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SAPInsider Benchmark Report: Financial Close Transformation 2023 – Key Takeaways

An efficient financial close not only helps organisations meet their regulatory responsibilities, but make informed business decisions for the future. However, despite the importance of the close cycle, many companies struggle with delays every month – a factor that not only slows the close and jeopardises deadlines, but piles pressure on accounting teams. Close efficiency challenges can have significant adverse effects, not least undermining data reliability, straining the controllership function, and preventing companies working on value-adding tasks.

With that issue in mind, SAPInsider conducted a research survey of 145 members of the SAP finance and accounting community, with a focus on learning why certain companies struggle with the close, and why others succeed. 

Let’s explore some of the survey’s key findings. 

Intercompany Accounting Challenges

The survey revealed that 55% of SAP customers viewed intercompany accounting as a ‘significant and growing challenge’ to close efficiency. These accounting processes, which are often function-specific and fragmented, represent up to 80% of large corporations global trade, and are rendered even more challenging thanks to evolving accounting standards and tax laws. Specific pain points include Reconciliations, cited by almost 50% of respondents, and journal entry management, cited by 36%. 

Manual vs Automation

Almost 60% of survey respondents regarded manual processing as most responsible for financial close inefficiencies. With that in mind, 54% of respondents suggested that their top objective should be to improve the efficiency of the close – up markedly from 37% in 2022, while 43% suggested that their objective should be to use data analytics to improve decision making – up from 35% in 2022. The figures demonstrate that finance leaders are ‘increasingly acknowledging the importance of integration automation technologies’, especially in applications around data organisation and the optimisation of journal entries, and that companies are increasingly relying on data-driven insights.  

Barriers to Digital Transformation

Despite clear recognition of the advantages of technology adoption, survey respondents reported several barriers to digital transformation – with 44% citing budget constraints, 31% citing poor quality data, and 28% citing ignorance of cloud computing capabilities as the top obstacles to implementing close software. The survey highlights a broader dilemma: that many companies do not yet view digital transformation as an investment with long-term ROI, but rather an upfront cost – and that these companies should perform a focused analysis to gain visibility into the cost-effectiveness of the changes they want to make. 

Managing Complexity

The survey revealed that 32% of respondents saw ‘business growth and evolution’ as an important driver of a financial close transformation – up from 26% in 2022, and that 30% wanted software that facilitated the ‘timely generation of actuals for reporting’ – up from 23% in 2022. Evidently, companies are concerned about the increasing complexity of the close, and are aware of the need for more agile, adaptive close technology solutions to help them manage that burden. To that end, respondents identified centralised data storage as a valuable benefit of any digital transformation initiative, with over 50% citing data coming from ‘too many disarranged groups’ as one of the top reasons for close inefficiency. 

Incremental Implementation

SAPInsider’s research revealed key strategies for successful close transformation, with the need for automated efficiency and accuracy emerging as top priorities. To that end, 82% of respondents cited the importance of ‘real-time unified and integrated master data’ during the close – up from 76% in 2022, 82% of respondents cited a requirement for automated reconciliation – up from 75% in 2022, and 80% cited the demand for a ‘fully-documented electronic audit trail’ – up from 75% in 2022. 

Given the barriers to close transformation that many companies faced in 2023, the research suggested that companies would be best served by an incremental approach to implementation. Rather than a complete overhaul of financial tech infrastructure, a step-by-step transformation process would minimise disruption and risk, and allow the employees to adjust gradually to new tools. The survey suggests that the benefits of close technology adoption will be ongoing and expansive, with increased data integrity improving the quality of financial reporting, enhanced controllership improving stakeholder trust, and task automation reducing pressure on accounting teams. 

Learn more about the benefits of close software, get in touch with FloQast today. 

Hugh O'Neill

Hugh O'Neill is a Chartered Accountant and Senior Sales Engineer based in the UK. Prior to joining FloQast, Hugh served in several senior accounting and financial operations positions.