Signs that Your Financial Close Process May Be Broken

From Elizabeth Milne, Senior Director Product Marketing EPM, SAP

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Recently I worked with Deloitte to publish the paper “5 Signs that Your Financial Close Process May Be Broken (and What to Do about It).” Deloitte is a fantastic partner with massive experience working around the close process and helping organizations shorten the close cycles and improve quality.

I worked with John Steele, Principal, Stuart Scott, Senior Manager, and Swapna Satwik, Manager at Deloitte on this paper. We had many conversations sharing our experiences working with customers to define the “5 Signs.”

The area of the financial close is where I’ve been focused pretty much since the beginning of my career. I started out working in finance at The Walt Disney Company and at Warner Bros closing the books and creating financial reports. Later, I moved to the software side of things and spent eight years implementing consolidation software.

Part of the fun of working on implementations is working with the customers to understand their processes and how we can improve them. The area of financial consolidation certainly has it’s complexities, but there are also consistencies across organizations.

So what are the five signs?

  • No defined close process
  • Not enough automation
  • No access to real-time data
  • Poor integration with plan and actual data
  • Manual creation of financial statements

And what should you do about them? Well, download the paper to find out!

In order to improve the close process, you need to identify any area where you can standardize, automate, and centralize. This analysis should cover people, processes, and technology.

To read the paper, visit Deloitte’s collateral kiosk and search on Financial Close.

 

This article was originally posted on the SAP Analytics blog channel, 21 August 2014

New SAP Press Book Offers Primer on Financial Planning and Analysis

From Malcolm Faulkner, Sr Director Product Marketing, SAP

A book I co-authored has recently been published by SAP Press and is now available on their website. I’ve been asked by my SAP enterprise performance management (EPM) marketing colleague, Mr. Chris Grundy (who manages our EPM social media programs) to write a blog explaining why we wrote the book, and to describe the whole experience. In this blog, I’ll provide a short overview of the book itself and in a second blog, I’ll share some of the lessons I learned in writing a book.

FPA Book

First off, the intention in writing the book was to explain in one place what financial planning and analysis processes are and how SAP software can make them more effective and efficient. The book is written as a primer for everyone interested in implementing SAP’s enterprise performance management applications to improve their strategic, financial planning and profitability analysis processes.

To that end, I truly believe the book provides enormous value to anyone interested in these functions and how software applications support them – in general and specifically, SAP applications. Enterprise performance management is an enormous subject that embraces many functions and business practices.

If you work in strategy, financial planning, or business analysis or a related field, and particularly, if you use or are considering using SAP software, then I hope you’ll check out Financial Planning and Analysis with SAP: SAP Solutions for EPM, by William D. Newman and myself.

Part 1 – The EPM Foundation

In Part 1 of the book, we define enterprise performance management, discuss it’s relation to business intelligence (BI), describe the financial planning and analysis lifecycle, and cover the key processes that occur in it. These include strategy development and translation (execution), planning, budgeting and forecasting, profitability and cost analysis, and internal monitoring and external reporting of performance. We also introduce the EPM portfolio from SAP.

Part 2 – EPM Products from SAP

In Part 2, we explore the three key EPM applications used to enable financial planning and analysis – SAP Strategy Management, SAP Business Planning and Consolidation, and SAP Profitability and Cost Management. We also have a chapter on SAP Financial Information Management, the “glue” for integrating SAP’s EPM solutions. Lastly, we discuss the use of both SAP’s EPM products and BI tools for continuous performance monitoring and support of reporting requirements.

Part 3 – Leveraging Capabilities from Alternative Software Solutions

An important component of EPM applications is financial consolidation. This is the sister of financial planning, so we include one chapter on it just for completeness. For more information on financial consolidation you can also read Accelerated Financial Closing with SAP by James Fisher, Elizabeth Milne and Birgit Starmanns.

Deploying an EPM application shouldn’t be a protracted process. While they may embody sophisticated forecasting and modelling processes, they aren’t massive ERP applications. Therefore, the implementation times should be correspondingly shorter.

Customers are also looking for pre-built content and best practices. SAP bundles (and sells) pre-built content along with the underlying applications and a prescribed set of services that are called rapid deployment solutions (RDS). We discuss the RDS’s that currently exist to help accelerate the adoption of SAP’s EPM solutions within financial planning and analysis.

EPM is a broad domain and uses data pulled from many other systems and sources, particularly ERP and data warehouses. Therefore, it would be remiss not to include some discussion of peripheral solutions, integrating SAP EPM with them and investigating how to extend EPM capabilities into other SAP solutions.

Part 4 – The Future of Enterprise Performance Management

Anybody involved with financial planning and analysis (whether on the business or IT side) is well aware of the developments in Big Data, cloud, and mobility, along with innovations in analytics. These advances are beginning to change the way we access and use applications along with providing additional power, capability and convenience. This last section talks about the relevance of these emerging technologies and highlights the future and planned innovations for EPM from SAP.

Wrapping it up

As I wrote in the forward, when writing this book, we focused on four key processes in financial planning and analysis, which themselves are composed of many sub-processes and activities. That’s a ton of stuff before we even begin to think about SAP’s EPM portfolio. On top of this, we have to consider the turmoil from a rapidly changing global business environment and huge technology shifts that are dramatically changing the way in which applications are built, deployed, and used. To say that writing this book was a massive undertaking would be an understatement to say the least. However, we believe that it fills a void and hope that it will help all readers better grasp the issues and importance of EPM.

This blog article originally posted on SAP Analytics 14 August 2014

Is Yoga our best performance management tool? – Part 2

From Malcolm Faulkner, Senior Director Product Marketing, SAP

Optimal performance depends on the effectiveness of the employees and management. Peak performance requires us to have alert and agile minds. In business we need to monitor the environment for changing conditions, opportunities and threats. Agile minds means we are able quickly interpret situations and devise appropriate responses. We were not created to be sedentary creatures and we can only have optimal mental performance if we are physically fit. Whether or not you do other forms of exercise Yoga makes a good complement as it stretches and relaxes tight muscles. Organizations in turn benefit from fit employees. Some progressive companies have recognized this and in addition to having onsite workout facilities schedule Yoga classes.

Continuing on from part I where I wrote about four ways in which Yoga helps you perform better, here are my five other reasons.

  • Focus
  • Patience
  • Courage
  • Clarity of mind
  • Fitness and health

5. Focus

In a world of increasing technological distractions and ever shortening attention spans the ability to focus is seemingly becoming a lost art. Some activities simply require deep concentration. Try computer programming or writing a blog, while being constantly interrupted. Instead, try taking some time with the smart phone and your browser shut off and focus your mind on a task at hand.

6. Patience

Depending on our job at some point we all have to either deal with unhappy customers, difficult co-workers, micro managers, overbearing, irrational bosses and worse. All of which require patience. How we handle these situations makes all the difference – we can escalate or mitigate. Yoga poses take time to perfect – they teach us to be patient.

7. Courage

Perhaps strange but courage is a word I hear yoga teachers use often. How exactly does yoga teach us courage? Our lives are not in danger and we are unlikely to get hurt. If it gets difficult we can stop. I’ve been doing yoga for so long I am completely un-phased about walking into a studio. In fact, as a Bikram yoga junkie I relish the heat. Yet, I often see the apprehension on newbies faces. The simple fact is they know they are about to struggle and endure the effort and exhaustion caused from a new and rigorous exercise practice. Some poses are frankly frightening as you could fall over while trying to do an unsupported handstand or headstand and break or tear something nasty. It would be easy to opt for something else less painful (at least initially). Developing the courage to do some of these “dangerous” poses might take years. The same is true in our personal and work lives – making difficult decisions takes courage and it is usually easier to opt for the status quo.

8. Clarity of mind

Having a clear mind allows us to make good decisions, to not overreact and to find the best course of action in any situation. It is hard to make good decisions when you are stressed or flustered. Yoga encourages and provides us with an opportunity to practice focusing the mind and in doing so clearing it of the plethora of thoughts that permeate and convolute our physical existence. This is possible because of the effort and concentration required to hold and perfect a pose. Through this mediation miraculously we begin to see things clearer and calmer. We can explore all angles of an issue and will likely formulate a more measured, well-thought out response to any problems, disputes or challenges that vex us, than we would have otherwise.

9. Fitness and health

Recently I read that a couple of years since the London Olympics that perversely physical activity in the UK has declined to levels below before the games. The desire to exercise is a personal thing. For those that don’t like to exert themselves physically there are forms of yoga that provide the many benefits described above in a gentle, gradual way, without the need to sweat so much. Much of the benefits of Yoga, after all are achieved through releasing and relaxing. That said Yoga comes in many forms. Arguably there is a form for all types of personality. The hot, sweaty, Bikram kind, graceful flows, gentle Yin Yoga and Iyengar for perfectionists, to name a few.

Mixed race woman using tablet computer on yoga mat

There are many other personal and professional benefits that can be derived from a regular Yoga regime beyond those discussed here. What you work at in one area of your life transfers over to other parts of it. So your Yoga practice serves as a microcosm for how you act off the mat. Certainly, it is hard to argue against the virtues of a centuries old practice. Yoga then will not only make you fitter, healthier and less stressed out, it will make you mentally more stable and calmer – better able to function in the rigors of your work life. It will also make you more effective, efficient and happy. This is all good business.

If you’re skeptical give it a try. But commit yourself to at least 3 times a week for a month at the minimum. See how you feel – and if it makes a difference and you’re inclined then please share your experiences here.

Is Yoga our best performance management tool? – Part 1

From Malcolm Faulkner, Senior Director Product Marketing, SAP

Yoga was conceived thousands of years ago as a practice designed to clear the mind of distracting thoughts through completion of a series of demanding physical postures held for a few seconds or even minutes. While Yoga by origin is a spiritual practice a by-product of it is better health and fitness. For many people this is the reason they do it. Yet the benefits of Yoga extend to the mental and emotional as well as the physical.

With the increasingly rapid advancement of technology machines and devices are doing increasingly more of the tasks that humans previously had to – many of them better than we could – but for the time being people run businesses and the performance of individuals and teams remains the ultimate determinant of results. Therefore, anything that helps us perform better in all aspects of our lives, not just work, is a good thing. It’s a simple fact that healthier, happier, more relaxed people, able to think clearly and make good decisions are good for business. Not to mention the reduction in lost productivity and associated medical costs caused through poor health and sickness.

In this two-part blog series I’ll share nine ways Yoga will help you perform better individually and in your career and correspondingly benefit your employer. The first four ways which we’ll cover in part I are:

  • Balance
  • Flexibility
  • Integrity and
  • Discipline

yogaman

 

1. Balance
Balance is an integral part of yoga poses. If you are off balance emotionally then how you respond to what life throws your way is much harder. It’s a bit like trying to reach for a glass from a cabinet while standing on a three-legged stool.

Analogously, for organizations the Balanced Scorecard was developed in recognition that organizations need to focus on more than financial (for profit) or customer (non-profit) goals in order to prevail. Any company that is purely financially focused will not survive in the long term. Sacrificing product quality to maintain margins will eventually lead customers to look elsewhere and competitors to emerge. Pushing employees to deliver more without addressing their job satisfaction is only successful in a down economy. When conditions improve and jobs abound they will surely hop ship.

2. Flexibility
A flexible body leads to a flexible mind as the saying goes. In business we often see the term, agility, described as a desirable characteristic of top-performers. Agility refers to the ability of shift course on a dime and refocus resources rapidly in response to new opportunities or changing conditions. Accordingly, business processes need to be flexible. There needs to be a readiness of available resources that can be diverted. There needs to be a willingness of management to act and there should not be bureaucratic processes that allow individuals to delay changes because the rules permit or require them to do so . So agility depends on process and people but the willingness to be flexible has to be there. As individuals we need to be flexible in the face of inevitable change – to bend with the prevailing winds, adapt to new environments, and accept and embrace change. Without an openness (or flexibility) to change it will not happen easily. We need to follow a path of least resistance and adapt. As Charles Darwin wrote “It is not the strongest of species that survives, nor the most intelligent … it is the one that is the most adaptable to change”.

3. Integrity (honest conduct)
You know (hopefully) whether you possess this quality or not. When you are bent over in Dandayaman-Bibhaktapada-Janushirasana (you can look it up) halfway through a rigorous hot yoga class you can rest up and not put your head on your knee. Assuming you have some moral compass you know whether you are being honest or not.

As individuals or organizations we will eventually pay a price for any lack of integrity. It may not be immediate but sometime, somewhere down the road we will meet the piper. The great tech meltdown of the past decade saw the eventual demise of companies (and their leaders) that lacked integrity.

4. Discipline
It is hard to practice (yoga) day in day out. In the same way it is hard to mediate, exercise, eat well, abstain from temptations and the list goes on. We understand the rewards of a disciplined life but it takes immense effort sometimes, perhaps often. Sometimes you don’t feel like it and the mental effort to drag your body into the studio can seem overwhelming. Yet, you would never regret doing it. If we can make the commitment to follow through and remain dedicated to a task in one area of our lives then we can apply the same discipline in other (work) activities – and see them through.

Look out for part 2 of this blog where I’ll cover five other benefits.

Is Your Finance Organization Thriving or Merely Surviving?

Coffee-break with GameChangers

Enterprise performance management (EPM) solutions are redefining how organizations manage and grow business. New technologies have exploded and the possibilities must seem endless to those in charge. In a recent SAP Game-Changers radiocast, panellists Steve Sussman, VP of sales and marketing for Column5; Michael Svolos, senior director of TekLink; and Karuna Mukherjea, senior director of product marketing on the SAP solutions for EPM team, offer insights into three main areas: enterprise mobility, cloud, and social and beyond.

Determine the value of your enterprise mobility processes
Moderator Bonnie Graham quotes Mukherjea as saying that “mobility is core to a successful EPM solution workforce.” Mukherjea asserts that EPM processes have gone mobile, giving users the ability to provide real-time input while on the job.

Mobile solutions are helping companies expand and accelerate EPM advancement, but, as Sussman cautions, “without doing the hard work up front of rethinking the process, they are putting themselves at risk of actually seeing any value from that investment in the project.”

He continues, “The big challenge sometimes is to convince the organizations not to just apply the technology to the existing process but to really use that as an option to rethink the process and how it currently operates today.”

Svolos echoes, “It’s important not to fall in love with what you are doing but rather understand why you are doing it.” This is the kind of distinction that makes the difference between surviving and thriving.

Accelerate innovation through cloud adoption
Svolos explains that many of his larger customers – Fortune 500 companies – are not adept at quickly shifting technology. With the cloud, however, they’re able to quickly see results such as proof of concept – enabling them to take their data, try it out on a cloud-based system, and achieve the ROI that they are expecting.

Mukherjea adds that cloud “has not only reduced the barrier to entry into organizations as we develop new solutions… but more importantly it’s about agility.” Svolos agrees that part of the allure of cloud is the predictability of cost to implement and support the platform over time.

Get ready to go “mocial”
And get ready for another industry buzzword. According to Mukherjea, the terms mobile and social have formed the amalgam “mocial,” referring to social collaboration that promotes work-life balance.

Many new technologies, such as the SAP Jam social software platform, foster real-time collaboration within a small network. Integrated with EPM processes, such platforms can greatly simplify and accelerate problem solving or keep problems from cropping up in the first place.

So where can all these innovations take EPM and finance? The panellists foresee a new title called “Chief Financial Technology Officer (CFTO)” coming into the mix to more seamlessly handle the new technologies that will define EPM.

To learn more, listen to the full radiocast.

How do we transform finance to cope with constant change? One word; Collaboration!

From Steve Player, North America Program Director for the Beyond Budgeting Round Table (BBRT)

Throughout my ten part blog series I have been discussing how CFOs can use new technologies to help leverage the finance team in providing greater organizational value. In the capstone summary I also wanted to note that underlying each of the changes discussed is a theme of greater collaboration.

Businessman and businesswoman using digital tablet in office

In many ways technology is enabling this collaboration. But your speed of adoption will increase if you start with a spirit of collaboration before any implementation begins:

  • A strong CFO looks to collaborate with his or her key lieutenants. More effective plans are developed when everyone is looking to optimize the whole organization.
  • A strong corporate finance team looks for ways to team with the business units they support. How can information be shared across units to make the whole stronger than the individual parts?
  • Strong finance teams also look to gain advantage by teaming up and down the value stream. For instance, the concept of eliminating duplicate data entry extends up and down the value stream. Why re-key a key vendor’s data or ask your customer to re-key yours?

New technologies such as integrated planning modules are leveraging collaborative work flows which are often imbedded into the design of new modules. These systems provide real time status of work flow which can be tracked automatically. Group messaging and polling functions facilitate online dialogues which can be happening with people around the globe. Joint work efforts can be tracked by automated audit trails maintaining change history. Teams can access the organization’s knowledge bases though on-line content management systems – anytime, anywhere. Even security concerns are better addressed as prepackaged solutions build in the security checks.

Old approaches that relied on linked spreadsheets had finance teams constantly trying to validate if they were working on the right numbers. Past surveys [1] have estimated that FP&A teams spend 47% of their time collecting and validating date. They spend another 30% of their time administering the planning process. As a result, they only have 23% of their time to do any real value added planning work. The new technologies we are discussing (mobile, in-memory, predictive analytics, and cloud) can flip this equation leaving finance teams free to focus just on collaborating and doing real planning work.

In addition to collaboration, success with these new technologies requires three key elements. The first is leadership and whether they are willing to explore new ways that finance can improve organizational value. This is likely a CFO who is looking to have greater impact. The second is an organization with a willingness to change. In addition to collaborating, there also needs to be an openness to what is possible. This leads to the third element which is experimentation. As Peter Drucker advised, systemic innovation “consists in the purposeful and organized search for changes, and in the systemic analysis of the opportunities such changes might offer for economic or social innovation.” [2]

Whether you are a CFO or just someone in looking to add greater value, ask yourself these questions:

  1. What changes should we be making to expand the value our finance team creates?
  2. How should our planning, budgeting and forecasting process change to take advantage of the next generation planning tools already here?
  3. How can in-memory computing help us harness Big Data for greater insights?
  4. What predictive analytics will provide us with greater lead time for improving?
  5. How can we better reach our strategies by aligning our execution efforts? What should be dropped to create capacity for what needs to be added?
  6. Which customers provide our current profitability? How will that change in the future?
  7. How can we improve the return on all expenditures?
  8. How can we eliminate wastes by moving to real time consolidation?
  9. How can we increase our response times using real time close and disclose approaches?
  10. How can finance improve collaboration?

Finally, how can finance find the time to pursue these goals? That begins with your leadership and identifying dumb stuff you are currently doing that should stop. I hope this series of blogs have helped get you started.

[1] See joint studies by APQC/ Beyond Budgeting Round Table (BBRT) and by Business Finance Magazine and BBRT. See “The Budget (1922 – 2009) Is Dead” by Jack Sweeney, Business Finance magazine, June 1, 2009.
[2] Drucker, Peter, Innovation and Entrepreneurship: Practices and Principles, (New York: Harper & Row) 1985, page 35.

Steve Player

Integrating Financial Analytics with Operational Transfer Pricing to Optimize After-Tax Profitability – Part Two

From Rob Jenkins, SAP Global Center of Excellence

In my previous blog, I discussed a variety of financial planning and tax modeling requirements and the disparate analytic tools finance teams are using to achieve their objective of partnering with the business to optimize decision making. Today, I want to discuss the rise (again) of profitability and cost management software.

For more than 20 years, profitability and cost management software has served a niche in finance and operations where organizations needed to model complex business rules of cost assignment, attribution and allocation in multiple process steps using driver volumes and multi-dimensional views. These data inputs often include financial values and non-financial measures by department, account, process, customer and/or product components in multiple layers all the way down to the bill-of-materials.

Gartner refers to this application space as Profitability Modeling and Optimization (PM&O) – part of corporate or enterprise performance management. These enterprise applications enable business users to use a point and click interface to rapidly build profitability and/or cost models and leverage built-in reports and OLAP (online analytical processing) multi-dimensional database for storage. Originally developed for activity-based costing purposes in the 1990’s, these PM&O applications have been adapted over the years to enable any methodology of complex revenue or expense allocation using a multi-dimensional database environment.

Organizations can transform source financial data where revenue and expense are typically captured in disparate dimensions into aligned, common dimensions. For example, revenue is captured by product and customer in a billing system whereas most expense is captured in the financial system by responsibility center without direct linkage to “market-facing dimensions.”

This transformation can incorporate robust rule sets that are visually depicted and easily maintained while accommodating large data sets. These types of models would be onerous to build, document, and maintain in spreadsheet software or would require IT to build a custom OLAP application with user interfaces and reporting tools.

Planning systems can be configured to import actual data and apply complex rule sets though the interface and dimensional data model are not pre-configured for multi-step, activity-based cost allocation purposes.

Integrating Planning Systems with Profitability and Tax Impact Modeling
PM&O applications can easily handle integrating budget, forecast or other scenario data using the version dimension. This enables alignment of planned financial data with actual results for revenue and cost following the mapping from resource center or account to process all the way to customer, product or other business dimension. Planned data can include financial data and driver-volumes or different capacity estimates if changes in operations or efficiencies are targeted.

PM&O applications have seen a recent resurgence given the applicability to modeling detailed operational transfer pricing rules. These rules are structurally very similar to activity-based methods and include robust, multi-step, driver-based allocation of shared cost pools along with the capability to model the detailed supply chain process steps and the tax impact based on jurisdiction, rates, etc

These applications can provide one integrated financial modeling solution that serves both FP&A and corporate tax enabling collaboration on inputs, rules and a single source of truth. With the proper configuration, an implementation team can create an accurate, documented view of pre-tax product / customer margin based on the true “economic map” of the business along with a tax-impacting process view of transfer prices, debt location, IP royalties and passive income.

The calculations can include actual results and “what-if” scenarios for the executive team to strategically organize global resources and operations.

So while taxes are a certainty, corporations will continue to deploy capital to maximize after-tax return on investment and finance organizations will be able to continue to use technology to be a strategic partner in modeling decisions and optimizing outcomes.

I’d like to hear your thoughts…where do you see financial analytics software heading given the convergence of planning, profitability and operational transfer pricing?