Two-close model: fast and accurate financial information

From the inception of a business to the scale of its operations, having access to real-time financial information is important for making informed decisions that will drive success.

As a businesses operations scale so do the financial operations scale, and traditional monthly close cycles begin to take weeks or even months, if financial practices are inefficient, which can be a major obstacle for businesses that need to adapt quickly to changing market conditions.

The two-close model or accelerated closing process is a solution that can provide businesses with faster access to their financial information while still maintaining accuracy, giving decision makers almost a real time view of their finances.

This model involves providing a preliminary "soft" close in a matter of days, followed by a more comprehensive "hard" close within a couple of weeks.

The soft close provides a working set of numbers that are within 5% of the actual numbers. This is done by using a process that is less intensive than the traditional monthly close, such as skipping full bank reconciliations and journal entries. This allows businesses to get a quick snapshot of their financial position without having to wait for the full month-end close.

The hard close is a more thorough review of the financials that takes 10-15 days to complete. This includes full bank reconciliations and journal entries, which ensures that the numbers are accurate. The hard close can be used to prepare statutory financial statements, tax returns, and other reports.

Inefficiencies and sub-optimal reporting times with your month end process may be due to an external event or internal symptoms that are less visible and impacting your critical path - large numbers of manual journals/activities, and high error rates are common causes of staff frustration and burnout at month end.-KPMG

The two-close model offers several benefits for businesses, including:

• Faster access to financial information: This allows businesses to make informed decisions more quickly and adapt to changing market conditions.
• Reduced risk of errors: The hard close ensures that the financial numbers are accurate, which can help to reduce the risk of errors and financial reporting issues.
• Improved cash flow management: The soft close can be used to track cash flow more accurately, which can help businesses to manage their cash flow more effectively.
• Increased efficiency: The two-close model can help businesses to be more efficient by reducing the amount of time spent on financial reporting.

The two-close model is a good option for businesses that need fast, accurate financial information. This includes businesses that:

• Are growing rapidly
• Are facing competitive pressure
• Are making strategic decisions
• Are subject to tight cash flow constraints

To implement the two-close model, businesses need to establish a team of qualified professionals who can manage the soft and hard close processes. The team should have a strong understanding of accounting and financial reporting.

Businesses should also invest in software that can help to automate the financial reporting process. This can help to streamline the process and reduce the amount of time that it takes to complete the two-close process.

FigureFlow helps finance teams aggregate their financial data. and make sense of their finances.

The two-close model is a valuable tool for businesses that need fast, accurate financial information. By implementing this model, businesses can gain a competitive advantage and make better decisions about their future.

What are your thoughts on this? Leave a comment and share your thoughts in the comment section.