How a Virtual Close Can Help You During the COVID-19 Crisis (and Beyond)

The following is a guest post from Kyle Cheney, Partner, Controllership, at Deloitte & Touche LLP.

Because of COVID-19, millions are working from home, and central offices are now being vacated across cities and regions. The way work gets done has changed, but your company's responsibilities to provide critical numbers and narrative to internal and external stakeholders has not. Companies now need to figure out how to close the books in a collaborative yet virtual manner. 

Businesses that are using effective tools and technologies can keep their close process running smoothly in the short term for their first-time remote workers and prepare them for an efficient virtual close process that will benefit them long after the situation stabilizes. 

Below are five steps to supporting the next normal of the virtual close.

1. Assess your situation

The first step to preparing your company for an efficient virtual close is to find out where the inefficiencies are in your current physical close process. This should be easy now as quarantining will exacerbate any potential issues. 

Start with technology. Can everyone who needs to, from preparers to reviewers to approvers, access your systems in the cloud, or do they have adequate VPN ability to get their work done? We tend to think that people have access to a work computer from home. Simple things that we tend to take for granted, like an extra monitor or strong Wi-Fi, may not be available for every employee. Further, home Wi-Fis are being stressed when you have children at home who are doing virtual schooling and consuming bandwidth. Find out your team’s equipment needs. 

Next, check on more human needs.What does the home office situation look like? Many, like my family, are homeschooling their kids. Is everyone in the same time zone? Those are things that take place over certain hours that we can't control. Your team may need to shift their work hours. They may have fewer work hours available. Introduce a pulse check survey of your workforce to understand what has changed for them in terms of their time allotment for work activity and what their preferred work schedule or hours of availability look like. 

2. Set up a command center

In most organizations, there's typically a small group of people who are the main, knowledgeable resources around a close. Have a team of 5 to 10 people—enough to cover your functional competencies involved in the close, from tax to treasury—who become the virtual command center. Outline the roles and responsibilities of each, because they're going to oversee what needs to take place throughout the close.

Your command center should also set up a collaboration solution. They're going to be responsible for making sure that the broader team involved in the close is able to collaborate and work through issues as if they were in the office. 

Separately from the command center, you want to have a technical technology support desk, so IT is aligned and ready to support the team. For access issues, permissions challenges, and hitting the ceiling on your VPN capacity, an IT support desk should be ready to facilitate. 

3. Meet the risks

One of the hardest parts of a transition to a virtual close is to avoid work falling through the cracks. 

Typically, when you're working together in an office setting, you're going through your close schedule and confirming resource assignments. It's easy to do that when you're near your coworkers.

When everyone is working remote, you may not know when someone isn't able to accept an assignment. Close task management software—where all the individuals involved can view the close schedule and understand the dependency within the schedule across tasks—is essential. It's a place where employees can view their own assignments and check off those assignments when they're completed, so others are aware of where the team is at during the close, which is a critical success factor right now. Transparency into the close process is needed, especially in a virtual working environment. 

Additionally, now is an opportunity to look at risk ranking controls and really focus on your high- and medium-risk controls. Consider potentially modifying procedures where it's warranted, based on your staff capacity as well as materiality or other aspects. This can enable you to operate effectively within your control structure but modify for the crisis in ways that make sense.  

4. Get the tools

As mentioned, a close task schedule is probably the most important item to have up front, but there are other tools that will help you navigate your transition to a virtual close.

You may need the ability to process journal entries through a software product, and you also may want to produce financial statements. How will you produce your disclosures and MD&A when you have multiple parties syncing together? Financial reporting automation capabilities, where you can collaborate and maintain version control, are critically important. 

Then there’s collaboration software and video conferencing products, which are key right now. Of course, new tools bring risks. Companies need to focus on the security and controls around those products to make sure they're managing a secure environment. 

Probably the biggest factor I see among firms that are doing well right now is their ability to be nimble in terms of work location. They have the financial systems, infrastructure, and accessibility in place. They have the VPN connectivity, and they have laptops for their employees. They were able to shift to a home working environment, and they're feeling a lot less pain. 

5. Take the long view

It’s important to remember that this crisis will end. Does your company want to spend this time just treading water, or does it want to take the opportunity to make your company stronger long term?

Historically, companies would do a hard, full, complete close every month when they didn't necessarily need to. Leading companies are doing a soft close in off-quarter months, where it's a more limited close for management reporting purposes. In some organizations, we've seen materiality thresholds being enforced, so different divisions or business units of the company can go far below those materiality thresholds for management reporting or performance management reasons. This can result in organizations completing hundreds of thousands of allocations to move dollars around for management reporting that didn't affect the financials. 

If you change your culture, you can use materiality to reduce high volume, low dollar amount transactions to make the close more efficient. Staff may be able to spend less time closing the books, and they can shift their time and their talents to more value-added activities: providing analytics, improved decision support, and partnering with the business.  

This can have a long-lasting impact that companies will benefit from after they get through the short term and realize that with the right tools, with the right approaches, they can be very effective in a virtual environment.