How to effectively categorize these KPIs? Managing accounting key performance indicators from a holistic perspective helps ensure effective management of the entire accounting process. financial close.
Holistic closing KPIs
1. Exposure to profit and loss – This metric provides companies with essential data on the profitability and to risks which can affect them. By dividing the impact on profit and loss by the number of reconciling items, companies can assess the effect of large volumes of reconciliations on the organization’s risk and profit profile.
2. Process costs – This accounting measure identifies the cost of managing the entire financial close process as a ratio of the company’s total revenue. The use of automation technologies not only allows organizations to reduce resources and overall costs, but also financial services to effectively expand their operations to cope with large volume transactions.
3. Closing time – With this financial KPI, companies can identify how well they are achieving their closing days target and how many days they actually need. The evaluation of this indicator provides visibility into the financial close schedule and helps understand what may be preventing finance and accounting team members from completing their tasks on time.
4. The quality of the fence – The evaluation of this metric is based on the figures found in the three previous KPIs. It gives a strong indication of the quality of the entire financial close process, helping to reduce rework and expense.
Closing monitoring KPIs
Analysis of close tracking parameters allows financial services and managers to have more confidence in the consolidated management report that is filed each period.
5. The risk profile relating to critical activities carried out on time – This accounting metric monitors the risks associated with the number of critical activities performed within the finance department. If too much critical tasks are not executed on time, the company’s financial risk profile may increase.
6. Comparability – This metric compares the number of task types per business unit (CU) to gauge the distribution and completeness of financial close tasks. Instead of placing the burden of closing tasks on a small number of people, delegating them allows accountants to have a more evenly distributed workload, which further reduces the number of overtime hours and cases of professional exhaustion (burnout).
7. Problem management – This metric measures the effectiveness of the close cycle, specifically the number of issues raised relative to the total number of close tasks. As organizations expand their operations, it is crucial to keep an eye on issues throughout the close; these problems can mean that the inefficiencies of workflow accumulate.
Key performance indicators that measure the efficiency of specific processes are essential for evaluating basic accounting processes at a granular level. This allows managers to identify opportunities to effectively automate controls or bottlenecks.
8. Timely reconciliations – Calculating the number of reconciliations completed on time versus the total number of reconciliations completed gives finance managers insight into theprocess efficiency overall reconciliation.
9. The number of aging elements – Assessing the number of tasks and their assignment duration gives finance managers insight into how many tasks are being processed accurately in a timely manner and how many tasks are delayed ; it also helps visualize any symptoms of closing difficulties and bottlenecks.
10. Automated reconciliations – This measure visualizes the ratio of automated and controlled reconciliations compared to all reconciliations to identify the effectiveness of the reconciliation process : The higher the number of automated reconciliations, the more efficient this process.
Finally, there are accounting KPIs specific to the compliance. These metrics will help gauge the effectiveness of compliance and regulatory controls across the business.
11. The Cost of Compliance – By adding the cost of controls and the cost of adverse events, companies can assess their control framework and determine where improvements must be brought.
12. Problem resolution time – Evaluating the time to resolution gives finance managers insight into how quickly each financial close task is completed. The calculation of the number of days between identification and resolution of problem shows if there are any bottlenecks and delays in the closing process.
13. Testing rate – By dividing the number of control tests by the total number of controls, organizations can assess the test rate. This helps determine the effectiveness of the control framework, reduce redundant testing, and provide oversight of controls present across all business units, sites, and risks.
It is essential that companies ensure that the indicators chosen cover the whole closing process, whether cost, time, effort or quality. It is by taking a step back and examining all the elements relating to the financial close that the company will be able to distinguish the indicators that it really needs to improve the quality of its finances. Measuring these thirteen metrics allows finance departments to assess their close processes with clear data. These KPIs also give an overview of the areas for improvement over time and those that are already optimized and streamlined. Over time, finance managers and executives should assess the trend of these financial close KPIs to see how teams are progressing each month. By regularly testing these key metrics, department members can capture quantitative data for all of their closing processes and tasks.
Helene Sourdeau has been Marketing Manager at Trintech since 2017. She is committed to promoting the benefits of automation to meet the challenges of digital transformation of the Finance Function. From Paris to London via Copenhagen, it provides the link between the financial players of major European companies by organizing debates, summits and other virtual or live events, so that ideas for transformation travel and processes change.