Common Financial Closing Challenges and How SAP Helps Manage Them

Some of the most crucial parts of an organisation's finance operation include the financial close. At the end of each month, quarter or financial year, finance teams are required to perform accounting duties, examine financial reports, reconcile accounts and create reports before certain deadlines. When multiple systems, departments or business entities are involved, oversight of this process can prove tricky.

Financial closing out processes are still managed by many companies using spreadsheets, email and manual follow-up. While this works for small companies, it can be problematic as you grow.

SAP Financial Closing helps organisations organize, manage and track closing processes. The SAP Advanced Financial Closing and SAP S/4HANA Financial Closing Cockpit tools, for example, include features that can assist teams with handling repetitive procedures, dependencies and tracking.

Some common financial closing pain points and SAP's answers.

What Is SAP Financial Closing?

Some of the most crucial parts of an organisation's finance operation include the financial close. At the end of each month, quarter or financial year, finance teams are required to perform accounting duties, examine financial reports, reconcile accounts and create reports before certain deadlines. When multiple systems, departments or business entities are involved, oversight of this process can prove tricky.

Financial closing processes are still managed by many companies using spreadsheets, email and manual follow-up. While this works for small companies, it can be problematic as you grow.

SAP Financial Closing helps organisations organize, manage and track closing processes. The SAP Advanced Financial Closing and SAP S/4HANA Financial Closing Cockpit tools, for example, include features that can assist teams with handling repetitive procedures, dependencies, and tracking.

Some common financial closing pain points and SAP's answers.

What Are the Common Financial Closing Challenges?

The finance teams working on the close may encounter a number of issues during the month-end, quarter-end and year-end closing. A few of the common challenges are discussed below.

1. Delayed Financial Closing Tasks

The most difficult task is the closing of all Financial Closing Activities within planned closing deadlines. Any delay in a single activity may have a cascading impact on subsequent activities and lengthen the closing cycle.

For instance, if the account reconciliation is not completed by the deadline, the finance team will not be able to move forward with the next review or reporting process. This may also apply to a delay in some other department supplying the required information.

How SAP Helps:

SAP Advanced Financial Closing allows organisations to schedule tasks and send notifications and alerts. You can set expected timings and task order. Managers can also look at what's happening with various activities and identify any pending tasks.

Where applicable, the scheduling or runs of selected jobs or workflows can also be automated depending on the setup. This is to decrease some manual intervention and aid teams in managing repetitive tasks.

But software cannot assure that each task will be accomplished on time. If the workers need to gather information that needs to be checked or they have to fix problems, they have to do it manually.

2. Unclear Task Ownership and Responsibilities

Groups involved in the financial closing process are: general accounting, accounts payable, accounts receivable, asset accounting, and financial controlling. If duties are not explicitly defined, workers might infer that their functions are being performed by someone else.

This may lead to deadlines being missed, work being duplicated and organisations unnecessarily communicating across departments.

How SAP Helps:

SAP financial closing functions enable an organisation to organise close activities and designate users or processing groups with responsibility.

Task-related assignments and notifications with SAP Advanced Financial Closing enable employees to understand which activities to focus on. Managers can see the status of activities and pursue activities that have not been completed.

Nevertheless, clear ownership is still contingent on the organisation having accurate allocation of users, roles, and responsibilities, and escalation procedures.

3. Closing Activities Not Completed

Unfinished financial closing activities. Activities may be incomplete because the data is unavailable, an error has occurred, or an approval has not been obtained.

For instance, a deposit did not go through because of incorrect data, or a reconciliation might be incomplete as additional information has not been supplied.

How SAP Helps:

SAP Solutions offer monitoring and task status data that alert the user to activity that has not been completed or executed successfully.

SAP Advanced Financial Closing task types, including jobs, workflows, and manual activities, are supported. Users can check out task details and any available logs, if they exist, to investigate processing problems.

While the system can guide teams to where an action is required, employees will still need to dig through errors, fix the data, and finish off the other work.

4. Handling Task Dependencies

Activities are often interrelated. Certain activities cannot start until other activities have been finished on time.

In this example, the depreciation posting needs to be completed prior to the review proceeding. In the same way, the reconciliation of the accounts needs to be completed prior to completing the reporting.

When dependencies are manually controlled, teams don't have visibility into the right order of work. If they commence too soon or skip a dependency, they'll experience waiting and rework.

How SAP Can Assist:

The software enables the definition of task dependencies and sequences. Predecessor and successor tasks can be defined to ensure that necessary processes are carried out sequentially.

It may be necessary for following activities to wait for the predecessor activities to attain the specified state or obtain approval.

This gives teams visibility into how activities are linked and prevents having to manage each dependency independently.

5. Limited Visibility into Closing Progress

Managing a number of spreadsheets, applications and emails for closing activities can make it hard for finance managers to get a clear picture of what has been done.

They might have to get in touch with other areas of the business to learn what has been done, what has not been done, and what has been delayed, which might make spotting bottlenecks more difficult.

How SAP Helps:

Monitoring and reporting capabilities for enhanced visibility into closing activities in SAP software for financial close solutions.

SAP Advanced Financial Closing provides relevant users with visibility of closing status in subsidiaries and headquarters. Task list and monitoring views provide users with a way to check task status and see what needs to be addressed.

SAP S/4HANA Financial Closing Cockpit also offers task lists, status details, and monitoring capabilities for the applicable closing procedures.

These features promote stronger control, but the data's precision relies upon precise task updates and suitable programming of the machine.

How Can SAP Improve the Overall Financial Closing Process?

SAP can help organisations establish a more structured approach to financial closing through several capabilities:

• Standardised Templates: Reusable closing templates help organisations maintain consistent processes across business entities and closing cycles.
• Task Scheduling: Planned dates and scheduling options help teams organise activities around closing deadlines.
• Automation: Eligible jobs and workflows can be automated to reduce repetitive manual coordination.

These capabilities can improve coordination and transparency, but successful financial closing also requires accurate data, clear responsibilities, effective controls and cooperation between departments.

Who Should Understand SAP Financial Closing?

SAP Financial Closing information may be valuable for people working in the finance and accounting department, in finance, accounting, or the SAP implementation project.

It may be particularly relevant for:

Finance and Accounting Professionals: Employees assigned to the month-end, quarter-end, and year-end close.

SAP FI Consultants: Consultants who work in the area of financial accounting processes and subsequent closing activities.

Financial Controllers: Accountants who oversee accounting and financial controls and reports.

Finance Managers: Managers who handle team communication and monitor the closing status.

SAP Implementation Teams: Financial transformation and closing process professionals.

Basic knowledge of SAP Finance and the Record-to-Report process will give your learner the background to understand where financial closing activities are situated within finance.

Build SAP Financial Closing Knowledge Using Prompt Edify

By being aware of financial closing pain points and SAP's product offerings in this field, finance professionals and consultants can have a better understanding of modern financial close management.

Prompt Edify To help both individuals and organisations expand their SAP knowledge, we provide SAP training courses and corporate learning programs. To learn SAP Financial Closing, professionals can talk to us about their learning needs, expected course content, and training options.

Grow your SAP Finance skills and prepare for financial close orchestration with our SAP Financial Closing training. Growth comes with this SAP Financial Closing course, whether you want to expand your SAP Finance expertise or understand how financial close orchestration works.