Closing the books is a source of frustration for many construction firms. The construction industry is not alone – “the close” can be a pain point for businesses across a variety of industries. Sage Intacct recently conducted the annual “Close the Books” survey to see what’s working, what’s not, and what the future holds when it comes to the close. Taking a closer look at the findings can give businesses insight into how they can make the close more efficient.
The state of the close
Closing the books takes time – anywhere from a few days to weeks on end. While many factors can impact the time to close, including business complexity, technology, and headcount, the survey found that the biggest factors affecting close were business size and industry.
“Best in class” close time for the businesses surveyed was two weeks or less. By industry, the businesses surveyed had average close times that ranged from 6-12 days, with construction firms surveyed averaging 8 days to close.
The average number of days to close the books also grew in proportion to the number of legal entities a business has. Those with 11 or more legal entities took 70% more time to close their books than those with five or less entities.
Most close teams are small, with 40% having two or fewer people and 78% having 5 or fewer. The survey found that the size of the close team grew as the total number of employees grew, with jumps at the 150, 500, and 1,000 employee count. Similarly, the size of the close team grew as revenue increased, with a near doubling of team size at the $50M revenue mark, and again at $250M and $500M, respectively.
However, it is worth noting that businesses over $100M in revenue saw a decline in the average number of close days by 30%. This can be due to efficiencies gained by increased team size and the use of technology solutions.
The role of technology
When it comes to technology’s role in the close, we are seeing the move to the cloud continue, with 63% of the respondents’ financial management systems now cloud or hybrid cloud-based, up from 58% last year. For those still using on-prem solutions, 28% plan to move to a cloud-based solution within the next year, and 42% within the next two years.
The top reasons why cloud-based solutions are preferred are: higher availability, a reduced need for IT, and the ability to scale as the business grows. Other reasons included lower cost, increased security, and the ability to have advanced features such as AI.
It’s no secret that implementing the right technology helps businesses increase efficiency — this holds true for the close. When it comes to how technology improves the close process, the top benefits cited were more automation, reduced manual work, and greater systems integrations. Workflow and real-time reporting were close behind.
Conversely, businesses that rely on more manual processes experience longer close times. The top factors that delay close times were investigating anomalies and the manual effort involved with the close, including accruals, allocations and imports. Other reasons included getting information from third parties, reconciliations, internal information flow, and management review.
Survey results showed that manual journal entries and manual consolidations also slowed theContinue reading