Financial Close Software

Today’s businesses often rely on a variety of accounts payable and receivable systems to manage their financial position. With financial data coming from so many directions, the process of coordinating monthly, quarterly, and annual closings can be cumbersome. Delays in closing can lead to elevated risk assessments from vendors, inaccuracy of financial reporting, and the inability to forecast future financial positions.

Financial close software provides businesses with the tools to streamline accounting workflows by managing the overwhelming amount of data. In doing so, companies can benefit from faster, more efficient closing lifecycles.

This guide will help you understand the different factors that must be considered when choosing a financial close software solution.

Here’s what we'll cover:

• What is financial close software?
• Common features of financial close software
• What type of buyer are you?
• Benefits of financial close software
• Key considerations
• Market trends

What is financial close software?

Financial close software draws on accounting data from multiple financial systems—such as general ledgers, balance sheets, and cash flow statements—to assist in monthly, quarterly, or annual business closings. The consolidation of financial data using one tool allows for the creation of detailed periodic reports and audit trails that can be used to improve financial workflows.

Common features of financial close software

While features vary from product to product, financial close software typically offers some or all of the following functionality:

What type of buyer are you?

As you research your options for financial close software, consider the type of buyer you are. This will help you better understand your company's needs and the required software features:

• Businesses with a high number of payees: A key requirement of an accounting department is to make sure that employees, vendors, and suppliers are paid on time. The more payees a company is beholden to, the more complicated the accounting processes become. By utilizing financial close software, these companies can be prepared to consolidate payments across multiple vendors and liabilities in order to hit target closing dates.
• Companies outsourcing accounting duties: In order to save accounting costs, small to midsize companies are increasingly outsourcing some accounting functions—such as payroll and tax accounting—to third-party companies. Financial close software provides companies with the tools to consolidate third-party financial data with in-house accounting packages and report closing data across multiple platforms.

Benefits of financial close software

By employing financial close software, companies can experience the following benefits:

• Accelerate vendor response: By providing up-to-date information on outstanding liabilities to vendors and suppliers, financial close software allows your company to prioritize which bills to pay first. In doing so, you will be poised to take advantage of relationships with vendors that reward their clients that pay earlier in the way of product discounts.
• Improve accounting workflows: In addition to simplifying current accounting close cycles, financial close software provides an audit trail as a tool for identifying where accounting errors and bottlenecks occur. By analyzing date and time information for accounting entries, you will have the information necessary to streamline and improve accounting workflows.
• Gauge performance and forecast: With all accounting information consolidated in one place at the time of close, financial close software can generate detailed reports about the efficiency of current process and provide vital information to help prepare for future periodic closings.

Key considerations for purchasing financial close software

With so many financial close software offerings on the market today, the process of selecting a vendor can be difficult. Consider the following when choosing a financial close software:

• Keeping up with requirements: Companies are increasingly being required to meet the demands of governmental and industry regulations, all of which will ultimately impact financial closing and auditing. Before choosing a financial close software solution, be sure to research which product offerings are poised to provide the flexibility to keep up with your industry’s specific requirements.
• Integration with existing systems: Considering that the goal of financial close software is to consolidate data from multiple accounting systems, it’s vital that you choose an offering that is capable of integrating with your current environment. Be sure to perform an inventory of the software you already have in place before choosing a vendor.

Market trends to understand

When researching the financial close software market, there are some market trends that you may want to consider.

Decentralized workforce: Due to the recent COVID-19 pandemic and an overall increase in mobile and cloud computing, more than half of employees globally are now working at least 2.5 days a week outside of their office headquarters. As this trend continues, consolidation of financial data across multiple departments will increasingly benefit from financial close software.

Outsourcing of accounting functions: In 2019, 37% of companies surveyed said that they were using some method of outsourcing to reduce costs, with accounting and payroll being the most outsourced functions. Consolidation of financial from third-party sources will continue to be a challenge for companies that aren’t taking advantage of financial close software.

Note: The application selected in this article is an example to show a feature in context and is not intended as an endorsement or recommendation. It has been obtained from sources believed to be reliable at the time of publication.