the cfo playbook on accounting: gauging the pros and...

The CFO Playbook on Accounting:

Gauging the Pros and Cons of

Automating Financial Reporting

Richard Beacham

Principal, Management Consulting Practice, KPMG

Andrew Hickey

Partner, Deloitte & Touche LLP

Moderated by: Russ Banham, Senior Writer, CFO magazine

Monday, November 18, 2013

Copyright © 2013 Deloitte Development LLC. All rights reserved.

Close, Consolidation and Reporting Processes What finance challenges impact today's CFO?

Financial

Close

Consolidation

Reporting

• Multiple source systems with varying close cycle

dates;

• Close process is circular with several iterations;

• Increased time spent on data collection, data transfer,

data reconciliations, manual journal entry accruals

and reversals; and inconsistent data elements

residing in multiple source systems;

• Lack of an integrated transaction processing

architecture.

• Manual effort spent on manual journal entries and

use of spreadsheets;

• Inconsistent set up of the consolidation architecture

(i.e., incorrect segment reporting set up);

• Lack of an integrated consolidation system that is not

interfaced with the sub-ledger;

• Significant top sides adjustments that are not pushed

down to the business unit or documented

appropriately.

• Untimely management reports, limiting decision

making;

• Inconsistent Corporate and Business unit reports;

• Sets of disconnected tools are used to report

performance measures;

• Challenges meeting regulatory reporting requirements

given the length of the close process.

Impact on the CFO’s time

• Increased time spend determining that

the operations are running efficiently in a

controlled environment (Steward,

Operator roles);

• Less time spent being a driver for change

and focusing on business growth

(Catalyst, Strategist roles);

• Finance function perceived as data and

number collectors/crunchers rather than

as partners to the business;

• Lack of repeatable and efficient business

processes to support the business.

© 2013 KPMG LLP, a Delaware limited liability partnership and the U.S. member firm of the KPMG network of

independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All

rights reserved. NDPPS 228053

Increased

Efficiency

Reduced

Risk

Enhanced

Capabilities

Support

Future

Growth

Benefits of Automating Financial Reporting Processes Beyond Efficiency lies Value in Enhanced Capability…

Efficiency:

Shorter time to close

Reduced manual effort

More timely and therefore relevant management information for decision making

Lower cost or more time for analysis and quality review vs data gathering

Capabilities:

Enhanced analytic capabilities

Multi dimensional views

Drill down

Ad –hoc reporting

Internal comparability and benchmarking capability

Business Intelligence

Informational consistency between internal management reporting and external information provided to investors

Future:

Sustainable as business grows

Analytic “what-if” platform

Easier to integrate acquisitions

Supports reorganizations

Risk:

Reduced risk of manual error

Lower likelihood of missing filing / regulatory deadlines

Reduced risk of internal control failures

Increased

Efficiency

Reduced

Risk

Enhanced

Capabilities

Support

Future

Growth




Potential Risks and Challenges of Automation Scoping and Buy-in, Implementation, Acceptance…

Clarifying Scope

Aligning with IT strategy

Quantifying Business Case

Aligning business stakeholders

Obtaining Executive Support

Securing Budget

Availability of people

Lack of implementation experience

Conflicting reporting requirements

Unwillingness of business to

standardize reporting

Data gaps and inconsistencies in

underlying systems

Identification of additional process

changes and requirements during

build

Resistance to change

Underestimated training

requirements

Unrealized business case elements

Expectation gaps

Insufficient user support post

implementation

Errors not caught during testing

cycles

Delayed or inaccurate reporting

Continuous

Improvement

• Understand IT strategy

• Engage right group of stakeholders

• Develop vision and roadmap

• Build robust business case

Prioritize project portfolio

Assign dedicated resources

Address reporting requirements and

“paper standardization” first

Assess data quality and underlying

processes

Implement core functionality first

Communications and Change

Management

Involve end users in testing and

training development

Manage expectations through

communications

Establish user support structure prior

to final testing

Build in sufficient time for thorough

testing

Go live on non quarter month

Acceptance Risks Implementation Risks

Ways to Address Ways to Address Ways to Address

Scoping / Buy In Challenges


Many organizations are cutting down the time it takes to close the books:

1. Leveraging Technology Solutions to improve business processes

• Staging data through use of data marts/warehouses ;

• Using accounting rules engines (or calculation engines) to replace spreadsheets and manual processes;

• Implementing broad reporting platforms to minimize use of ad hoc reporting;

• Sub-ledger implementations that are interfaced with many core financial systems.

2. Continuously Improving Business Processes

• Optimizing manual business processes by leveraging technology to shorten close process

• Standardizing business process design and documentation including controls;

• Use of shared services for core transaction processing;

• Use of a well-defined common closing calendar that is centrally managed, documented and understood by many.

3. Establishing a Close Automation

• Integration of automated dashboard reporting solutions;

• Performing close calendar assessments to determine areas of improvement and/or areas to leverage technology capabilities.

4. Enforcing Balance Sheet Integrity

• Performing reconciliations on defined materiality and timing standards using consistent templates;

• Implementing broad reconciliation and automation tools that are utilized for matching and reporting;

• Establishment of a well defined reconciliation policy and procedure that is well defined, enforced, managed and governed.

5. Improving Data Quality

• Implementation of standardized data definitions across the organization;

• Existence of a common data model across the enterprise, with uniform data definitions and standard processes for information

capture.

Close, Consolidation and Reporting Processes Market place activity


Close, Consolidation and Reporting Processes Emerging trends in consolidation and reporting

Emerging trends around consolidation and processes are applicable to many companies that rely on a highly

intensive manual process. Some companies are taking the following steps in automating their consolidation and

reporting processes:

Consolidation

• Implementing a single enterprise-wide;

consolidation system that supports multi-currency;

• Centralizing GAAP consolidation activity at the

corporate level;

• Establishing standardized policies, processes, and

procedures that are monitored and enforced;

• Automating interfaces that collect and report data

elements as well as process intercompany

eliminations

• Automating a multi-tier reporting for management

and legal/financial structures;

• Automating consolidation process with

integrations with general ledger data;

• Implementation of an automated workflow to

organize, manage inquiries, decisions, and

approvals; associated with reclassifications and

top-side adjustments.

High-quality information

Transactional Data

Decision Support

Analysis

Reporting

Consolidate

Close

Policies, Processes,

Protocols, Procedures

Data

Transformation

Data

Transformation

Copyright © 2013 Deloitte Development LLC. All rights reserved. 7

Close, Consolidation and Reporting Processes Achieving a more integrated reporting and consolidation process

• Disparate stand alone systems;

• Increased manual processes and manual journal

entries;

• Lack of understanding of various data definition;

• Lack of understanding and ownership of close

calendar;

• Unclear reporting requirements that are sourced

from various systems

• Top side journals that are not pushed down

• Source systems with varying close cycle.

• Reduction in man-hours spent on the close and

reporting process;

• Use of existing technology to meet reporting

requirements;

• Scalable framework to address other reporting

requirements

• Reduced risk with enhanced internal controls

over the external reporting process

• Standardizing reporting systems, tools, and

master data ;

• Integrating reporting tools;

• Implementing broad reporting platforms with drill

down capabilities.

Automating External Reporting

Manually Intensive External Reporting




4.1

Trial Balance

Review (legal

entity based for

tax)

What about components that can’t be automated? Governance as path to quick standardization,

risk reduction & ROI…

ERP/Feeder Systems

Consolidation Application

Close Governance Technologies

Tax Systems

8.0

Continuous

Improvement

7.0

GL Close

Calendar

6.0

Reporting

5.0

Financial Data

Consolidation

3.0

General Ledger

Accounting

2.0

Allocations

5.3

Financial

Statements

Review

5.2

Consolidated

Financial

Statements

5.1

Business Unit

Financial

Statements

4.3

Management

Adjustments

3.3

GL Account

Reconciliations

3.1

Process Journal

Entries

2.2

Process

Allocations

2.1

Allocations

Set-up

1.3

Sub-ledger to GL

Reconciliation

1.2

Sub-ledger

Data Transfer

to GL

1.1

Transaction

Posting to

Sub-ledgers

(inc. tax stat info)

8.1

Policies &

Procedures

Updates

7.3

Consolidated

Calendar

Development &

Communication

7.2

GL and Tax

Close Calendar

Developments &

Communication

7.1

Pre-close

Meeting

6.4

Quarterly/Annual

Filings and

Shareholders

Reports

6.3

Notes to the

Financial

Statements

6.2

Prepare

Statements for

the Board

8.2

Accounting

Research

8.4

Post Close

Review

8.3

Regular

Communication

among Groups

Data Recording/Accounting Period Close Consolidation Reporting Communication and Governance

Process

8.5

Issue Tracking

& Resolution

4.4

Tax Calculations

3.2

Intercompany

Transactions

4.2

Preliminary

Financial

Statements

Review

6.1

Management

Reporting

Adjustments

5.5

Consolidated

Tax

Adjustments

& Tax

Allocations

6.5

Regulatory &

Tax Reports

5.4

Financial

Statements

Adjustments

9.1

Chart of

Accounts

Maintenance

9.2

Roll

Forward

Procedures

9.3

Interface

Maintenance

9.4

Other GL

Accounting

Rules

Maintenance

9.5

Security and

Work flow

Maintenanc

e

4.0

Preliminary

Financial

Statements

1.0

Feeder System/

Sub-ledger

Accounting

9.0

Accounting

System

Maintenance

Sub-Process

Common Application of Technology


Close, Consolidation and Reporting Processes Determining when to automate

Execution challenges

Stimulate behaviors across

the organization to achieve

strategic and financial

objectives

Performance challenges

Provide financial leadership in

determining strategic business

direction and align financial

strategies

Efficiency challenges

Balance capabilities, costs and

service levels to fulfill the

Finance and wider organization’s

responsibilities

Control challenges

Protect and preserve the

assets of the organization,

enable compliance, and

exercise good judgment

Today’s finance environment is more complex and challenging than ever. As a result, finance is facing significant

pressure from:

• Mergers and acquisitions

• Growing complexity in legal and operating models

• The increased demand for data analytics across the organization

• The need to playing an active role in corporate initiatives

• Increasing compliance and external reporting expectations

• Reducing or maintaining the current cost of finance

Each of these pressures demand a need for a more automated reporting processes that is enabled by an

integrated technology solution.

A CFO’s aspiration to be the driver of change and the strategist also influences the decision to automate accounting

and reporting processes.




Is automation right for your organization? What’s our Finance Function Maturity Level?

People Scorekeeper Business

partner Diligent caretaking

Reactive ad hoc

analysis

Business acumen

and financial

knowledge

Insightful analysis

people and comment

Driver of hypothesis

based Investigation

and change agent

Process Locally specific Standardized

and optimized

Disaggregated

processes and

responsibilities,

multiple G/Ls

Low degree of

standardization and

automation (divisions/

geographies)

Recommendation

for common

methods, processes

Standardized

processes globally

for low value high

volume transactions

Standardized

processes globally

for financial

management

Technology Incompatible

systems Global systems

Multiple systems,

tools and manual

interfaces

Unified consolidation

framework, multitude of

systems with interfaces

Standard systems,

interface layer and

data repositories

Standard

tools/applications, on

multiple occurrences

Standard tools and

applications, fully

integrated

according to a road map

Governance/

controls Informal

Centralized,

automated and

preventive

Reactive. Reliance

on manual detective

controls; no formal

governance

Regular reviews of

controls, some

analysis;

limited governance

Risk-based, near

real-time control

execution with some

automated testing

Use of systems-

automated controls and

analytic tools; global

governance standards

Automated, risk-based

preventive controls

integrated into existing

systems

Service

delivery

model

In-country,

decentralized

Global finance

function with

strategic

sourcing

Local finance

reporting into local

management; some

offshoring for low value,

high volume transactions

Strong alignment

with group finance

(hard dotted);

regional SSCs

Central guidance,

local implementation;

majority of finance

processing in SSCs

Global finance

community;

all financial

processes in

optimal locations

Autonomous finance

function, e.g.,

objective setting at

BU or local CFO

Data/

Reporting

Inconsistent and

decentralized data

& analytics

Information platform

supports actionable

analytics

Lack of analytics

capability and

standardized

KPIs/Metrics/

Measure

Data and reporting are

still spreadsheet driven,

not value driven, and do

not support decision

making

BU/Geographic/

Segment-specific data

analytics and reporting

Global standards/

guidelines for data and

reports; reports are

rationalized

Harmonized data

supports fully integrated

reporting across

organization




Where should I start? Building an overall vision / roadmap and business case

STRATEGY EXECUTION

STRATEGY ROADMAP DESIGN IMPLEMENT MONITOR

Clie

nt

Issu

es a

nd

Bre

akth

rou

gh

Id

ea

s

Business and

IT Strategy

Rapid Value

Assessment

Vision

Target

Operating

Model

Roadmap

Service Delivery

Model

People

Governance, Risk and

Compliance

Process

Technology

Data/Reporting

Re

qu

ire

me

nts

Ma

na

ge

me

nt

Business

Change

Implementation

Technology

Change

Implementation

Inte

gra

te a

nd

prio

ritize

in

itia

tive

port

folio

La

un

ch

, G

o L

ive

Re

lea

se

Ma

na

ge

me

nt

Transition to

Steady State

Ongoing

Maintenance

Continuous

Improvement

Business Case and Value Gateways

Program Design and Governance

Behavioral Change Management

Program and Project Management

Performance

and

Stakeholder

Value Analytics

De

sig

n A

rch

ite

ctu

re / S

olu

tion

De

taile

d I

mp

lem

en

tatio

n P

lan

1 2 4 3


Close, Consolidation and Reporting Processes Taking the first step towards automation

High Level Steps Description

Perform a current state

assessment

• Assess the current finance processes, technology and service

delivery model.

Future State Vision • Develop an integrated vision for the future finance function that

meets the information requirements of business leadership, and is

aligned with the systems architecture, future state operating model

and guiding principles.

Initiatives Portfolio • Identify, define and prioritize the initiatives required to close the gaps

between current state and required finance capabilities and

supporting infrastructure.

Finance Transformation

Roadmap

• Sequence and prioritize initiatives into a phased implementation

roadmap that is supported by a high level business case.

Finance Transformation

Business Case

• Develop a business case that is supported by leadership and key

stakeholders

About the Sponsor Based just west of Toronto in Canada, Prophix develops

innovative corporate performance management

software that automates important financial processes.

With powerful solutions built on the Microsoft SQL

Server stack, Prophix streamlines budgeting, planning,

reporting, consolidation, and more.

In 2013, Deloitte recognized Prophix as one of

the 50 fastest growing tech companies in Canada.

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