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What is Involved in "Closing the Books"

Posted by Protiviti KnowledgeLeader on Wed, Dec 12, 2012 @ 02:57 PM

Leading companies have taken advantage of recent innovations in technology and process design to ease the burden imposed by the financial close and reporting process. Regrettably, many companies continue to rely on inefficient processes plagued by decentralization, aging technology and over reliance on manual activities. The end result includes an extensive close cycle time, inadequate analysis of results, high turnover and costly errors in reporting. Migration to the next plateau of maturity – “closing the books” completely and efficiently – is typically not an easy leap. This is understandable in high-growth scenarios, where already–scarce time is focused on increasing revenues, expanding operations and integrating new business units.

Reluctance to resolve these issues is generally attributed to one or more common culprits – budgetary constraints, cultural adversity to change, and lack of resources. Often left unaddressed – “we’ll focus on the close process after the IPO…” – these issues are heightened with the increasing scrutiny and reporting requirements that come with being a public company. It can easily be carried over into the public environment, escalating the severity of the risks and limiting the ability of finance to focus its time on value-adding activities. 

Our experience shows that significant risk mitigation can be achieved by building (and managing against) a detailed close activity checklist. Pre-IPO and newly public companies have the most to gain, as they can least afford to have a bumpy ride on the road to their first filings.

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