of personnel absenteeism) and clarity of the close schedule and task assignments.
Today’s crisis will severely test the resilience of the close. We, therefore, recommend finance take the following steps to facilitate the close during COVID-19.
- Realign the close calendar for a remote workforce. Apply a risk-based approach to re-prioritize tasks. Identify the activities that could see delays in the remote working structure and determine how to accelerate those tasks (e.g., book accruals, schedule analysis of error-prone accounts earlier in the close, etc.). Communicate the revised close schedule to finance and relevant stakeholders.
- Restructure the team and clarify roles and responsibilities. Ensure sufficient backup for close activities in the event of employee absenteeism. Follow a risk-based approach to allocate resources based on the risk of balance misstatement. Consider mobilizing a ‘Close PMO/SWAT’ team to manage the close, monitor progress, drive the resolution of data/system access issues, and ensure timely task completion.
- Redefine policies and procedures. Assess the need to apply new internal controls or adjust existing controls if designated reviewers are absent or if the control process cannot be performed. Review journal/adjustment materiality and reconciliation tolerance levels to reduce time spent recording and reviewing immaterial transactions.
Establish daily or twice-daily close meetings. Before COVID-19, we advised our clients to conduct daily close meetings for effective mobilization and communication before, during, and after the close:
A few days before the close: review the close schedule and timeline, issues to consider, follow-up items from the previous month’s close, and changes to be implemented for the upcoming close
During the close: Ensure effective mobilization, as well as communication and resolution of issues and bottlenecks
After the close: Perform a post-mortem evaluation of the close, assessing what worked and troubleshooting what did not. Evaluate actual versus scheduled task completion date/times, and discuss the root cause of delays, bottlenecks, issues, and abnormalities.
The need for frequent close meetings is even more critical during this crisis to foster collaboration and productive dialogue with finance and its stakeholders to ensure problems are quickly resolved.
Surviving the next few months of virtual closes is not the only imperative for finance: finance needs to create readiness and resilience after the pandemic. The upheaval of COVID-19 represents an opportunity to reflect on and enhance the close process, as well as advance automation and digital transformation. Finance teams should look to boost the automation of manual controls, reconciliations, and repetitive, spreadsheet-heavy tasks.
They should also consider leveraging close workflow tools to track the status of the close real-time, ensure the segregation of duties, and promote collaboration, communication, and accountability. Investment in digitalization will drive resiliency in the ‘new normal’ and better position finance for future growth.