Clinical trials are among the most complex financial endeavors in biotech, requiring careful financial planning, tracking, and reconciliation. Ensuring accurate financial reporting and vendor accountability means answering three key questions: What do we expect to happen? What has actually happened? And what is driving the variance between expectations and reality?

The Challenge of Forecasting Clinical Trial Costs

Unlike other industries where cost forecasting follows predictable patterns, clinical trials introduce many unpredictable variables. Enrollment rates, protocol amendments, and site-specific costs can make standard financial tools ineffective. Forecasting must be dynamic, aligning cost distributions with actual clinical drivers rather than relying on broad assumptions.

Accrual accounting—determining costs incurred but not yet paid—is another essential component. Many companies still rely on spreadsheets to manage this process, but doing so often leads to inefficiencies. When data is delayed or inaccurate, finance teams must choose between speed and accuracy, a trade-off that can complicate compliance and financial reporting.

The Pitfalls of Straight-Lining Costs

One common but problematic approach is straight-lining costs—spreading expenses evenly over time. While this method may seem simple and efficient, it often leads to major financial and compliance issues. Inaccurate accrual estimates can trigger audit misstatements, requiring time-consuming adjustments and increasing the risk of financial restatements.

A better alternative is to use activity-based accruals and multi-source triangulation—leveraging multiple data sources to validate costs. This approach provides a more accurate picture of clinical trial expenses and enhances financial reporting. While implementing an automated accrual system requires upfront effort, the long-term benefits include faster close times, improved audit readiness, and reduced financial risk.

Case Study: Ventyx’s Transition to Automated Accruals

Ventyx, a leading biopharmaceutical company, faced significant inefficiencies in their R&D accrual process. Heavy reliance on CRO reporting and manual processes led to long close cycles, frequent audit adjustments, and budgeting challenges. Managing multiple Phase 1 and Phase 2 trials further complicated financial forecasting.

By adopting an automated accrual platform, Ventyx reduced their monthly close process by 78%, completing it in under a week. The impact was significant:

• Efficiency: Faster and more reliable accrual processing.
• Accuracy: Fewer post-close adjustments and better compliance.
• Collaboration: Improved communication across finance, FP&A, and clinical operations.
• Vendor Management: Enhanced visibility and stronger contract negotiation capabilities.
• Audit Readiness: Strengthened SOX compliance and reduced audit-related inquiries.

As Roy Gonzales, Senior Vice President of Finance at Ventyx, stated:

"Previously, our close process spanned between 3 to 4 weeks and heavily relied on our CRO. Our new system enabled us to streamline our monthly close process, cutting it down to under a week."

Ventyx’s experience underscores a crucial point: organizations don’t have to choose between speed and accuracy. By leveraging automation, they can achieve both.

The Role of Automation in Clinical Trial Financial Management

As clinical trial portfolios grow, managing financial reporting manually becomes unsustainable. Automation bridges the gap between finance, accounting, and clinical operations by:

• Integrating vendor contracts, change orders, and out-of-scope costs in real time.
• Ensuring forecasts and actuals remain aligned.
• Providing structured data that enhances transparency and decision-making.

Organizations that invest in automation transition from reactive financial management to proactive strategic oversight. By removing inefficiencies and enhancing data accuracy, finance teams can support broader business objectives more effectively.

Final Thoughts

Clinical trial financial management requires a delicate balance between efficiency and accuracy. While straight-lining costs may seem like an easy solution, it often creates more problems in the long run. Investing in automation, adopting multi-source triangulation, and aligning finance with clinical operations can ensure long-term financial stability.

The takeaway is clear: accurate, fast, and compliant accruals are not mutually exclusive. By making the right investments, biotech companies can streamline operations and gain greater financial control.