The Elusive Virtual Close: Navigating the Changing Landscape of Financial Reporting

In the fast-paced world of finance, the ability to report results quickly is more important than ever. But folk have been talking about fast close for longer than I care to remember. Almost a quarter of a century ago, I was part of a Big 4 consulting practice specialising in fast-close solutions. Next week, I'll be part of the GrowCFO Global Finance Summit, where one of the core themes will be faster close. Has anything actually changed? Or do the recent advances in AI and automation technology finally make the elusive virtual close possible?

PWC Experience in the Early 2000s:

During my tenure at PWC, the need to speed up the reporting of year-end results was a critical concern. The faster the information was made available, the more influence it had on analyst opinion and, subsequently, on share prices. The same was true of quarterly market updates. To address this issue, solutions were sought to perform group consolidation efficiently, enabling organizations to deliver timely and accurate financial statements.

When we spoke to clients we often cited Cisco Systems. Even then a day 0 close was possible. Cisco Systems was at the forefront of implementing the virtual close. The driving force behind their adoption was not only to expedite the reporting process but also to achieve significant cost savings. There was a clear correlation between the cost of a process and the time taken to perform it. By streamlining and automating various financial processes, Cisco Systems was able to achieve both efficiency gains and financial benefits.

Has Anything Changed?

Fast forward to 2024. There is no widespread adoption of the virtual close. To assess the current state of financial reporting and the adoption of the virtual close, Growcfo conducted member surveys. The results revealed that there are still challenges in achieving efficient closing processes. The surveys highlighted two peaks in time to close the books each month: the first on workday five and the second on workday ten, indicating that some organizations are able to close their books in the first week of the new month but still not on day 0. However, a significant portion of respondents reported a much longer closing period, some even surpassing the ten-day mark.

The Problem:

The longer the closing process takes, the more historical the information becomes. This poses several challenges. Firstly, the opportunity to take action or make informed decisions based on real-time data diminishes. Secondly, the ability to analyze the data and produce valuable insights is severely compromised. Lastly, the constant cycle of finishing one month-end and immediately transitioning into the next leaves little room for strategic planning or process improvements.

The Global Finance Summit:

We're addressing the problem at the upcoming Global Finance Summit, scheduled for the 15th and 16th of May, which aims to address these challenges and explore the future of financial reporting. Chris Tredwell will be kicking off the summit with the opening keynote. I caught up with Chris on the GrowCFO show to get a peek at the themes he will be introducing

Chris Tredwell emphasizes the importance of leveraging modern cloud accounting solutions before embracing emerging technologies like AI and automation. An outdated accounting solution will severely limit your ability to transform, but one that properly enables AI and automation will be vital. These advancements can revolutionize financial reporting processes, enabling organizations to streamline operations, reduce costs, and enhance decision-making capabilities.

I spoke to Randy Wootton , another summit speaker, on the GrowCFO Show. Randy is the founder of Maxio, a fintech company that is already embracing some of this new technology in its product stack.

Randy predicts that 2024 will be a year of experimentation in the finance industry. He also suggests that investors will increasingly demand cost savings and productivity gains in 2025 and beyond. So now is the time to play with the new technology and learn how it works. Wootton emphasizes that the changing landscape of finance will not necessarily result in job losses but rather necessitate a shift towards upskilling and adapting to new roles and responsibilities. He cites the current shortage of skilled finance professionals and AI making it possible to do more with the people who are available. Emma Chieppor will explore this topic further at the summit, asking whether AI can replace financial analysts.

Other sessions at the summit will explore how to achieve faster close and implement the financial transformation that will enable it. Joe Paget , Dan Stockdale , Oliver Deacon , and Stephen Campbell will provide expert advice.

Adam Shilton will take a look into the future showcasing some of the emerging technology that brings AI and machine learning to finance.

FP&A is likely to benefit most, with faster close providing more time for better interpretation of results. Catherine Marks and Paul Barnhurst examine the developments here.

ChatGPT and Copilot already make a big difference in our daily lives. Nicolas Boucher and Christian M. will help us understand the art of what is already possible.

Vineta Bajaj and Aneal Vallurupalli bring the CFO perspective, reflecting on how they expect finance transformation to unfold in their own organisations.

Conclusion:

The concept of the virtual close, which emerged in the early 2000s, continues to be relevant as organizations strive to expedite financial reporting and drive cost savings. However, the challenges associated with extended closing processes remain, hindering organizations from capitalizing on real-time data insights. The Global Finance Summit provides a platform for industry experts to share their knowledge and explore innovative solutions that leverage technology and streamlined processes. As the finance landscape continues to evolve, embracing change and adopting new approaches will be crucial for organizations to stay ahead in an increasingly competitive environment.