accelerating your close leveraging sap's closing cockpit

Accelerating Your Close leveraging SAP’s Closing Cockpit Balaji Krishnaswamy

PwC

SESSION CODE: FI 1071

Understand the current challenges with Close Process

and our approach and methodology to improve the close process

Improve your understanding of how SAP Financial

Closing Cockpit (FCC) can help to gain complete visibility into close process

Advance your knowledge of identifying and optimizing processes and tools automation to improve future closes

Learn how the features of FCC enhance monitoring controls around the close process

LEARNING POINTS

1

Introduction

Current Challenges

Close Acceleration – Approach & Methodology

Leading Practices

Tool enablement using SAP Closing Cockpit

Key Learnings

Wrap Up

AGENDA

2

Companies face increased pressure to provide higher quality information faster

and more efficiently.

External Pressures

• Higher expectations of transparency from banks, venture capital firms and other financing sources

• Increased scrutiny from the investment community with larger penalties for restatements and/or material

weaknesses

• Accelerated deadlines for certified results and greater complexities associated with multi-GAAP reporting

Internal Pressures

• Greater need from the business to provide critical decision support with timely and accurate analysis

• Increased responsibilities beyond traditional components of corporate reporting including planning, budgeting

and forecasting and business analytics

• Expectation to deliver insight into how to interpret data to drive decision making and improved performance

• Demand for automation and integration within financial systems for tax, management and operational

reporting

Cost Pressures

• Executives looking to maintain profit margins demanding better value for the money from finance functions

• Increasing pressure to do more with fewer resources without compromising accuracy and control

• Significant overtime, higher turnover and increased resource replacement costs

Source : PwC Point of View- Close-to-Report (C2R)

Today’s environment

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Indicators and Common Challenges

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There are a number of indicators that suggest there are opportunities to improve the close-to-report cycle.

Lack of Speed

Insufficient

Accuracy and

Control

Dependence on

Manual Processes

Ineffective

Decision Support

• It takes more than 5 days to close and generate consolidated results

• Earnings release requires more than 30 days or lags your key competitors

• Information is provided too late to support business and operational decisions

• Perpetual fire fighting with limited focus on strategy and vision

• Significant adjustments or corrections recorded after the books are closed

• Difficulty balancing inter-company transactions

• Material weaknesses or significant deficiencies

• External financial reports differ from internal management reports

• Significant manual activities and reliance on off-line Excel spreadsheets

• Disparate systems or multiple charts of accounts

• Plans to implement a new consolidation and reporting tool

• Poor coordination and communication

• Too much time collecting data and not enough time on analysis and decision support

• Limited standardization, complex reporting requirements and ad-hoc requests

• Potential financial surprises are difficult to identify

• Inconsistent data and limited performance measurement

Attributes of efficient close cycle

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A smart, efficient close to report cycle creates a foundation for evaluating performance,

supporting business decisions and satisfying external reporting requirements.

Characteristics of a successful C2R cycle

• Focus on discipline, control and accuracy as opposed to

speed

• Improve accountability and control

• Simplify and standardize processes to eliminate unnecessary

complexity and inconsistencies

• Streamline the close by appropriately sequencing work steps

and by eliminating bottlenecks, duplication of effort, and non-

value added activities

• Focus on process and effectively leverage technology

• Align process with stakeholder needs to provide effective

decision support

Business benefits

• Gain earlier access to financial results and

spend more time analyzing information

• Reduce volatility in financial data and improve

confidence when certifying financial

statements

• Obtain more timely and accurate information to

support business and operational decisions

• Automate consolidation activities and

minimize adjustments

• Streamline the flow of information to support

disclosures, MD&A and other statutory and

regulatory reporting requirements

• Improve credibility in the market and within the

organization

• Respond to regulatory requirements and lower

overall compliance costs

• Improve control and minimize the risk of

material weakness and/or restatement Source : PwC Point of View- Close-to-Report (C2R)

Project management & quality control

Analyze & redesign

Test and roll-out

Continuous improvement

• The initial stage requires

a strategy and focus

dedication of a project

team to move forward.

• Alignment of realistic

objectives needs to be

properly communicated

with stakeholders and the

project team.

• A detailed assessment to

identify specific

bottlenecks in the closing

process highlight the pain

points and opportunities.

• An evaluation of

proposed solutions

should be prioritized to

attain desired results.

• “Quick wins” can be

implemented near-term.

• Organization, process,

structural and information

technology changes

require testing and are

ultimately rolled-out

according to a plan

sequentially.

• Change communication is

critical to the success of

the effort.

• In the final stage. A

program to ensure

continuous improvement

procedures to ensure

that hard won gains are

not lost.

SmartClose ™ Methodology for SAP

Our proven approach focuses on maximizing the close process

across strategy, structure, people, process, and technology.

Technology

Process

Strategy

Change management

Structure & people

Strategize & mobilize

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Close Acceleration - A holistic approachstiapproach

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Dimension Approach

Strategy

Is the company’s financial strategy aligned

with the overall vision of the organization?

• Review key drivers to monitor performance

• Determine consistency with planning, reporting and analysis

• Look for corporate leaders, not silver bullets

• Consider opportunities throughout the close and reporting cycle

• Identify known strategic gaps

Structure

Are the financial organization structures

meeting the needs of internal and external

stakeholders?

• Evaluate alternative operating models

• Review alignment of your structure to meet specific stakeholder needs

• Determine effectiveness of collaboration throughout the organization

People

Are the resources and financial talents of the

organization high performing?

• Evaluate roles and responsibilities in the organization

• Review closing calendar, determine whether defined milestones support

accountability

• Evaluate workload distribution and resource alignment

• Determine effectiveness of communication throughout the organization

• Measure performance and rewards

Process

Are financial processes streamlined,

simplified and standardized throughout the

cycle?

• Determine effectiveness of sequenced activities and whether work is performed away

from the close

• Evaluate appropriate use of estimates and materiality thresholds

• Review issue resolution process and determine effectiveness of root cause analysis

• Assess the quality and value of the monthly C2R cycle

Technology

Are the capabilities of systems and tools

properly leveraged?

• Identify opportunities to further leverage technology

• Evaluate employee technology proficiency for the current systems or applications

• Determine whether intensive manual activities are automated

• Evaluate the use of data to appropriately meet organization reporting needs

• Leverage tools to track status real-time and promote accountability

Achieving sustainable improvement in the close-to-report cycle requires a holistic

approach that considers factors across all business dimensions.

PClose Question # 1i1Closeng Question#1

What is the average number of days to close the

books?

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Answer # 1 estion#1 – Results

What is the average number of days to close the books?

7.0 days

– PwC Global Practices Benchmark

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Since Sarbanes Oxley added rigor to the Financial

Reporting Process, has the number of days increased or decreased?

PClose Question # 2i1Closeng Question#1

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Since Sarbanes Oxley added rigor to the Financial

Reporting Process, has the number of days increased or decreased?

Our data suggests, on average, it takes longer to

complete the ‘Financial Close Process’


Answer # 2 estion#1 – Results

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PwC Global leading practices on Close to Report ices

close to report

Benchmark group: Number of days (close to report)

Average days Min Median Max

Monthly 8.2 1.0 5.0 7.0 10.0 30.0

Quarterly 12.2 1.0 6.0 10.0 15.0 66.0

Yearly 28.9 1.0 10.0 16.0 33.0 270.0

Full cycle average is 8.2 days.


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Leading practices to achieve a 5-day close

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Common 5 day close

Close activity Day activity complete

Production/Process Order Closure -1

Payroll -1

Inventory -1

Material Close 0

Accounts Payable 1

Fixed Assets/Depreciation 1

Cash 2

SG&A Accruals 2

Revenue 2-3

Operational Costs 2-3

Accounts Receivable 2-3

Intercompany 3

Legal Entity Ledger Close & Review 3-4

Consolidation Activities & Review 4-5

Management Reporting 6-7

Common characteristics

• Intelligent use of accruals and estimates

• Proactive issue resolution and error correction

• Streamline transaction processes

• Automation or elimination of manual entries

• Elimination of non-value-added activities

• Automation of reconciliations

• Elimination of duplicate data entry

• Utilization of materiality thresholds

• Workload distribution away from period-end

• Accountability and enforced deadlines

• Publish the closing calendar and track status

• Cross-trained finance personnel

• Clear and regular communication

• Continuous process improvement

Common SAP close practices


Close Acceleration tools

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Opportunity Potential Benefits

1. Financial Closing Cockpit • Improve effectiveness of close process communication and evidence completion of

sequenced tasks through technology

• Enables improved accountability for financial closing tasks

• Improved visibility to close activities throughout close cycle

• Enables sequencing or change in sequencing and alignment of triggers

• Allows for scheduling of batch jobs or reports within close process

2. New General Ledger • Enable multi-GAAP or financial reporting requirements through common book of record and

use of parallel ledgers

• Improve integration with document splitting – reducing intensive manual reconciliations

• Maintain audit trails and book to report differences in common ledger

• Balance sheet across multiple dimensions

3. Business Planning and

Consolidation

• Enable fully integrated financial planning and consolidation

• Improve analysis and cause of change between plan vs. actual results

• Enable single source of the truth for planning and consolidation

4. Improved Analytics through

HANA , BI Accelerator,

Xcelsius and Crystal

• Improve performance of reports or processing using in-line memory computing

• Enhance availability and reduce run-time for transaction intensive reports

• Improved reporting capabilities from executive dashboards to ad-hoc reports

5. Optical Character

Recognition and Data Entry

tools

• Enhance entry of data intensive transactions such as vendor invoice entry or manual entries

• Scan invoices and reference originating financial transactions

• Improve compliance and preserve audit trail by tightly integrating financial postings and

documents

6. Disclosure Management and

XBRL

• Improve report format and explanation of cause of change

• Reduce time and effort required to generate XBRL reporting

• Eliminate XBRL outsourcing services

7. Mobility • Improve presentation layer enabling mobile devices

• Enables on-line transaction processing or approval through mobile device

An integrated SAP Business function or Add-on to plan,

automate, execute and monitor period end activities in SAP, as

well as with other systems.

The Closing Cockpit enables business to standardize the close

process globally and automates wherever possible.

It increases visibility into all steps of the close, allowing

analysis of bottlenecks and time spent for each action.

Provide email notifications to the next stakeholder after the

dépendent task is updated.

Source : SAP

SAP Financial Closing Cockpit – What is it?

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SAP Financial Closing Cockpit - Overview

HOW DOES IT WORK?

The Closing Cockpit provides a central template that includes:

Tasks to be executed as part of the close and a timeline for the tasks (e.g., Run payroll on key

date -1 day, Run allocations on key date +1 day)

Users responsible for executing and monitoring the tasks

Enforcing any dependencies between tasks (e.g., Do not run allocations until Payroll data is

available).

The template is repeatable as it is copied to task

lists;

The responsible users access this task list to initiate

their tasks (both manual and automatic), monitor the

task status and document the progress of close;

When the close is complete, this task list is used for

compliance purposes to provide documentary

evidence concerning what close tasks were

executed when and by whom.

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Entity Close Process in SAP FCC

• Plan the close centrally

• Original template is created for the local close

• The template contains all tasks relating to the local close

and a default schedule

• Task dependency settings are completed within the

template

• The template is repeatable as it is copied to Task Lists

Corporate Controller Local Controller Shared Service Center / Local Accountant Local Controller/

CFO

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• Generate and Release Local task list

• The task list contains all tasks relating to the local close

and the calendar for the tasks

• Schedules the task execution based on monthly or factory

calendar.

• The task list contain scheduled tasks for automatic

execution, manual transaction execution or just manual

task to update status and documentation.


CFO

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• Tasks can only be executed from the Task List.

• Task list owner can re-schedule task as required

• Task owners can add comments and explanations for

review.

• Once the task is updated, relevant audit trail is available for

compliance tracking

• Job log, Spool and change documents are available at task

level


CFO

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The status and progress of the local close can be

displayed as BI queries that provide realtime access

to the close figures.


CFO

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Monitor and Metrics – Status of Close Close

Optimize Gain Insight

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BI Queries – Monitor and Control Close process

• Used to monitor tasks and how the process is tracking against

plan.

• Do not contain any financial data instead they display the statuses

of tasks in a Task List.

• Can be accessed only via the Enterprise Portal and access can be

provided to most financial users by default.

• Use “Direct data” access to read the data from the live system

rather than data replicated to BI.

• At the start of each close, the task list structure (hierarchy of tasks)

need to be extracted once to BI.

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BI Queries – Monitor and Control Close process – cont.

Close Status Overview - Provides an

overview of the closing status of each task

list.

Close Schedule Overview - Provides an

overview of the planned start and end times

and the actual start and end times for each

task.

Close Schedule Monitor - Monitors the

tasks# implementation status for tasks not yet

executed.

Close Schedule Analysis - Analyzes the

tasks# completion status.

Close Status by Unit - Provides an overview

of the closing status by company code..

Designed for controllers who are monitoring

the status of each company code assigned to

the close..

Queries delivered for Reporting on the

Local Close.

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Automates the close by making it possible to schedule all jobs

associated with the close centrally and automatically passing the start

parameters for the relevant task to each job.

Accelerates the close by making dependencies and bottle-necks

transparent; by providing a tool in which all parties involved can monitor

progress.

Ensures a compliant close by providing a central data repository for all

documents, logs and comments relating to the close.

Provides key figures that allow management to understand in which

tasks time is lost in the close process

Provides* email notifications to inform the responsible person/processor

about the task status i.e Task over due, Pre-requisite task completed .

* Feature available with Closing Cockpit Add on version

Financial Closing Cockpit - Benefits

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SAP FCC - System Landscape

ORACLE JD Edwards SAP ERP 6.0 Other Systems

SAP ECC EhP7 with

Business function for

Closing Cockpit

activated

(FIN_ACC_LOCAL_CL

OSE 3 ) *

* FIN_ACC_LOCAL_CLOSE 3 is the business function for activating closing cockpit as part of

SAP ERP Enhancement Package 7 for SAP ECC. However business function for activating SAP

Closing Cockpit is available from SAP ECC Enhancement Package 3.

SAP GUI

SAP Enterprise

Portal

SAP CPS

(Central Process

Scheduling)

SAP BI

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Email notifications and Custom scenarios

Template Export and Import

Time Zone at Task Definition

Cross Template Monitor

Change documents monitor

New Task Types

Background job Monitor

Paused Status for Task Lists

FCC Add-On features

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FCC Features – Evolution

SAP ECC EHP 3 -

*FIN_ACC_LOCAL_CLOSE

SAP ECC EHP 5 –

*FIN_ACC_LOCAL_CLOSE_2

SAP ECC EHP 7 -

*FIN_ACC_LOCAL_CLOSE_3

SAP Financial Closing

Cockpit Add-on 2.0**

• Comprehensive and

user-friendly WEB UI

• Ability to add comments

to tasks through Portal

• Operation across SAP

clients or systems as

well as non-SAP

systems

• Advanced grouping of

tasks into phases and of

task lists by status

• Integration into SAP Net

Weaver Portal or SAP

Net Weaver Business

Client

• Mass change for Closing

Template and Task list

• Maintenance of

Dependency

• Multiple calendars at folder

level in same template

• Responsible assignment,

support document upload,

list, new closing

organization: Plant, etc..

• Improved integration with

SAP CPS and workflow

• Simultaneous multiple

access of task list

• Adding customer fields

and documents to a task

• Setting the current

template or task list as

the default

• Time zones are

supported

• Easier ways of creating

and releasing task lists

• Defining multiple

destinations for SAP

CPS in the cockpit

• Template Export and

Import

• Time Zone at Task

Definition

• Email notifications and

BADI for custom

scenarios

• Cross Task list and

change documents

monitor

• Paused Status for Task

Lists

• Storage of Spool list and

Job Log

* Business function activation or Add-On installation is a pre-requisite for using

Closing Cockpit.

** Add-on includes features of business function available as part of SAP EHP7.

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Leading Practices and approach to accelerate the Close

Process.

Designing the Global template is key to successful implementation of SAP FCC.

Finance team should be responsible for the template and

task list maintenance.

SAP FCC integration with BI and Enterprise Portal provide greater value to enhance close process.

Monitoring of the Prior Close process and updates to the

Template need to be an ongoing activity.

KEY LEARNINGS

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FCC supports closing tasks from multiple transaction

systems and integrates the Close Process.

BI Queries help to monitor and control the close status and improve the future close.

Leveraging FCC Add on features provide more

opportunities to enhance the close process.

KEY LEARNINGS

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STAY INFORMED

Follow the ASUGNews team:

Tom Wailgum: @twailgum

Chris Kanaracus: @chriskanaracus

Craig Powers: @Powers_ASUG

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THANK YOU FOR PARTICIPATING

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SESSION CODE: 1071

For ongoing education on this area of focus, visit www.ASUG.com

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accelerating your close leveraging sap's closing cockpit

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