Cloud accounting and continuous closing poised to disrupt

Companies are increasingly replacing rigid closing cycles with “continuous close” approaches that use automation to speed business processes.

That’s one finding of an accounting-focused survey of executives by interRel Consulting, which specialises in analytics and business intelligence. Aiming to identify “disruptive” trends, the company asked about data management technology, forecasting strategies, and more.

“In the last 10 years, we’ve seen companies that were market leaders get left behind as a result of external disruptions in business models and markets,” Edward Roske, CEO of interRel, said in a news release. Now disruptive change is happening inside companies as new technology allows dramatic changes to planning, reporting, and analysis processes, according to Roske.

The study included responses from more than 250 companies across 18 industries and 13 countries. The companies with the shortest closing times were in telecommunications, technology, and manufacturing, while some of the slowest were in health care and media, the research found. Companies have sped closing periods by replacing manual processes with automatic ones and improving processes and technology.

Continuous forecasting

Forecasting also is moving to a more continuous model. About 44% of the companies surveyed use rolling forecasts, with most looking at planning horizons ranging from 12 to 24 months.

The “bottom-up” approach to forecasting was by far the most popular, with nearly 80% of companies reporting its use, followed by driver-based, trend-based, and top-down forecasting.

Those more flexible planning capabilities may also be allowing some organisations to account better for changing business scenarios. More than 30% of survey respondents reported the use of scenario planning, a method of preparing for multiple possible events and outcomes, which interRel expects will become “dominant” in the next five years.

Cloud technology adoption was most frequently reported by survey respondents whose companies have more than $250 million in annual revenue. Companies that use cloud platforms also are more likely to have real-time reporting, according to the study.

A shift in responsibility

Reporting has become the domain of financial planning and analysis, with 59% of businesses responding in the survey that it’s owned by FP&A. This is a major shift from a decade ago, when information technology professionals owned more of the reporting function, according to interRel.

Data management, meanwhile, is expected to move more towards pre-built products. InterRel’s study suggests that “black box” products that require heavy IT involvement will decline in favour of “technology agnostic” solutions.

Ultimately, though, technology isn’t the only factor. InterRel’s overriding advice is that context and relevance ultimately govern how useful new streams of data can be. Data should be combined holistically, rather than separated by source. Reports should include analysis that guides users through data. And every report, the company argues, should lead either to a deeper question or to a meaningful action.

Andrew Kenney is a CGMA Magazine contributing editor.