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The Financial Close: Optimizing Performance and Driving Financial Excellence
Financial Excellence is also known as :
Financial Excellence,
Excellence in Financial Management,
Achieve Superior Financial Performance,
Integrated Financial Management Solution,
Financial Excellence Achieve,
Optimize Financial Processes,
Performance Management Financial Excellence,
Keys to Financial Excellence,
Promote Financial Reporting Excellence,
Financial Implications of Promoting Excellence,
Business Process Excellence in Financial Services,
Driving Management Excellence in Financial,
Management Financial Excellence,
Excellence in Retail Financial Services,
Vocational Excellence for Financial,
Benchmarking Financial Services,
Managers Guide to Financial Excellence,
Introduction Financial,
Recognized for Excellence in Financial,
Highlight Financial Excellence,
Download Excellence in Financial Management,
Evaluating Financial,
File Download Excellence,
Event for Financial Services,
Process Excellence Exchange,
Financial Services Industry,
Operational Excellence for Financial Services,
White Paper Financial Services,
Driving Inventory to Financial Excellence,
Think Financial Markets Excellence,
Financial Report Recognized for Excellence,
Financial Services Achieving Excellence,
Achievement for Excellence in Financial Reporting,
Financial Management.
CONTENT
- Executive Summary
- The Essential Ingredients of Financial Excellence
- Drivers for a Fast, High-Quality Financial Close
- Internal and External Stakeholders
- The Dynamic Regulatory Landscape
- The Benefits of a Fast Close
- Faster Access to Financial Information
- More Time for Value-Added Analysis
- Improved Control Systems and Quality
- Greater Time and Cost Savings During the Close Process
- Better Investor Relations
- How Fast Is Fast?
- Barriers to a Fast, High-Quality Financial Close
- Identifying and Understanding the Barriers
- Data Quality and Collection Errors
- Intercompany Reconciliation
- Poor Performance from Reporting Applications
- Lack of Automation
- Weak Audit Trails
- The Role of Technology
- Quick Wins and Long-Term Performance Optimization
- Peer-to-Peer Intercompany Reconciliation
- Integration with Source Systems
- Consolidation Applications
- Ad Hoc Analysis and Reporting
- Automated Internal Control Processes
- Close Process Monitoring and Scheduling
- Significant Gains Are Within Reach
- SAP Solutions for Enterprise Performance Management
- For More Information
- Acknowledgements
EXECUTIVE SUMMARY
THE IMPORTANCE OF CLOSING BOOKS
QUICKLY AND WITH QUALITY
The term "financial close" describes
a corporation's ability to complete its
accounting cycles and produce financial
statements for internal management
and external legal reporting. The
require ment to close books quickly
and with quality is emerging again as
an important project for today's global
finance function.
In the late 1990s, companies became
more efficient at closing their books
and reporting financial information, but
compliance regulations such as the
Sarbanes-Oxley Act placed additional
reporting rules on organizations. The
result is often a time-consuming, laborintensive
effort to ensure the quality of
financial data. Companies are once
again focused on improving reporting
times and ensuring effective internal
controls to govern the accuracy of
these processes.
Why is it important for corporations to
close their books quickly and with quality?
Closing fast enables quicker access
to financial information, which gives
management the foundation for timely
and better-informed planning and decision
making. The fast close requires a
quality close, where processes are
monitored to ensure a foundation of
trusted information for decision making.
Closing fast also helps companies
maintain a healthy image in the market,
while companies that don't close fast
can often suffer in the eyes of shareholders,
investors, regulatory agencies,
and trade exchanges.
In this white paper, we discuss how
corporate finance centers can overcome
the barriers to a fast, high-quality
close. By converging previously disparate
disciplines of business intelligence;
governance, risk, and compliance; and
enterprise performance management,
companies can get trusted data into the
hands of key stakeholders in a timely
manner. This paper identifies solutions
to help organizations improve and sustain
their close times and address the
challenges associated with automating
and testing internal controls.
THE ESSENTIAL INGREDIENTS
OF FINANCIAL EXCELLENCE
RESOURCES, PEOPLE, AND TECHNOLOGY
Financial excellence is achieved when
resources, people, and technology are
combined to optimize and streamline
processes, decrease operating costs,
manage business performance, and
avoid certain risks. A streamlined, efficient,
and high-quality financial close is
a key ingredient of financial excellence,
although it should not be a new concept
to corporate accountants. Since
1998, companies have focused on
improving the speed and quality of the
close process for both statutory and
management reporting. They have
come to recognize the importance of
the close and its role as one of the
most essential ingredients of a successful
global enterprise.
Numerous global companies successfully
engaged in well-publicized attempts
to improve not only the speed
but also the accuracy and reliability of
their reporting processes ' often investing
what has amounted over time to
hundreds of millions of dollars globally.
Now the requirement to complete the
financial close quickly and with quality
is emerging once again as a process
improvement project that needs the full
attention of corporate accounting staff
worldwide. A collection of disturbing
research from both sides of the Atlantic
confirms that close times at the some
of the world's largest companies, far
from getting shorter, are, in many cases,
getting longer.
The drive for fast close, partly sparked
by the e-business revolution and the
promise of the "click-of-the-mouse"
virtual close, has not delivered its full
potential. People attempting to implement
a financial close project often
underestimated the need for a structured
approach to industrialize the
close with a formal methodology. Additionally,
the impact of the Sarbanes-
Oxley Act of 2002 (SOX) was hugely
underestimated, to such an extent that
it challenged the dominance of the
United States at the top of the fastclose
league, allowing companies in
Europe to narrow the advantage the
United States had traditionally held.
In the following sections, we examine
the drivers, barriers, and solutions to
the financial close and set out to deliver
practical and sustainable advice for
the global corporate center looking to
improve close times and establish a
framework for improved internal
control.
The Benefits of a Fast Close
Good corporate governance is inseparable
from the benefits of a fast and
efficient close. These benefits have
multiple touch points both internally and
externally to the organization. Some of
the well-researched benefits ' and subsequently
the most common contributing
elements ' of a fast-close project
business case are discussed in the following
sections.
Faster Access to Financial Information
By reducing the close time, businesses
benefit from much faster access to
information relating to the performance
of their business. As part of an integrated
and coherent performance
management process, this allows management
to focus attention quickly on
problem areas and make faster business
decisions to improve future
performance.
More Time for Value-Added Analysis
By streamlining close processes and
reducing the number of staff days
required, you free significant time for
accounting staff. This can be used to
add more depth and value to the written
reports produced at the end of the
quarter and year but also allows more
time for ad hoc financial analysis during
the monthly cycle, improving the quality
of decision making.
According to a survey conducted by
Business Objects in partnership with
BPM Magazine,2 62% of respondents
overwhelmingly saw this as the single
biggest benefit for cycle-time reduction
(see Figure 1). It's also important not to
overlook how the fast close creates a
more manageable work-life balance for
staff in the accounting department.
Quite often, the length of a close cycle
is only the tip of the iceberg when it
comes to the effort involved, and it's
not uncommon for staff to work significantly
longer hours during the close.
Improved Control Systems and Quality
A financial-close initiative should establish
a number of best practices for
financial reporting, including automation,
workflow management, and dataentry
validation. One of the keys to a
fast close is "right-first-time" reporting,
which not only increases quality earlier
in reporting processes, but the additional
time spent on analyzing the data
leads to better quality reporting that
delivers greater value. Because the fast
close is about streamlining and industrializing
the close process, internal control
systems are inherently improved,
which, in turn, improves the audit signoff
process.
Greater Time and Cost Savings During
the Close Process
The cost impact of a fast close is substantial.
A streamlined close process
offers time savings in terms of manual
intervention, error reconciliation, variance
analysis, and data processing
and collection across a variety of close
processes. These time savings can
then be quantified into numbers of staff
days, which, in turn, can result in
reduced headcount, fewer temporary
staff working on low-value activities,
and reduced recruitment costs.
These savings, however, are not limited
to possible financial rewards. When
applied to value-added activities, freed
time increases revenues and lowers
costs. Particularly relevant is the application
to Section 404 of SOX, where
fast-close initiatives not only aid compliance
but also assist in driving down
the high costs associated with Section
404 compliance by establishing sustainable
and repeatable processes to
reduce audit fees.
Better Investor Relations
The ability to publish statutory results
ahead of shorter regulatory deadlines
is, in itself, only part of the benefit for
companies that close fast. Publishing
faster than industry peers and more
closely monitoring business performance
are associated directly with the
management capability of a company
and, in turn, the company's image.
It not only implies a level of expertise
but also allows for speedier communication
' and at a greater level of detail
to investors and analysts, giving them
greater comfort. Additional transparency
enables greater access to capital for
those reporting earlier. It means the
reporting of material events can be performed
in a more timely manner, which
can have a positive impact on stock
value. Additional analysis, including the
use of narrative and commentary, also
has a big impact on how a company is
perceived.
How Fast Is Fast?
The battle for who reports the fastest
is somewhat one-sided as U.S. corporations
have consistently reported
almost twice as quickly as their European
counterparts, with the average time to
report year-end or fourth-quarter
results in the United States standing at
29 days in the 2007/2008 reporting
year, compared with 50 days in
Europe.
The simplest and most publicly accessible
way to establish a fast-close benchmark
is to look at the published legal
year-end reporting periods, including
the time to announce results and the
time to obtain audit sign-off. The latest
research from the BPM International
network (BPMi) does precisely this for
the 2007/2008 reporting period.
According to BPMi's Global Close
Cycle Rankings 2008, over the past 5
years, 60% of the largest European
companies have reduced their results
announcement timetables by an average
of 10 days; and 46%, their audit
timetables by an average of 14 days.
A slightly different picture can be
observed in the United States. Here
BPMi's research indicates that 52 of
the 100 largest U.S. corporations actually
added an average five days to their
fourth-quarter and year-end results
announcement timetable over the past
five years. Audit cycles have also
lengthened significantly in the United
States, with 71% of companies surveyed
adding an average of over 2
weeks (19 days) to the time it takes to
get audit sign-off over the last 5 years.
The trend toward a "slow close" in the
United States started several years ago
and can, in part, be attributed to the
introduction of the Sarbanes-Oxley Act
of 2002, with a big spike in close and
audit sign-off periods immediately after
implementation of the rules. That
said, even though more companies
increased the length of close and audit
sign-off than those that reduced it over
the five-year period, there is now some
evidence that close periods are returning
to previous levels.
Interestingly, however, the gulf that
exists on legal fourth-quarter or yearend
reporting between Europe and the
United States does not exist when it
comes to internal management reporting.
A study by BPM International
shows that while the United States is
marginally ahead of Europe and that the
gap between the best and the worst
performers is still large, the general
pattern is very similar. These results
are summarized in the following table.
There is no 100% right or wrong
answer as to how fast a company
should close. To determine how quickly
you should close and report, you need
to understand where you sit compared
to your peers, either by geography or
industry, and how this relates to the
relative complexity of your performance
management and financial reporting
process. Determining this benchmark
should be the first stage of any close
project, as it helps you establish a
"SMART" (specific, measurable,
achievable, relevant, and time-bound)
objective on which you build a project
plan to shorten your reporting time.
3.
BARRIERS TO A FAST, HIGH-QUALITY
FINANCIAL CLOSE
DEVELOPING A STRATEGY FOR YOUR BUSINESS
Identifying and Understanding
the Barriers
While compliance-related issues have
resulted in the increase of close cycles
in the United States, especially around
the audit sign-off associated with internal
controls, compliance itself is not a
direct barrier to a world-class financial
close process. The issues are with the
processes, people, and technology barriers
to a financial close. These barriers
can be found at both the head-office
and reporting-unit level and affect multiple
teams and processes. By identifying
and understanding these barriers,
you are then able to outline a strategy
through which you can remove them
systematically from your close process.
Some of the most frequently cited barriers
' based on our experience of supporting
fast-close initiatives in the
corporate centers of today's global
enterprises ' are presented in Figure 2
below, with a number of the most significant
explained in more detail.
Data Quality and Collection Errors
The inability of many companies to
achieve a "right-first-time" financial
close process is a critical hindrance to
faster reporting cycles. It's linked to
manual data entry, late delivery from
reporting units, a lack of validation and
controls, poor integration with source
systems, and a lack of integration
across multiple close processes. Data
needs to be collected from different
charts of accounts and multiple sources,
including ledger systems, HR systems,
and spreadsheets, and once
collected, normalized into a common
chart of accounts. Often the data collected
is both financial and nonfinancial
and includes supporting text and
commentary. Once data collection is
accomplished, the real process of consolidation
in accordance with multiple
accounting standards can begin.
Intercompany Reconciliation
The intercompany process all too often
sits on the critical path for the close
cycle, causing significant delays while
operating units resolve unmatched
intercompany transactions and balances.
Time spent at both the head office
and local operations contributes to a
significant number of staff days that are
needlessly wasted on this essential but
cumbersome process. According to
research conducted by Business
Objects and BPM Magazine in 2006,
77% of respondents thought that
improved intercompany reconciliation
would speed the close process.
Poor Performance from Reporting
Applications
The consolidation process is, by its
nature, iterative and involves many
rounds of consolidation, review, and
adjustment before the process is finalized.
The performance of consolidation
and reporting applications is critical as
organizations look to enhance the close
process and save time in every area.
Poor processing speeds and lack of
scalability and availability of applications
during peak close periods can be
serious impediments to a world-class
financial close.
Lack of Automation
The close process comprises multiple
elements, many of which can be automated
to speed the close process,
reduce errors, and increase staff availability.
Examples of key processes that
can be automated include intercompany
matching and elimination, consolidation
of entries, currency conversion, ownership
and control calculations for minority
interests, equity elimination, cash
flow, and GAAP conversions. Lack of
automation and guided workflow also
adds to the issues associated with staff
that may be unfamiliar with business
processes and reporting systems.
Weak Audit Trails
Not only an issue during the close process
where central finance may seek to
investigate and verify figures, the lack
of strong audit trails also has an impact
on the postclose audit sign-off. A
detailed and automated audit trail from
source to disclosure can be a key tool,
especially when a close process features
lots of late data changes and
journal entries. More than 40% of
respondents to the Business Objects
and BPM Magazine survey8 felt that
improved audit trails were very important
in reducing close times (see Figure 3).
THE ROLE OF TECHNOLOGY
LEVERAGING SOFTWARE FOR
THE FINANCIAL CLOSE
Quick Wins and Long-Term
Performance Optimization
The use of technology is key to facilitating
wider people- and process-oriented
change as part of your financial close
project. Technology can be used to
achieve both quick and big wins, and
understanding your options is a critical
part of project planning for the financial
close. It's vital to align your use of technology
with your organization's resources
and needs, focusing on what can be
achieved in a defined time frame. For
example, the combination of implementing
a standard chart of accounts in
a new single instance of an enterprise
resource planning (ERP) or general ledger
(GL) application may be far too
time-consuming and expensive for even
the largest and most technology-rich
companies. However, the benefits of
making improvements to an existing
consolidation application or implementing
a new functional and highperformance
consolidation engine to
collect and consolidate results are still
achievable within the time frame of a
financial close project.
We have identified several focal points
to help speed your closing cycles.
These can be achieved through
improvements to current applications
as quick wins, or by defining what you
may need from future investments in
performance optimization applications.
Peer-to-Peer Intercompany
Reconciliation
Identified as a barrier to the close,
intercompany reconciliation often sits
directly on the critical path and takes
far too long to complete, involving the
head office in a complex communication
process that ideally should be
resolved among local operating units.
By enabling Web-based peer-to-peer
intercompany reconciliation, you can
remove the process from the critical
path. In addition, when operating companies
can reconcile balances earlier in
the reporting period, it becomes possible
to dramatically reduce the number
of staff days the process takes,
decrease the number of errors, and
easily enforce corporate policies.
While the majority of consolidation
applications feature an intercompany
component, these are often applied
after the close and fail to improve the
quality of the process or remove it from
the critical path and, as a result, drive
multiple iterations of the consolidation
while adjustments are made. Applications
are now available as stand-alone
solutions or as part of integrated suites
to facilitate online peer-to-peer intercompany
reconciliation. They can often
be installed alongside existing consolidation
applications and, due to the centralized
nature of their deployment, can
be implemented very quickly and at relatively
low cost, resulting in dramatic
reductions in the close time and generating
significant ROI.
Integration with Source Systems
In organizations where it's not possible
to have a single-instance ERP or GL
application, the integration of consolidation
and enterprise performance management
applications with underlying
subsidiary systems is even more crucial.
Establishing direct links to these
systems ' which can be automated as
much as possible ' not only speeds the
process of loading data but it helps
avoid costly mistakes and subsequent
wasted time resulting from manual data
entry, corrections, or errors associated
with batch loading of comma-separated
value files.
Establishing a mapping between various
systems, while preferred, is also
prone to error, as reporting structures
and definitions of accounts vary among
business units and change over time.
Leading financial information management
applications support mapping performed
by business users, validation of
destination data, and the ability to drill
back to source data to mitigate risk.
Consolidation Applications
Consolidation applications play a key
role in the corporate center close process.
Although implementing a new
application is not an undertaking to be
taken lightly the benefits for the organization
in terms of improved speed, quality,
and workflow offered can be significant.
A new application provides a basis
for implementing numerous quick wins
as well as driving wider financial transformation
where appropriate.
The following points are important
when considering the role of a consolidation
application in a fast, high-quality
financial close process.
Data Entry and Validation
Integration with source systems to
improve the way data enters the system
is only half the battle. Data coming
into performance management applications
also needs to be checked and
filtered intelligently based on the
reporting framework and rules defined
by the central finance team. GAAP presentation,
required breakdown of data,
and start and end dates are examples
of automatic checkpoints.
By leveraging functionality in consolidation
applications, it's possible to ensure
data quality at every level of a corporate
reporting cycle and guarantee that
incoming data not only respects the
timing and expected format but also
"makes sense" and is consistent, complete,
commented appropriately, and
goes through the right auditable
approval process. This leads to greater
quality and a right-first-time approach
to the closing cycle, which reduces the
need for late adjustments and additional
data submissions and speeds the
review and variance analysis process
by ensuring narrative is provided where
required.
Consolidation applications enable you
to monitor and record the performance
of the various contributors to the close
process. It's long been said that what
gets measured, gets managed ' and
that is just as true for the close process
as for any other activity. By publishing
statistics on the best and worst
performers in the close process and by
coaching and training in the areas that
are identified as weak, you make the
process a managed one, increase
discipline, and carry out significant
improvements to the close time.
High Performance
As the adoption of Web-based consolidation
applications has increased over
the past five years, so has the importance
of their performance in the
closing cycle. Not only are some
applications limited to single-process
consolidations, but the time it takes to
perform a consolidation, multiplied by
the required iterations and views in a
close cycle, can add to the problem.
Instead of supporting high performance,
they become a major bottleneck.
The performance of some
applications is also greatly reduced
when full audit features are turned on,
forcing companies to sacrifice speed
against auditability. By leveraging consolidation
applications that allow and
perform simultaneous consolidation
processing yet don't require compromises
on the audit trail, you can experience
significantly faster consolidation
times and run fewer iterations.
Process Automation
Because the industrialization of the
close process is key to a successful
financial close, the ability to automate
as many processes as possible is
extremely advantageous. Applications
that centralize data and metadata management,
automate business rules, and
interface with source systems are a
start. Leading applications, however,
take automation to the next level by
introducing financial intelligence, which
further speeds the close cycle by using
built-in rules logic to automate consolidation
entries. Because such applications
also understand the life cycle and
challenges of finance departments,
they can handle multiple reporting
channels with different charts of
accounts and different account flows or
analysis dimensions over time. They
can also manage the retention of past
reporting frameworks so finance professionals
can safely adapt to everchanging
financial needs without having
to copy and paste, rebuild, or destroy
their previous reporting scenarios.
Ease of Use
Lack of buy-in from divisions into the
processes at the corporate center is
often caused by requiring divisions to
follow resource-intensive manual processes
or use applications that are
unfamiliar, nonintuitive, or nonsupportive
of local reporting requirements.
Leading consolidation applications
overcome these challenges through
extensive use of familiar tools such as
Microsoft Office combined with
straightforward business process flows
that guide users through the key stages
of the business process, ensuring
they are followed consistently throughout
the enterprise.
Ad Hoc Analysis and Reporting
Enterprise stakeholders require more
analysis based on complex models and
in shorter time periods. The ideal
application for your company should
support data entry and validation,
automate business processes, provide
advanced search functionality, be flexible
enough to enable business users
to perform ad hoc query and analysis,
and perform at a speed to meet your
needs. A single application may not be
able to meet all your ad hoc analysis
and reporting needs in real time. So it's
important that whatever application you
choose can integrate with a business
intelligence platform that can provide
the additional functions you require.
A business intelligence platform can
provide advanced search functionality
that enables users to identify key metrics
and trends hidden in hundreds of
internal and external resources, such
as structured databases, unstructured
company and text content, and the
Web. A business intelligence platform
can help you deliver information to
users on a near real-time basis, with
information updates occurring automatically
from the underlying consolidation
applications. With immediate availability
of information during the financial close
process, business users can leverage
the ad hoc analysis and reporting tools
available to them to perform more inprocess
analysis, thereby increasing
insight and further contributing to
reducing the time needed for the financial
close.
Automated Internal Control Processes
As global regulatory mandates multiply
and grow more stringent, manual
approaches to control activities are
becoming untenable. By embedding
automated controls into your financial
close process, you can move away
from resource-intensive manual control
activities to address critical business
risks. A rationalized set of automated
controls ensures that your organization
can meet compliance mandates in the
most timely and cost-effective fashion
while optimizing operational efficiency.
Leading financial management applications
for governance, compliance, and
risk (GRC) provide a risk-based
approach to establishing a control environment
and identifying the most effective
and efficient controls for business
processes and cross-enterprise IT systems.
They reduce the cost of compliance
by streamlining and automating
control processes, including automated
controls with "lights-out" control testing,
to accelerate time to compliance.
An additional critical piece of the compliance
process relates to the proper
segregation of duties and access control
over key information assets ' one
of the most effective safeguards
against fraud and a prerequisite for regulations
like Sarbanes-Oxley. It is also
one of the most difficult controls to
deploy and sustain, given the thousands
of users, roles, and processes
that require access and authorization
evaluation, testing, and remediation.
Leading GRC management applications
offer a comprehensive set of access
controls that identify and control
access and authorization risks in crossenterprise
systems to prevent fraud
and reduce the cost of continuous
compliance and control.
Close Process Monitoring and
Scheduling
Process automation and workflows
within the consolidation application help
reduce the amount of time spent on
lower-value activities. However, as
organizations become more complex
and as compliance regulations add to
the number of steps required in a close
process, the need to control and manage
all of these steps across the entire
close and applications involved
becomes more important and even
more challenging. You can gain significant
benefits from creating a complete
overview of the status of a closing
cycle, its critical path, and the execution
of the processes and steps. It
helps you establish a closing calendar,
track hundreds of tasks, dependencies,
milestones, and approvals across entire
company, and enforce deadlines. The
additional automation and greater collaboration
improve coordination and
increase staff productivity for enhanced
compliance and greater transparency.
SIGNIFICANT GAINS ARE WITHIN REACH
YOUR FINANCIAL CLOSE ACTION PLAN
Understanding the drivers for a close,
the barriers you face, and the technology
options open to you is important '
but that's only part of the solution. A
financial close project, like any other
corporate initiative, requires a structured
approach with a methodology
that's supported by people, process,
and technology; is manageable; and
has clear but realistic objectives. A
full financial close project can, and in
most cases must, extend beyond corporate-
centric processes and functions
(although the focus of this paper, as a
whole, is on those driven by the head
office). That being said, the project
doesn't necessarily have to result in a
major change program and ' provided
you structure your approach, deliver
the appropriate and sponsored resources,
and manage the project ' it's possible
to make significant gains relatively easily.
A Four-Stage Action Plan
To a large extent, the principles are no
different from any other large change
management and implementation project.
As shown in Figure 4, you can take
an incremental approach to developing
an action plan.
In the first stage, for example, you create
a vision, review your technology
and processes, and identify "quick
wins" and "big wins." Some of the
questions you have to answer are,
"What's the target?" and "What's the
worth to us to meet the target?" From
here you map your existing financial
close process, including key dates and
durations, to identify your critical path
and the challenges. For example, you
could look at the time it takes to submit
packages from reporting units, the time
to complete the consolidation process,
and the time to announce the final
consolidated figures. Senior sponsorship
on project objectives and the
resources required to achieve them are
key to success.
The second stage is the implementation
of your quick wins. These serve to
produce almost immediate timetable
reductions, demonstrate that time savings
are achievable, and put people into
a positive and determined frame of
mind for delivering the bigger wins. The
key here is to understand that not all of
the barriers to a close require huge
amounts of effort ' in some cases, you
can easily make very significant gains,
provided your consolidation solutions
are robust and flexible enough. The
trick is to evaluate the options open to
you and prioritize them according to the
amount of time and effort needed to
implement and the size of the impact
on your close cycle. Those with the
least required effort but maximum
impact are the most attractive and
should be your quick wins.
Examples of quick wins include:
- Reviewing intercompany reconciliation
processes to take them off the
critical reporting path
- Developing mechanisms within your
consolidation applications for the validation
of data at the source, including
the submission of supporting
commentary
- Resolving data transmission bottlenecks
and data submission policies
during the close process
- Establishing the close process as a
managed one by using the workflow
functionality of your consolidation
tools to publish tables of the best and
worst performers and then implementing
coaching processes to
improve performance
Assuming that the quick wins by themselves
cannot lead you to achieve all
your targets or that you're unable to
implement them given your current systems,
you then move on to third stage,
the big wins. These require greater
resources and more time but often lead
to big reductions in the close process.
Examples of big wins include:
- Establishing a standard chart of
accounts across the entire enterprise.
Although this can bring many
benefits, including timetable reduction,
it can affect every GL in every
subsidiary ' and it's a major
undertaking.
- Implementing new consolidation software
where existing applications
were unable to deliver suitable quick
wins or provide a sustainable infrastructure
for the fast close in your
organization
- Harmonizing packs and processes
across reporting cycles. Standardizing
on the same data flow each
month helps to avoid discrepancies
and reduces timetables because the
increased volumes this standardization
typically produces forces subsidiaries
into automating processes and
standardizing their own systems. The
end result is often better data quality
and shorter timetables.
- Establishing a new reporting framework
for all stakeholders involved in
the financial close process to provide
a broader range of possibilities and
greater depth of analysis
- Where manual data entry processes
exist, replacing them with direct integration
between source ERP or GL
applications and enterprise performance
management applications
- Establishing a control environment
identifying the most effective and efficient
controls for financial close processes
and then streamlining and
automating them to minimize the
compliance burden
- Developing a framework to monitor
and control the entire close process
from local close activities in an ERP
application through to final statement
production in consolidation
applications
A key consideration ' and the final
stage in the action plan ' is continuous
process improvement. Once you have
identified a fast financial close as a priority,
each time you review a process
or supporting technologies for enterprise
performance management, you
do so in such a way that continues to
support and challenge the close
process.
Finally, it is important to note that the
benefits don't have to stop at the financial
close. Much of the learning can be
applied to other key processes. You
can apply the same type of methodology
' challenging the way you do things,
taking a holistic approach, and leveraging
technology ' to other processes,
such as planning, budgeting, and forecasting.
In fact, 72% of respondents to
the Business Objects and BPM Magazine
survey feel that integration of actuals,
plans, and forecasts is important or
very important in reducing close times
(see Figure 3).
SAP® SOLUTIONS FOR ENTERPRISE
PERFORMANCE MANAGEMENT
COMPREHENSIVE FUNCTIONALITY TO IMPROVE
EFFECTIVENESS AND PERFORMANCE CONTROL
SAP® solutions for enterprise performance
management are a comprehensive
set of solutions that help your
company capitalize on the value of your
existing data assets. With these solutions,
your organization becomes more
agile, gaining organizational alignment,
visibility, and greater confidence that
give you optimal control and competitive
advantage. These solutions can
integrate with SAP Business Suite
applications; SAP solutions for governance,
risk, and compliance; and the
business intelligence platform from
SAP and Business Objects. As a result
you can maximize business profitability,
manage risk and compliance, and optimize
corporate systems, people, and
processes.
For More Information
For more information about how solutions
from SAP and Business Objects
can improve your financial performance,
call your SAP representative
today or visit us on the Web at
www.sap.com/epm.
Acknowledgements
Business Objects, an SAP company,
would like to thank the BPM International
consulting network
(www.bpminternational.com) for its
permission to include findings from
Global Close Rankings 2008 and
Consolidation, Reporting and Planning
Functions in European Enterprises
2006 in this report. Business Objects
would also like to thank all those who
kindly gave permission to be quoted in
this paper.