Workday’s Path to a Zero-Day Close: Q&A With Philippa Lawrence

As finance teams continue to feel pressure to move quickly and adapt to change,  perhaps nothing captures the immediacy more than technology that can help enable a zero-day close. 

Reconciling financial statements at the end of the reporting period—whether monthly, quarterly, or at year end—has traditionally been a labor-intensive process that could take weeks to complete. That’s why Workday has embarked on a journey to automate as much of our financial close as possible, as part of a larger effort to continuously optimize our accounting and finance functions. A zero-day close—also known as a continuous or touchless close—will let organizations close the books quickly and have access to up-to-date information. And while the goal is zero days, it’s the actual process improvements that, with each one, are truly advancing the finance function.

That’s because speed is just one consideration in Workday’s broader vision to give both our internal teams and our customers a financial management system that’s part of a more modern and agile approach to meet future challenges and help redefine the future of finance work. In short, it’s not just being able to close the books quickly but establishing a constant feedback loop. Such a shift can deliver better business insights, free up resources for important strategic initiatives, and provide a comprehensive financial picture for all stakeholders. It also gives finance additional time to analyze results, prepare remarks for earnings, and focus on clearly articulating its strategic vision.

In a recent interview, Philippa Lawrence, chief accounting officer and vice president at Workday, shared her vision of how technology can help make a zero-day close a reality and how it fits into the bigger picture.

As chief accounting officer for Workday, you are the executive sponsor of Workday’s zero-day close initiative. Can you share more details about this? 

While the close is a big part of corporate accounting, the good stuff comes from diving deeper into what the numbers mean and then working with the organization to shape business strategy. 

Here at Workday, we are constantly reimagining how we work, removing friction from finance processes. We’re transforming the close and reimagining it through relentless automation. In a conversation with Robynne Sisco, our current co-president and at that time our CFO, we decided to take on the challenge of a zero-day close. And now, in partnership with our new CFO, Barbara Larson, we’re embracing the goal and advancing our process.

The objective of a zero-day or continuous close is closing the books at any point in time because you’re continuously booking information throughout the period, which means always having access to the latest up-to-date information. A zero-day close is the goal our own finance team is working quickly toward, along with our customers, who saw the incredible value during the pandemic of being able to close the books virtually and access information anytime, anywhere. 

What’s the strategic importance of this initiative?

It’s a way to rally the team around a shared goal, as well as prove our hypothesis that you can leverage technology to remove the mundane aspects of accounting— for example, manual data entry for invoices or manual journal creation—so we can focus our resources on delivering more valuable insights to the business.

A zero-day close affords us the luxury of time. And in today’s business environment, that is a competitive advantage.

As part of this effort, my team has identified a number of specific automation use cases that target data-intensive, highly complex processes such as our stock compensation program or foreign exchange hedging. My team is super enthusiastic about the opportunity to work on a project that could radically change the lives of accountants everywhere. As we march toward a zero-day close, we continue to achieve our automation milestones while creating greater efficiencies.

Why is improving the close process so important today, and why should finance executives want to compress it?

There’s always been focus on reducing the time it takes to close the books. It’s a commonly monitored metric. But why is spending less time closing the books so important to a fast-growing company like Workday?

First and foremost, spending less time closing the books gets information into the hands of decision-makers quickly, which is even more critical today given the pace of change and uncertainty of the past couple of years. My team no longer spends time verifying individual transactions. Instead, they focus on finding anomalies or trends in the data to help the business understand the “why” behind numbers. 

Because we’ve also automated much of our management reporting processes, we’ve been able to reduce reporting cycle times by 50%, and slashed the time it takes to provide quarterly board updates from three days to just a few hours. 

So when it comes to the speed by which we close the books and report internally, we are confident that we can realize our vision for a zero-day close and show our customers how they can achieve this as well. We are also focused on speed when it comes to delivering our [Securities and Exchange Commission] filings. For our most recent fiscal year ending January 31, 2022, we filed our Form 10-K on the same day that we released our earnings report for the first time—an achievement we know can be challenging for many companies.

But speed isn’t the only consideration. Another key element remains the quality of information that’s reported to investors and other stakeholders looking for insights into a company’s growth potential, customer sentiment and momentum, corporate purpose and values, and its resiliency in an uncertain economic environment. It’s the combination of increased speed and continued quality that is the true measure of an ideal close.

You’ve had experience working with many other finance systems. Why do you now believe you can get to a zero-day close?

Two differentiating aspects of Workday give me the confidence we can easily achieve a zero-day close. First is Workday’s data model. With Workday, I can make an entry and seconds later I can run a consolidation and that entry is included.

This data model helps produce automated indirect and direct cash flow statements within a Workday report. Using worktags—our native dimensionality—we’re able to tag transactions with additional attributes eliminating unnecessary manual work as well as provide traceability back to the underlying transactions.

Workday’s data model is enabled by the intelligent data core where we combine operational data from over 15 external sources, bringing all accounting into one system. Workday Financial Management along with Workday Accounting Center and Workday Prism Analytics is foundational to the intelligent data core, saving us over 50 hours during the close by automating the accounting from external data.

Second is our adaptable architecture, enabling us to “future-proof” finance. Creating a new dimension, legal entity, or even a business process is quick and easy. Workday also makes it easier to keep up with evolving regulatory environments, such as changes to revenue recognition that we saw a few years back and the more recent lease accounting standards.

What are some of the benefits you’ve realized so far on the journey toward a zero-day close?

We’ve realized tremendous benefits using these best practices. Perhaps the most important one is that we’re able to see problems early in the close process before they become issues, enabling us to take remedial action quickly and resolve anomalies as they surface. 

Also, the percentage of manual journal entries we now perform is extremely low. Thanks to the automation in our system, we’ve achieved nearly 100% automation of our cash flow and 100% billing accuracy, but as you can imagine there are exceptions. Workday surfaces those exceptions, helping us quickly address and resolve them before they impact the close. And we know there is so much more value ahead as we continue to adopt more machine learning capabilities.

You’ve been very vocal about the best practices that companies can adopt to streamline their own close processes. Can you share those?

First, send out a close survey so anyone involved in the close can surface risks, provide feedback, and share what’s working and what’s not. This gives you a holistic view, making it easier to identify bottlenecks or areas of risk.

Second, enable better collaboration and partnership with FP&A (financial planning and analysis). Our teams are working from the same dataset, which helps drive real-time insight into budget versus actual and make it easier for the teams to resolve variances together. 

Third, using dashboards in Workday, create a chief accounting officer command center where you can see critical metrics, such as cash collections, accounts receivable (AR) analysis, days sales outstanding (DSO) and days payable outstanding (DPO), and profit and loss (P&L) expense trends. This allows you to identify unusual trends and take action throughout the month, not just at month end.

Fourth, monitor the close. The period-end close dashboard gives us real-time information, including the leader board, which provides management with a high-level status of the close process, and the close overview, which gives us a view of all remaining tasks to complete the close. 

Finally, do a thorough financial analysis of external reporting, whether it’s a regulatory filing, news release, or preparation for investor calls. Since FP&A and accounting are working from the same data, we can perform deep analysis to ensure the numbers are accurate.

Who else benefits from a shorter closing process?

The employees themselves benefit. Especially as we’ve seen during the pandemic, the forces that have contributed to the “Great Resignation” mean that people have placed a new emphasis on their quality of life. This includes a better work-life balance, which is supported by a zero-day close.

Of course, a more streamlined process that doesn’t take up weeks of our finance team members’ lives also helps with recruiting and retaining talent—and that’s absolutely important to help organizations succeed now and for the foreseeable future. 

Finance professionals want to work for a company where technology empowers them to solve challenging, complex problems that help the business. With Workday’s adaptable architecture and unique object data model, anyone on my team—with the proper access privileges, of course—can spin up their own dashboards or reports, drill down to transaction-level detail and get to the story behind a certain number or trend, and get the answers they need on their own to make an impact.