Closer to
excellence
The Nordic Closing Excellence
Survey 2015 takes a closer look
at the financial closing processes
of 146 Nordic companies. Find
out what you can do to bring your
company closer to an excellent
financial closing process.
Contents
Welcome4
Executive summary
6
Why focus on Closing Excellence?
10
How fast are the fastest?
12
What does it take to become a high performer?
16
How do high performers manage their financial closing process?
21
How do high performers work with internal controls over
the financial closing process?
29
How have high performers designed the IT setup that
supports the financial closing process?
34
Survey methodology
38
How EY helps clients move closer to excellence
40
High performers spend
five days or less on their
monthly closing process
| Welcome
Welcome
Niels-Jørgen Andersen
Partner
Nordic Head of Process Improvement
Thomas Kühn
Executive Director
Danish Head of Process Improvement
Closing the books is a core task of the finance function in almost all companies.
The monthly management report provides key decision-makers with the
information they need to analyze the performance for the business and make
the right decisions. The financial closing process is therefore vital, not only
because the quality of the management report is crucial, but also because the
process itself often requires use of significant resources.
At EY, our specialized teams have helped numerous companies improve both
the speed and quality of their financial closing process. With this report, it is
our aim to use that experience — combined with the large amount of data that
we have gathered by interviewing 146 large Nordic companies — to contribute
to the continued improvement of the financial closing process in Danish
companies.
Particularly, we wish to draw attention to what it is that high performers do in
order to achieve excellence in their closing process.
We hope you will find the report inspiring and informative.
Henrik Jürgensen
Senior Manager
Closing Excellence Solution Leader
Niels-Jørgen Andersen
4 | Nordic Closing Excellence Survey 2015
Thomas Kühn
Henrik Jürgensen
High performers…
• spend five days or less on their monthly closing process
• produce both internal and external financial reporting of
a higher quality
• are more confident in their own processes and create
higher stakeholder confidence in their financial
reporting
• have gained a detailed understanding of their closing
process and are constantly working to improve it
• have a documented and detailed understanding of
significant processes, enabling them to identify key risks
and mitigating internal controls
• have implemented and continuously monitor a groupwide closing calendar with supporting checklists
• operate a well-functioning shared service center
• have a higher degree of automated processes
• have a higher degree of system integration, and one
standard chart of accounts in place
• implement group-wide materiality thresholds and adopt
a risk-based approach to the closing process
High performers?
Throughout this survey report, we use the term ‘high performers’ to signify the companies with the overall best-inclass performance on their closing processes. Above, you see a list of characteristics of high performers, which gives
an overview of areas that set high performers’ closing processes in a class of their own. These characteristics outline
the basis for building excellent closing processes, which will be elaborated on in the following chapters. The discussion
comprises how high performers manage financial closing processes, internal controls, and the IT setup. For insight into
the methodology behind the collection and analysis of the survey data referred to in this report, see Survey methodology.
This includes a walkthrough of the criteria used to identify the group of high performers.
Executive
summary
| Executive summary
With this publication, EY wishes to establish a baseline for excellence in the
financial closing process. We aim to do this by analyzing the characteristics
of companies that have achieved a fast and efficient closing process while
retaining high quality in the reporting output. The report focuses on three major
areas:
• How high performing companies manage their financial closing process
• How high performing companies work with internal controls over the financial
closing process
• How high performing companies have designed the IT setup that supports the
closing process
Most companies today focus on closing excellence for three reasons:
• To achieve a fast and cost-efficient financial closing process
• To ensure high-quality financial reporting free of material errors
• To free up time for more value adding activities
In fact, this is exactly what the high performers in this survey have been able to
achieve.
Nordic Closing Excellence Survey 2015 | 7
| Executive summary
Main conclusions
High performers spend considerably less time on their
financial closing process. On average, they spend five
working days in total to complete the management report,
which is seven working days less than the population
average. Time that can be spent on more value-adding
activities.
High performers are more confident in their financial
reporting. Some of the reasons are that high performers
have more focus on risk and materiality, a centralized setup
that ensures a group-wide standardized approach, and a
higher degree of automation and system integration.
High performers not only produce higher quality reporting
faster, they also achieve this while spending less resources
on the finance function than the population average. High
performers’ finance function costs account for approxi­
mate­ly 1.2% of their revenue, while the population average
spends 1.4%.
The message is clear — by striving to be a high performer, the reward will
be a closing process that is faster, of higher quality, and more cost-efficient,
resulting in an output which is more value-adding and better aligned with the
company’s strategy.
8 | Nordic Closing Excellence Survey 2015
14 different
industries
146
participants
Denmark | Sweden
Finland | Norway
14
of the companies on the Copenhagen
Nasdaq OMX C20 index
Survey facts
The 146 survey participants range from mid-sized companies to some
of the largest listed groups in the Nordics. Four countries, and 14 different industries
are represented. Among participants are 14 of the companies on
the Copenhagen Nasdaq OMX C20 index.
Revenue (EURm)
Number of reporting entities
Ownership structure
Number of FTEs
12%
12%
35%
41%
43%
52%
48%
24%
64%
53%
16%
<500
500-5,000
>5,000
<15
15-30
>30
Listed
Non-listed
<250
250-1,000
>1,000
Why focus on
Closing Excellence?
| Why focus on Closing Excellence?
When we talk to our clients about the role of the finance function, it is clear
that this has been undergoing significant changes in recent years. The finance
function is expected to be focusing on value-adding, business supporting
activities, while still maintaining high quality in the reported historical figures.
This development has had a profound impact on the financial closing process.
Figure 1.1 Most companies want to spend less time producing
financial reporting and more time analyzing it.
Analysis
Control
Production
Analysis
Control
Production
In our experience, the main purpose of many companies’ financial closing
process has been the production of financial data, i.e. getting the numbers
finalized. The main part of the closing process has been spent on the mechanics
of closing the business units and consolidating the figures from a group
perspective. Financial controllers are actually in many cases deeply involved
in the production of financial data, and we often see group controllers whose
main focus is helping the business units close their books. The value adding
business controlling that provides input into what the numbers say about
the development of the business is often sacrificed, as the finance function
scrambles to finalize the management report on time.
While the finance function is obviously still expected to produce high quality
historical financial data, the development described above has created an everincreasing pressure to expand the scope and quality of the business analysis.
CFOs are expected to provide the business with the ability to understand the
reality underlying the financial figures, explain significant developments, and
help CEOs and other business leaders understand the strategic implications of
changes to the business environment.
This change — as well as constant demands for high quality financial reporting
free of material errors — requires focus on the closing process, because
optimizing this process frees up time and resources from production to analysis
and eliminates the sources of errors in the process.
Nordic Closing Excellence Survey 2015 | 11
How fast are
the fastest?
| How fast are the fastest?
When analyzing the financial closing process, we divide it into four steps in
order to create some structure to the analysis (see Figure 2.1). The four steps
present different challenges to companies. When closing business units,
many companies struggle to ensure a standardized approach. Therefore,
centralization (or the lack thereof) becomes an important issue. The challenges
in connection with consolidation often relate to IT and automation, as well
as low quality reporting from local business units. Preparation of reports –
both internal and external – often relies heavily on manual procedures and is
dependent on key personnel.
Figure 2.1 The phases of the financial closing process
Closing of local
business units
Management report
Consolidation
External report
The difference is quite significant between how quickly the group of high
performers and the rest of the population, respectively, go through the steps.
In the following pages, we discuss how high performers approach the closing
process, but first let us take an overall look at the cycle times.
As is evident from Figure 2.2 on the next page, the average high performer
delivers a finalized management report after approximately five working days.
The process involves closing local business units in three working days, before
spending approximately one working day consolidating, and one working day
preparing the management report. In contrast, the population average spends
a total of 12 working days. A striking observation is that high performers have
finalized their management report well before the population average have
closed their local business units.
Nordic Closing Excellence Survey 2015 | 13
| How fast are the fastest?
Figure 2.2 Monthly reporting
1
2
3
4
5
6
7
8
9 10 11 12 13 14 15 16 17 18 19 20
High performers
Population average
Closing of local business units
Consolidation
Management report
In other words, high performers gain seven working days each month, which
can be spent on forward-looking and more value-adding activities. Furthermore,
high performers get the numbers early, allowing them to react much quicker to
significant developments. In slower reporting companies, we often see the need
to produce ad hoc reports to management, because they need information and
key numbers. This has several undesirable consequences. First, the preparation
of extra reports increases the amount of work and takes resources away from
the full-scope management report as well as other important tasks. Second, the
level of internal controls over ad hoc reports is often lower, resulting in more
errors and less management confidence in the reporting. Third, when the fullscope report arrives, the information is outdated and has lost its relevance.
These trends reveal themselves again when we look at the quarterly and annual
closing process (Figures 2.3 and 2.4):
Figure 2.3 Quarterly reporting
1
2
3
4
5
6
7
8
9 10 11 12 13 14 15 16 17 18 19 20
High performers
Population average
14 | Nordic Closing Excellence Survey 2015
Closing of local business units
Management report
Consolidation
External report
| How fast are the fastest?
Figure 2.4 Annual reporting
1
2
3
4
5
6
7
8
9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40
High performers
High performers
Population average
Population average
Closing of local business units
Consolidation
Management report
External report
In our experience, the main aspect that high performing companies approach
differently is that they manage the closing process more efficiently, whereas
average performing companies have a much more ad hoc and unstructured
approach to closing the books.
High performers:
• know what has to happen — and when — in order for the process to work
• have reduced and eliminated redundant tasks
• have established clear roles and responsibilities
• have analyzed and understood the connection between the process and the IT
setup
• have adopted a risk- and materiality-based approach ensuring that internal
controls are focused on material risks and do not slow down the process
unnecessarily.
The average high performer delivers
a finalized management report after
approximately five working days
Nordic Closing Excellence Survey 2015 | 15
What does it take
to become
a high performer?
| What does it take to become a high performer?
Reporting in five days or less is impressive, but what is it that high performers
have done that enables them to produce management reporting so fast? And is
fast reporting achieved at the expense of quality? We will now turn our attention
to answering these important questions.
The following sections will discuss how high performers have prioritized their
efforts in order to achieve an excellent financial closing process, internal
controls and IT setup. We have analyzed the results and added our extensive
experience from partnering with some of the largest Nordic companies on
developing excellent closing processes.
Nordic Closing Excellence Survey 2015 | 17
High performers spend
1.2% of revenue
on their finance function
…the population average
spends 1.4%
High performers
from EY APQC
Global Benchmark
only spend 0.8%
This is an average
saving of
EUR 5.8 million
every year
| What does it take to become a high performer?
| How do high performers manage their financial closing process?
How do high performers manage
their financial closing process?
In the following section, we
look at how high performers
have designed their closing
process to facilitate fast
reporting while maintaining
high-quality output. We have
analyzed the survey data
from three different angles to
convey an understanding of
some of the key areas that high
performers have addressed:
1.Quality in output
2.Centralization of the
reporting setup
3.Standardization of
processes
Figure 3.1.1 Confidence in
management reporting
Quality in output
Intuitively, it would make sense to think that faster reporting leads to lower
quality. All other things being equal, less time to produce the output means less
time for performing the mechanics of compiling the data, financial controlling
and analysis of the figures. In our experience, however, the correlation is
actually the opposite. The fast reporting companies that we have worked with
over the years tend to have higher quality reporting than their peers. The
survey data supports this, as is evident from figure 3.1.1. Recall that high
performers prepare their management report in seven working days less than
the population average. Nonetheless, they are actually more confident in the
quality of the reporting than the rest of the survey population. So, the survey
data suggests that it is possible to significantly speed up the process and
actually increase quality at the same time — an observation that is completely in
line with what we see when working with our clients.
High performers succeed in producing higher quality in less time through a
number of different measures, but let us start by looking at the contents of the
management report.
Important aspects of reporting quality are reporting content, focus, and scope.
To a larger extent than the population average, high performers have designed
both a management report and an external report (quarterly and annual), which
reflect the strategy and related KPIs of the company, as is evident from figure
3.1.2 on next page.
Best in class
5
4
3
2
1
Worst in class
High performers
Population average
Nordic Closing Excellence Survey 2015 | 21
| What does it take to become a high performer?
| How do high performers manage their financial closing process?
Figure 3.1.2 The degree to which the
companies strategic KPIs are reflected
in the reporting
Management report
Excellent
5
4
3
2
1
Poor
Excellent
5
External report
4
3
In our experience, it is a very common issue that the contents of the
management report have not been aligned with the company’s strategy. This
often leads to the management report missing the mark in terms of delivering
the value that stakeholders require, both because it contains information that
is not strategically significant to management, and because there may be
important information which is not contained in the report.
Not only does this diminish the value of the management report, it also means
that resources and time are spent to produce information that does not bring
sufficient value to management. In our experience, many companies can
benefit substantially from re-designing their management report. Ensuring that
(only) strategically important KPIs are included improves the report’s value
to its readers — and removing non-essential data may drastically diminish the
size and scope of the management report, freeing up time and resources. Our
experience is that many companies produce management reports that contain
too much information, are too unfocused, and simply too large to be of real
value. High performers have to a larger extent addressed this issue, resulting in
higher quality and a more efficient process.
2
1
Poor
High performers
Population average
22 | Nordic Closing Excellence Survey 2015
Centralization of the reporting setup
The benefits of centralizing key processes are many. Centralization provides the
opportunity to develop highly specialized employees, because the transaction
volume at the centralized location is much higher. Centralization also makes it
easier to develop a standardized approach and to effectively roll out standard,
group-wide policies due to the higher degree of control that group finance has
over a centralized process. Finally, centralization often provides cost-saving
opportunities due to economies of scale. In our experience, centralization
actually is an important prerequisite for a fast close, but note that we have also
seen plenty of examples of unsuccessful centralization efforts. If companies are
to reap the benefits inherent in a centralized reporting setup, the process of
centralizing must be carefully planned and executed.
High performers
are more confident
in their financial
reporting
| What does it take to become a high performer?
| How do high performers manage their financial closing process?
Figure 3.1.3 Use of shared service center
100%
52%
High performers
Population average
A common way of achieving centralization is through the establishment of
a shared service center. In our experience, many companies have reaped
significant benefits from a shared service center setup.
One area where high performers differentiate themselves from the population
average is that they — to a much larger extent — have a shared service center
in place (see figure 3.1.3), which manages three or more processes (see figure
3.1.4). Again, the data supports our assumption that operating an efficient
shared service center is an important prerequisite for excellence. In our
experience, efficient and effective use of a shared service center requires the
existence of well-documented processes, continuous evaluation of the quality
of output from the shared service center, and group-wide accounting and
controlling policies.
The processes that are most often managed by a shared service center are
accounts payable, cash, accounts receivable, and intercompany (see figure
3.1.5).
Centralization — along with standardization and automation, both of which are
covered in the following pages — is one of the pillars upon which an excellent
financial closing process can be built. But it is important to understand that
centralizing key processes requires a structured, meticulously planned, and
well-executed approach if it is to succeed.
Figure 3.1.4 Number of processes
managed by shared service center
Figure 3.1.5 Processes managed by financial shared
service center by rank (high performers)
High performers
Population average
>6
Accounts payable
Cash
Accounts receivable
Intercompany
Inventories
3-6
Revenue
Salaries
Controlling
Project accounting
<3
Other
0
20
40
60
80
100
%
24 | Nordic Closing Excellence Survey 2015
0
20
40
60
80
%
100
All high performers
have a shared service
center in place
| What does it take to become a high performer?
| How do high performers manage their financial closing process?
Standardization of processes
Ensuring a standardized execution is integral to achieving excellence in the
closing process. In our experience, the group finance function must assume
ownership of the financial closing process (and other related financial
processes) in order to ensure a group-wide standard quality in the execution.
Lack of standardization leads to numerous issues that stem from inconsistent
application of accounting policies, different views of the level of quality required
in the reporting, lack of consensus regarding materiality levels etc.
In our view, a common, group-wide understanding of the closing process and its
components is essential when companies wish to improve their financial closing
process. A key area lies in developing and continuously maintaining process
documentation in the form of flow charts and process descriptions (an area
covered in the chapter “How do high performers work with internal controls
over the financial closing process?”). Other key areas include creating a high
level overview of the entire process (a group-wide closing calendar), constantly
monitoring progress and ensuring that the process is continuously improved.
As is evident from figure 3.1.6, our survey shows that high performers
generally have a higher degree of standardization of their processes. Most
companies in the survey — both high performers and the population average
— have a standard group-wide chart of accounts in place, with the high
performers scoring a little higher. One standard chart of accounts — at least in
all material entities — lays the groundwork for adopting a standardized approach
and facilitates the application of uniform group accounting policies, and not
least uniform booking of intercompany transactions (minimizing the need for
intercompany reconciliations).
Having a formal checklist of all key tasks in place as well as defining and
communicating materiality levels for the purpose of group reporting are two key
components of an efficient financial closing process. As can be seen from figure
3.1.6, high performers score significantly higher on these two parameters.
26 | Nordic Closing Excellence Survey 2015
| What does it take to become a high performer?
| How do high performers manage their financial closing process?
Figure 3.1.6 Level of standardization in the financial closing process
All reporting entities use
a standard chart of accounts
Standard reporting package
utilized by all reporting entities
Formal closing checklist outlining
the key activities in place
Defined and implemented
materiality levels
%
0
20
40
60
80
100
High performers
Population average
Most companies have checklists, but in our experience, the quality differs
greatly. Knowing which tasks are to be performed by whom — and what the
deadline is — is of course essential. But companies which also know how long the
different tasks are expected to take, when they are to be initiated, and how they
interact with each other are generally in a much better position to close fast and
continuously improve the process. In our experience, many companies struggle
with materiality levels, and as figure 3.1.6 shows, this is one area where high
performers really stand out. Establishing consensus regarding materiality
thresholds ensures that the resources applied to the closing process are spent
on the specific issues that are material, and frees up time to focus on complex
accounting problems, rather than issues of little or no significance.
Ensuring a standardized
execution is integral to achieving
excellence in the closing process
Nordic Closing Excellence Survey 2015 | 27
| What does it take to become a high performer?
| How do high performers manage their financial closing process?
What can you do?
The key to improving your company’s financial closing process without having to spend excessive time and resources lies
in correct scoping of the approach. In our experience, successful improvement projects start with identifying the specific
areas that can yield the greatest benefits — and analyzing the costs (in terms of internal hours, IT upgrades, and external
assistance) associated with identifying and implementing the improvements. Plan the project well, set realistic targets,
and — crucially — focus on involving key players in the financial closing process to ensure that ownership of the solutions
are embedded in the organization.
We have helped numerous clients harvest low-hanging fruits and achieve significant and lasting results through a fourphase approach:
1
2
4
3
Perform rapid assessment. Perform a rapid
assessment of the current state. Focus on areas
that are time-consuming and where errors occur. Use
the rapid assessment to focus your future efforts on
the issues that really matter. In our experience, most
companies can get an overview of their challenges in
a week or less if the approach is planned and executed
well.
Implement improvements. Prepare an
implementation plan that describes what
needs to be done, who is responsible for doing it,
and what the deadlines are. As implementation
unfolds, continuously monitor progress and adjust
the approach when necessary.
28 | Nordic Closing Excellence Survey 2015
Prepare project plan. Based on the rapid
assessment, scope and plan your project.
Focus on low-hanging fruits (i.e. improvements with
a large impact at a low cost). Identify the specific
process owners and other key personnel that need
to be involved in order to identify critical issues and
develop solutions.
Execute plan. Interview process owners and
key personnel to understand current processes
in sufficient detail, get their input on improvement
opportunities, and prioritize these improvements.
Based on the information gathered on current
processes and the planned improvements, design
the future process. When identifying issues, focus
on eliminating redundant tasks, moving nonvalue-adding tasks out of the closing process,
implementing materiality thresholds, and making
better use of the existing IT setup.
| What does it take to become a high performer?
| How do high performers work with internal controls over the financial closing process?
How do high performers work
with internal controls over the
financial closing process?
A solid internal control
environment not only leads
to more confidence in the
numbers, but also implies
less time spent to get there.
A highly automated internal
control environment with a
predominance of preventive
controls is strived for by many
companies.
The overall conclusion based on the survey results is that there is plenty of
room for improvement within the internal controls environment. Especially
when it comes to automated controls supported by IT systems, as well as the
degree of preventive controls, all participants — including high performers —
have great potential for improvement.
Figure 3.2.1 Companies with detailed
process descriptions and flowcharts
Figure 3.2.2 Frequency of companies’ review of their process descriptions
and flowcharts in place
The survey shows that high performers more often have detailed process
descriptions and flowcharts in place — a fact that applies to almost all high
performers (Figure 3.2.1). However, when it comes to keeping these process
descriptions and flowcharts up-to-date, less than half of all participants review
them once a year or more frequently (see figure 3.2.2). Failure to continuously
update process descriptions means that these will often be outdated and viewed
as irrelevant by the employees, who are supposed to use them. Understanding
Multiple times per year
92%
72%
Once per year
In case of significant changes
High performers
Population average
Rarely
High
performers
Population
average
%
0
20
40
60
80
100
Nordic Closing Excellence Survey 2015 | 29
| What does it take to become a high performer?
| How do high performers work with internal controls over the financial closing process?
Figure 3.2.3 Companies with a Risk
and Control Matrix in place
processes is key to understanding the risks of material misstatements in the
financial reporting. Thus, out-of-date process descriptions also mean that the
company’s mapping of risks is out-of-date.
67%
57%
High
performers
Population
average
Figure 3.2.4 Extent to which controls
are preventive (as opposed to
detective)
33%
26%
High
performers
Population
average
Figure 3.2.5 Controls automated and
supported by IT systems
Best in class
5
4
3
2
1
Worst in class
High performers
Population average
30 | Nordic Closing Excellence Survey 2015
In addition to this, the survey shows that the majority of high performers have
a Risk and Control Matrix in place (Figure 3.2.3). The Risk and Control Matrix
is a key tool allowing the company to manage best-in-class internal controls. It
brings clarity and overview, focuses on areas with risks, and ensures a robust
control environment with just the right level of controls.
As for the design of the controls, the survey shows that most companies
have a majority of detective controls (Figure 3.2.4). This applies to both high
performers and the population average, and is in line with the finding that
companies only have limited automation and IT support for internal controls
(Figure 3.2.5).
In our experience, there is a strong correlation between having a high degree of
automated controls and having mostly preventive controls. When controls are
performed outside the systems, the tendency is that they are mostly detective.
An important part of achieving an excellent internal control environment is
to use a risk- and materiality-based approach. In our experience, an excellent
internal control setup starts with an excellent — and continuously updated —
understanding of the financial processes in general and the closing process
specifically. This approach will ensure that all significant risks are identified and
it subsequently enables the design of controls to mitigate the risks.
| What does it take to become a high performer?
| How do high performers work with internal controls over the financial closing process?
What can you do?
Having an optimized internal controls setup in place not only reduces the risk of material errors in the reporting to an
acceptable level, it also plays a big part in closing the books more efficiently and faster. Below, we have listed four critical
areas to focus on when working on optimizing the internal controls:
1
2
4
3
Prepare a Risk and Control Matrix. The Risk and
Control Matrix provides an overview of the internal
controls and their relation to key risks in the financial
processes. In order to get the most out of the Risk and
Control Matrix, it is critical that the Risk and Control
Matrix:
• is based on an updated and documented understanding
of your company’s current processes and related risks
• is continuously updated to reflect changes in
processes and related risks
• is prepared based on well-defined, group-wide
materiality thresholds ensuring that internal controls
target and mitigate only material risks.
Monitor your controls. Continuous monitoring
of the processes, risks, and related controls
is a key aspect of an efficient and effective
internal control setup. One option is to implement
IT supported monitoring of risks and controls
(GRC systems), but many companies run efficient
monitoring without such systems. A key aspect
of control monitoring is to ensure that group
controllers’ and internal audit’s site visits include
evaluation of whether the controls documented
in the Risk and Control Matrix are performed as
prescribed. Getting the balance right between
self-assessment and actual testing of controls is
also a key aspect in order to maintain a high-quality
internal control setup at a reasonable cost.
Bring your controls to life. Listing your
internal controls in the Risk and Control
Matrix is a good starting point. However, ensuring
that they are actually carried out is of course a
necessary second step. Your internal controls
should be imbedded in documentation and
guidance used in day-to-day activities, such as
process documentation, standard operating
procedures, and service level agreements with
shared service centers and outsourcing partners.
Automate your controls. To the highest
extent possible, ensure that controls are
supported by IT and automated. Therefore,
perform an analysis to understand the correlation
between your processes, controls, and IT setup
to take maximum advantage of automation
possibilities. Pay particular attention to how you
can utilize the functionality in your ERP system to
support automated controls.
Nordic Closing Excellence Survey 2015 | 31
Surprisingly, half of the
high performers do not
formally test
their controls
| What does it take to become a high performer?
| How have high performers designed the IT setup that supports the financial closing process?
One set of
numbers,
one truth
How have high performers
designed the IT setup that
supports the financial closing
process?
When we talk to clients
about their financial closing
process, IT is often a source
of frustration. When asked
about the main internal
challenges associated with
the financial closing process,
half of all participants point to
inefficient processes (Figure
3.3.1). However, while half of
the population average also
mentions poor IT alignment as
a major challenge, only a third
of the high performers share
this view. Let us look at what
drives this difference.
High performers’ IT setup is characterized by a higher degree of system
integration. This is supported by the fact that the majority of high performers
have one main integrated system (Figure 3.3.2). They have newer and more
updated versions of their ERP systems (Figure 3.3.3), which is a consequence
of increased focus on IT infrastructure planning. In addition to high performers
having more updated ERP systems, they are also more satisfied with how these
systems support finance processes. In combination with their consolidation
systems, these ERP systems simply better fulfil high performers’ needs (Figures
3.3.4).
Figure 3.3.1 Main internal challenges associated with financial reporting
Inefficient processes
(Manual routines)
IT (Poor alignment between
financial processes and
supporting IT infrastructure)
Organizational issues
(Complexity, unclear roles
within finance)
There are no internal
challenges with the financial
reporting
Mismatch between
reporting requirements
and reporting setup
Insufficient time/resources
(Tight deadlines)
Lack of competences
High performers
Population average
Other
%
0
34 | Nordic Closing Excellence Survey 2015
20
40
60
80
100
| What does it take to become a high performer?
| How have high performers designed the IT setup that supports the financial closing process?
Figure 3.3.2 ERP system structure
One integrated system
across all reporting entities
One integrated system, but
local installations
Different ERP systems across
local entities/reporting entities
High performers
Population average
Other
%
0
High performers
Population average
60
80
100
Figures 3.3.4 Satisfaction with IT setup
Excellent
5
4
3
2
1
Poor
Excellent
5
4
3
2
1
Poor
Consolidation system fulfills needs
5 years old
ERP system fullfills needs
3 years old
40
Having one group-wide integrated ERP system can help the finance function
accomplish a faster closing of business units and consolidation, while reducing
iterations substantially. But there are other benefits to be derived. The ERP
system can help support the internal control environment by enabling the use of
a higher degree of preventive controls, which directly leads to higher confidence
in the numbers. Regardless of organizational area, business management is
carried out based on the same numbers. This eliminates discussions and errors
and creates one set of numbers, one truth. As one main ERP system holds many
advantages, it also makes it easier to standardize and optimize across borders,
while enabling up- and down-scaling according to the company’s needs.
System and IT integration
Figure 3.3.3 Age of ERP systems
20
Excellent
5
4
3
2
1
Poor
High performers
Population average
Nordic Closing Excellence Survey 2015 | 35
75% of high performers
have a plan for how the
IT architecture of their
finance function should
look in three years
Only 52% of the population
average have such a plan
| What does it take to become a high performer?
| How have high performers designed the IT setup that supports the financial closing process?
What can you do?
IT infrastructure, including the ERP setup, plays a big part in achieving an excellent closing process, but even companies
that are not on the verge of investing heavily in IT systems and ERP setups can probably identify many low-hanging fruits
to pick. It is our experience that the functionalities in companies’ existing ERP system are often not fully utilized — and
that the setup is not aligned with the financial processes it is supposed to support. Below, we have listed three issues that
companies can address to ensure better IT support of the financial closing process.
1
Utilize your existing IT setup better. In our
experience, the majority of companies can greatly
improve their financial closing process by making better
use of functionality already available in their existing
ERP system. When working on improvements in this
area, ensure that you involve finance, process, and IT
personnel in developing solutions, so that all aspects are
covered. This approach facilitates solutions that increase
integration between systems, automate controls, and
improve utilization of IT systems in place.
2
Prepare a finance/IT roadmap. Ensuring that
the strategies for IT and finance are aligned
is critical in order to build an efficient and effective
approach and identify future automation and
integration possibilities.
3
Manage the risks associated with spreadsheets. Everyone uses Excel, because it is versatile and easy to use.
However, the use of Excel should be governed by policies for how Excel models are designed and documented in order
to minimize the risks associated with these models. Particular attention should be given to those Excel models that actually
generate accounting figures. To the greatest extent possible, ensure that such models are reduced and/or eliminated, so that
accounting figures are generated in source systems and/or ERP systems, rather than in Excel. Models used to analyze data
should be designed according to structural guidelines separating input of data from calculations and output, and the models
should be documented and transparent.
Nordic Closing Excellence Survey 2015 | 37
Survey
methodology
| Survey methodology
Who participated in the survey?
The 146 survey participants range from mid-sized companies to some of the
largest listed groups in the Nordics. Four countries and more than 14 different
industries are represented. Among participants are 14 of the companies on the
Copenhagen Nasdaq OMX C20 Index. Below, you see illustrations of how the
entire group of 146 survey participants can be described in terms of revenue,
number of reporting entities, ownership structure and number of FTEs:
Revenue (EURm)
Number of reporting entities
12%
35%
41%
53%
43%
16%
<500
500-5,000
>5,000
Ownership structure
<15
15-30
>30
Number of FTEs
12%
52%
48%
24%
64%
Listed
Non-listed
<250
250-1,000
>1,000
To illustrate clearly how high performers manage their financial closing process
differently from other companies, we divided the survey participants into
groups of ‘high performers’ and ‘population average’.
How was the group of high performers determined?
To be included in the group of high performers in this report, companies had to
live up to the following criteria:
• The company had to be among the fastest 10% of all participants, measured on
working days spent on monthly reporting (Number of working days for Closing
of Business Units + Consolidation + Preparation of Management Report)
• The company had to have revenue exceeding EUR 500m
• The company had to have at least five reporting entities
• The company had to prepare a consolidation, as well as a management report
on a monthly basis
Nordic Closing Excellence Survey 2015 | 39
How EY helps
clients move closer
to excellence
| How EY helps clients move closer to excellence
At EY, we have many years
of experience helping a
wide range of Danish and
international companies
improve their financial
processes in general, and the
closing process specifically.
Our Financial Accounting
Advisory Services (FAAS) team
includes specialists within
financial process improvement,
ERP systems optimization, and
internal controls improvement.
FAAS is committed to playing
our part in improving the
financial closing process of
Danish companies.
Closing Excellence. We work with our clients to improve all aspects of their
financial closing process. This includes reducing the time spent on closing local
business units, consolidation and preparation of the internal and/or external
reporting. We help clients reduce errors, close faster, and improve the quality of
their management reporting.
Rapid assessment / Diagnostics. Using our tried and tested methodology,
we provide our clients with a quantitative and qualitative assessment of the
potential for improvements in their closing process. We engage with main
stakeholders to build a framework for significant lasting and value-adding
changes.
ERP / Digital Services. We partner with the client to ensure proper utilization
of their current or future finance systems. We ensure that the automation
opportunities inherent in their systems are fully utilized, we help establish data
transparency and clarity in order to improve speed and quality, and we assist
our clients establish “one set of numbers”.
Internal controls optimization. We help our clients optimize their internal
controls over the financial closing process by ensuring that the control
framework is based on a solid understanding of the industry, the current
financial processes and the associated risks. We work with our clients to ensure
firmly established roles and responsibilities throughout the process to minimize
redundancy and focus on risk and materiality.
Project management. When delivering Closing Excellence projects, our FAAS
team gives our clients the benefits of a wide array of state-of-the-art tools and
templates. Combined with our industry-leading methodology, this gives our
clients efficient and fast results through a structured, tailor-made approach.
Change management. Closing Excellence projects are first and foremost about
people. We ensure that all major stakeholders are involved in the improvement
process so that the changes are embedded in the organization. This way, great
ideas become lasting, self-sustaining improvements.
42 | Nordic Closing Excellence Survey 2015
| Our team
About FAAS Denmark
At EY’s Financial Accounting Advisory Services (FAAS), we help our clients
with all types of financial reporting related issues, including optimization of our
clients’ financial closing process, as well as GAAP assistance and enhancement
of the annual report. We translate a technically complicated field into practical
solutions, making daily working life easier for our clients.
About Closing Excellence
In Closing Excellence projects, our clients appreciate that we bring specialized
skills within accounting, process optimization, internal controls, IT, project and
change management. What makes a difference to our clients is that our projects
yield tangible, lasting results that are embedded in our clients’ organizations.
FAAS Closing Excellence contacts
Niels-Jørgen Andersen
Thomas Kühn
+45 5158 2596
Niels-Joergen.Andersen@dk.ey.com
+45 5158 2721
Thomas.Kuehn@dk.ey.com
Henrik Jürgensen
Gert Andersen
+45 5158 2889
Henrik.Jurgensen@dk.ey.com
+45 2220 2363
Gert.Andersen@dk.ey.com
Alex Blicher Hansen
Casper Kjær Andersen
+45 3078 2070
Alex.Blicher.Hansen@dk.ey.com
+45 3078 2147
Casper.K.Andersen@dk.ey.com
Jonas Bank
Anders Laurup Petersen
+45 2529 4208
Jonas.Bank@dk.ey.com
+45 2529 3268
Anders.L.Petersen@dk.ey.com
Mark Blauenfeldt Nissen
Annemette Mortensen
+45 5158 2861
Mark.Nissen@dk.ey.com
+45 2529 3348
Annemette.Mortensen@dk.ey.com
Partner
Nordic Head of Process Improvement
Senior Manager
Closing Excellence Solution Leader
We help
companies make
better decisions
by partnering
with them to
develop best-inclass financial
reporting
Manager
Manager
Senior Consultant
Executive Director
Danish Head of Process Improvement
Executive Director
Head of ERP / Digital Services
Manager
Manager
Senior Consultant
Nordic Closing Excellence Survey 2015 | 4
EY | Assurance | Tax | Transactions | Advisory
About Ernst & Young
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in the capital markets and in economies the world over. We develop
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about our organization, please visit www.ey.com.
About EY’s Financial Accounting Advisory Services
The changing accounting and reporting landscape provides challenges
for multi-national companies as they seek to respond to global market
conditions and report on their financial results while facing increased
scrutiny from a range of stakeholders.
EY’s accounting, regulatory, compliance and IT professionals combine
technical expertise with business and industry insights to help clients
navigate complexity. Whether your focus is on managing highly technical
accounting requirements or addressing governance and regulatory issues,
having the right advisors on your side can make all the difference.
Our team uses proven and integrated methodologies to help you solve
your challenging business problems, deliver accurate financial reports in
complex market conditions and make improvements sustainable for the
longer term. We understand that you need services that are adapted to
your specific industry issues, so we bring our broad sector experience
and deep subject matter knowledge to your projects in a proactive and
objective way.
© 2015 Ernst & Young P/S, CVR No 30700228
All Rights Reserved.
This material has been prepared for general informational purposes
only and is not intended to be relied upon as accounting, tax, or other
professional advice. Please refer to your advisors for specific advice.
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