Connecticut CPA Magazine Excerpt: Finance Transformation - Fostering greater efficiency, higher quality, and stronger controls

By Kelly Harper, Senior Manager – Audit & Assurance and Scott Szalony, Partner – Audit & Assurance at Deloitte & Touche, LLP

This article appeared in the Winter 2025 issue of Connecticut CPA magazine.

Finance transformation has taken accounting departments by storm in the past decade as more and more organizations are asked to do more with less – but it isn’t always easy to know where to start on the finance transformation journey.

There are specific actions you can take to move forward in terms of people, process, and technology to create efficiencies, reduce cost, and improve employee morale all while maintaining proper controls.

We advisors often speak in terms of people, process, and technology, which can feel overwhelming to translate to what needs to happen to actually change. But at the end of the day, it’s a good way to think about your barriers as you set out on a finance transformation journey.

There can be clear benefits to shortening the financial close. The ability to deliver financial information to stakeholders expeditiously – while maintaining proper accounting controls – can have significant positive impacts to finance organizations.

In addition to producing timely finance information more efficiently, there are more benefits – including greater accuracy, improved employee morale, and seeing that proper value is obtained from technology investments.

In a global marketplace of rising labor costs and declining interest in accounting as a career, the challenge to do more with less is top of mind for many finance leaders.

This article begins a series of ideas and concepts that leaders in any industry can put into practice to shorten the financial close. We will explore process analysis and redesign, technology, and finance operating models. In this issue, we are going to dive deep into process analysis and redesign.

Process Analysis and Redesign

Accounting organizations can benefit from taking a fresh look at accounting processes and how they are designed. Finance leaders are often surprised when leaders take a step back and review the steps that it takes to complete certain tasks throughout the accounting close.

Generally, the processes that are in place were designed around technology and systems that have changed. Sometimes, the process was even designed for a specific person with a certain skill set. When finance leaders review the process in detail to understand the source systems, the output, and the downstream impacts of the close process, there are generally steps that can either be skipped, enhanced, or automated.

Examples of close processes that are often ripe for this analysis and redesign include close and reporting checklists and account reconciliations.

Accounting Close Checklist

An accounting close checklist analysis is one of the simplest ways to begin the process of examining and redesigning the close process. A close checklist should include all the tasks that are required to effectively perform the accounting close. If your organization doesn’t have an accounting close checklist, creating one is a great first step to start the transformation.

Once all of the accounting close tasks are listed, it’s also helpful to include additional information, such as when the task should be completed, who will complete the task, any dependencies before the task can be completed, and a description of the task.

Leading practice close checklists also include step-by-step instructions on how to complete the task. This isn’t critical to a close checklist analysis, but it certainly can help if the person analyzing the checklist with a goal of reducing or automating steps is unfamiliar with how the process is completed.

The analysis should include developing a deep understanding of the purpose of each task and considering its relevancy and need. The analysis should also determine if the task must be completed at the current frequency. Accounting organizations will often identify tasks that are unnecessary or do not need to be completed as a dependency to produce accurate financial results.

Once the tasks are fully understood and tasks that are not necessary are eliminated, the analysis can move to an automation assessment. During our technology segment in the next issue, we’ll dive deeper into purpose-built automation and how it can shorten your close by automating certain tasks on your close checklist.

Manual Journal Entries

Manual journal entries are another area that can present opportunities for improvement, regardless of the size of the finance department. In general, manual journal entries are required because some type of system is not working as it should. There are certainly exceptions, but when an organization is looking to reduce cycle time in the close, a focus on manual journal entries can produce opportunities to reduce effort expended during the accounting close.

A great first step in manual journal entry reduction is to analyze manual journal entries over the period of a year. After gathering the data, it should be reviewed for certain attributes such as dollar value, business day the entry was booked, and who performed the journal entry.

Many organizations find that a large number of manual journal entries are below a reasonable threshold and can be eliminated. Other entries that may be reasonable from a dollar amount perspective could be automated or performed less frequently (e.g., an entry booked monthly might only be necessary quarterly, semi-annually, or even annually in some cases). Finally, once the population of manual journal entries has been narrowed down to what cannot be eliminated or reduced in frequency, consider automating the remaining entries.

One important piece to manual journal entry reduction initiatives is having a clear manual journal entry policy that is fully supported by leadership. The policy will provide clarity around thresholds, required documentation, approvals, and timing, which will support a reduction in manual journal entries.

Often, organizations find it helpful to have a late entry policy that is designed with the intent to discourage entries that are brought in late in the accounting close process. Late entries can have negative downstream impacts, create rework, and lead to a lengthier close.

Balance Sheet Account Reconciliations

Finally, balance sheet account reconciliations are an area that often yield significant opportunity for redesign and are the foundation of any sound financial close process. Organizations that have a healthy balance sheet can have a level of assurance of the accuracy of all the other financial statements.

When reviewing balance sheet reconciliations with the goal of effort reduction, there are a few key areas to consider. The first is risk rating and frequency. In general, there is no need to complete every balance sheet reconciliation monthly. Taking a fresh look at the risks that exist within each account reconciliation is prudent from a controls perspective but can also decrease the level of effort required during the accounting close.

For example, if you complete a risk analysis of your balance sheet reconciliations, you can assign a preparation and/or an approval of reconciliations at a different frequency than monthly. Frequency can be assigned based on the risk. A low-risk reconciliation could be performed less frequently than a high-risk reconciliation, which can reduce workload and shorten the close.

Another way to reduce effort involved in balance sheet account reconciliations is by grouping reconciliations differently. Many times, accounts in various departments in the same organization use the same source of information to support different account reconciliations. If the source information is the same, there is an opportunity to combine them into one reconciliation for multiple account balances.

Other ways to decrease the effort required for balance sheet reconciliations include leveraging a different operating model and technology. We will dive deeper into these concepts in upcoming publications as it relates to all close processes with the focus on how to transform the financial close.

Mindset Shift

Changing the mindset of accountants to focus on efficiency and quality can be challenging. By taking each step of the close process and challenging the way it has always been done, finance organizations can achieve reduced cycle time, higher quality, and stronger controls.

Finance transformation is a massive undertaking. Many companies are challenged in knowing and identifying where they need to focus their time and resources.

Regardless of how the organization sees the need for finance transformation, a change in mindset and willingness to do things differently can go a long way in reducing the financial close while maintaining the integrity of the financial reports.

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