Cisco's Virtual Close: Environmental Scanning and Business Operations

This report provides an in-depth analysis of the virtual close process, with a specific focus on its implementation at Cisco. The report begins by defining the virtual close as a financial process that allows for immediate closing of account books and preparation of financial statements through real-time posting of financial transactions. It then examines Cisco's adoption of this approach, highlighting the company's efforts to reengineer financial processes and leverage technology to reduce closing times. The report further discusses the importance of environmental scanning in the context of virtual close, emphasizing the need for companies to analyze external factors to mitigate risks associated with over-reliance on technology and rapid financial reporting. The report concludes by underscoring the significance of integrating environmental scanning into virtual close strategies to ensure accurate financial forecasting and sustainable business operations. The report uses various sources to support its findings.

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Introduction
The virtual close or the financial close is referred to as the financial process where the
period end accounting events such as closing the account books and consolidation of
financial statements can take place almost immediately and accordingly financial reports can
be prepared (Janvrin & Mascha, 2014). The significance of the virtual close lies in the fact
that in order to achieve it, various business transactions relating to finance should be posted
in the real time, only then the financial statements can be reconciled at the period end. The
following work is aimed at evaluating the various aspects of the phenomena virtual close,
specifically in relation to the company Cisco and the role of environmental scanning in the
business operations.
Overview
It takes days for the companies to close their financial books after a month or a
quarter end. It must be significantly noted that timely information is critical to sustained
growth of the modern entities. Thus, in the virtual close scenario, the real time posting of
financial transactions gears up the whole process, nevertheless it requires enhanced software
combined with improvements in technologies. The virtual close is further vital as is leads to
the reduction of time taken by the Finance department in posting and reconciling the
transactions and thus leads to core efficiency in business operations.
Virtual close and Cisco
The entity Cisco was one of the very first firms to implement a virtual close and
continuous monitoring capability in their business operations, under the leadership of Larry
Carter, who was the Chief Financial Officer (CFO) of the entity, back then when Cisco was
in the centre of massive growth (Zafar, Khan & Qayyum, 2014). The CFO wanted to reduce
the 14-day close to roughly one day and thereby not only speeding the information flow but
also dramatically renovating the means in which the information flow was accomplished by
the firms. Taking this view in the mind, the leaders of the entity Cisco were set to work to
reengineer a range of the financial processes, in addition to the compressing its cycle times.
Some of the activities that were undertaken as the part of the exercise are listed as
follows. Firstly at the central level, the entity established distinct instantiation of data
warehouse and the enterprise resource planning (ERP) system. Secondly, web was used

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wherever possible to automate the transactions and more mechanised processes were
involved instead of earlier manual processes. Thirdly to state, a workflow system approach
was introduced to aid the individual; approval process which would not only accelerate the
whole process but would also control the same. Lastly, the user-friendly access to the
information in the form of graphs and charts was enabled for the leaders.
The result of the renovation is explained as follows. The tools used and the data
generated is stated to be invaluable in helping the entity manage its growth. It is significant to
note that the time spent on processing the transactions by the finance department of the
company fell from 65 percent to 35 percent (O'Leary, 2012). This further aided in the
reduction of group expenses as a percentage of total company revenue for the said department
from 2 percent to 1.3 percent.
However, it is significant to note that with the increased speed came the challenges in
the form that the company did not forecast the economic downturn and other related pit falls,
leading to plunging the sales forecast of the company by 10 percent in 2001. There are ample
number of evidences that support the view that the company’s overreliance on technology
prevented it from analysis the environment as was being done by other companies.
Importance of environmental scanning
As states above, the virtual close advocated speed at the expense of accuracy. This
makes the issue of environmental scanning more important. Environmental scanning by the
companies is important with regards to the growing complexity of the business environment,
where the notion of real time closing is unrealistic. It is also vital to note that as the financial
and economic processed are now being interconnected because of globalisation, the real time
processing without the aid of the forecasting software would lead to companies sustaining
heavy losses as in case of Cisco. According to Bragg, (2009), the process of the data
integration and preparation of financial statements are description of interdependencies of
governance, people and technology. Thus, environmental scanning is vital to sustain the
changes in the business environment.

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References
Bragg, S. M. (2009). Fast Close: A Guide to Closing the Books Quickly. UK: John Wiley &
Sons.
Janvrin, D., & Mascha, M. F. (2014). The financial close process: Implications for future
research. International Journal of Accounting Information Systems, 15(4), 381-399.
O'Leary, D. E. (2012). The virtual close and continuous monitoring at Cisco. Journal of
Emerging Technologies in Accounting, 9(1), 111-126.
Zafar, F., Khan, S., & Qayyum, K. (2014). E-commerce and change management.
Transforming existing organizational system to virtual organizations. International
Journal of Academic Research and Reflection, 2(1), 30-40.
Zhou, M., & Aguirre-Urreta, M. (2012). Reporting Capabilities, Financial Closing Time and
Effects on Cost of Equity Capital. AMCIS 2012 Proceedings. 8.
https://aisel.aisnet.org/amcis2012/proceedings/AccountingInformationSystems/8