The Abused Metric: Days to Close the Books in ERP

In the realm of Enterprise Resource Planning (ERP), one statistic reigns supreme, yet often stands as the most abused: "Days to close the books." It's the success story we've all heard—the company that slashed its closing time from 11 to 3 days. Three days—a metric synonymous with operational excellence. But here's the truth: blindly following the three-day benchmark might not be the right path for your organization. Nor does your company even have the capability to track or monitor the days to close from a system perspective. Most consulting firms fail to help you identify the unique factors that should shape your closing time goals.

Consider these essential variables:

1. International or Domestic Presence: Are you a global player with numerous legal entities or a domestic operation?
2. Product Portfolio: How many products or services do you offer?
3. Customer Base: What's the scale of your customer base?
4. Regulatory Requirements: Do you have specialized regulatory reporting needs?
5. Manual Transactions: What percentage of your transactions require manual processing?
6. Company Turnover: What's your company's annual revenue turnover?

For instance, a B2C company with 40 million customers offering eight different products to each customer operates differently from a B2B with 1,000 customers and four products generating the same revenue.What's less known but equally critical is the imperative for ERP once your company crosses the threshold of $1 billion in revenue or employs over 3,000 individuals. ERP becomes a necessity to manage the complexity of your operations effectively. But it's not just about implementing a system—it's about scalability and avoiding operational bottlenecks that may require external ERP consultants to resolve.  So, how do you distinguish systems running seamlessly from those in need of improvement? 

Here's where the challenge lies:

Data Accessibility: Can your organization readily generate reports displaying the number of days it took to finalize the financial books for the last month? How about an average report for the year? Unfortunately, this data isn't readily available from large ERP systems out of the box.

Drilling Down: It's not just about having the data; it's the ability to drill down into months with longer or shorter closing periods to understand what happened.

Modern ERP systems can track it all, from delayed invoices to un-reconciled payments and missed revenue bookings from downstream systems. However, these processes vary widely across businesses and often find themselves relegated to high-level checklists in Excel during month-end close procedures.

Today's controller faces the challenge of improving these processes, even though they often exist outside the multi-million-dollar ERP system. And they must do this while navigating a constantly changing business landscape.

The silver lining is that solutions exist, and they're often cost-effective to implement. The real challenge lies in finding implementation consultants who truly understand how to optimize these processes. Ultimately, it comes down to whether you believe your company could benefit from enhanced transparency in its financial operations.