5 Things to Look for in Lease Accounting Software in Light of New Regulations

By Pete Graham, Director, Finance Solutions, SAP

As part of our ongoing accounting and financial close series, today we’ll be covering Lease Administration

Most companies use leases in some part of their operations or business activities. At the moment, operating leases are reported off balance sheet and disclosed in the notes of the financial statements. Today’s current lease accounting regulations have been stable for years, but that is about to change. Organizations worldwide will need to start complying with new regulations for lease accounting that are being proposed by the FASB and the IASB.

With the new regulations, organizations will be required to capitalize many of these operating leases and record them in their balance sheets as assets and obligations. With these major changes to the accounting standards, the burning question is, “Is your organization ready to meet the proposed leasing regulatory standards?

To ensure they have the information ready and organized to meet and comply, organizations need to start considering how technology can help them prepare. So, what should they look for in software to ensure they meet the new regulations and also benefit from additional costs savings, realized with improved lease administration processes?

The right solution that goes beyond just the regulatory compliance should provide to you and your organization the following characteristics:

  1. Unified database for all lease operations

Organizations should aim to build a comprehensive lease portfolio by centralizing lease data in a single repository. This approach provides excellent access, visibility, and traceability regarding critical issues, such as lease composition, key lifecycle dates, the value of leased assets, and responsible organizational units.

  1. Collaboration during the process of data collection

The right technology should offer the entire organization (not jut a single user) the abilities to track changes and understand who made those. Collaboration tools are essential to empower all stakeholders to easily validate contracts for leased assets and better understand all the associated legal, financial, and business implications.

Collaboration across the enterprise for accurate and validated lease data

Collaboration across the enterprise for accurate and validated lease data

  1. Strategic insight for sound decision-making

Executives need to be able to analyze the financial implications on the business of current and proposed lease accounting regulations, in order to make more informed decisions. Therefore, it’s important to use a tool that can provide rich analytics and visibility into the portfolio composition by different dimensions and provide “what-if” scenario analysis to identify opportunities to efficiently manage leases.

  1. User-friendly interface with minimum training required

The new accounting regulations are approaching fast and many compliance processes are very time consuming. With this in mind, your accounting team needs to be able to hit the ground running with a solution that requires a minimum of training. It’s very important to look for a solution that allows for efficient management of lease administration in a user-friendly, visual format that is easy to learn and use.

  1. A solution that adapts to your business

Integration with your current systems and flexibility to address your specific business are key technical requirements for the right solution. The solution should also enable a smooth transition to the new required processes and controls by the accounting and finance departments.

Make sure to attend the session, “Is your organization ready to meet the proposed leasing regulatory standards?” on March 17 at Financials2015 and stop by the Nakisa booth #325 to evaluate your compliance readiness.

For more information on how SAP can help, download the whitepaper, “Getting smart about revenue recognition and lease accounting.”

 

Article originally posted on SAP Analytics. Reposted with permission.

 

 

 

The Financial Close and Simple Finance – How Fast Is Fast Enough?

By Birgit Starmanns, Senior Director, Product Marketing, SAP

Originally posted on SAP Analytics, 20 Feb 2015. Reprinted with Permission.

As part of our ongoing accounting and financial close series, today I’ll be covering how you can accelerate your financial close.

Marathons. Formula One. Internet downloads. Streaming video. There are many examples where we intuitively know that faster is always better.

For finance, one of the traditional measurements of the performance of the finance organization is the speed at which a company closes its books. In benchmarking studies, SAP Value Engineering found that the top quartile performing companies achieve the annual financial close in 26% fewer days than their peers. A result of these efficiencies is a 61% lower general ledger and closing costs.

Why the focus on the number of days it takes to close the books? There are three simple answers:

  • The financial statements need to be disclosed to stakeholders. These deadlines are not negotiable for public companies, and can affect their stock value and investor confidence.
  • If the number of days to close the books takes a significant amount of time, it exposes inefficiencies in finance processes in general, often due to non-standardized and manual processes.
  • A delay in closing the books translates into a lack of management insight into profitability, which postpones critical business decisions in an environment in which information is expected to be available immediately.

Enter SAP Simple Finance – One Source of the Truth

A key factor that causes delays in the financial close is the number of financial systems that companies have in place, from multiple transactional systems, to analytics and performance management systems. And each system has its own database. Not only does this cause delays in getting the needed information into the right system for the close, many times there is logic associated with transferring information from one system to the other, which may introduce inconsistencies.

With SAP Simple Finance, these redundancies are significantly reduced. With the power of the in-memory technology of SAP HANA, the same data can be used for transactional, analysis, and planning processes. And since key performance indicators can be calculated on the fly using these transactions, there’s no need for the additional logic and summarization in moving data from place to place, which reduces duplication of information and the need for additional reconciliation.

Real-Time Processes for Instant Insight One of the bottlenecks to achieving a faster financial close is the number of processes that are run in batch at the end of the period, because they are resource-intensive, both from a finance and an IT perspective.

Now imagine that these processes could be run on the fly using SAP HANA, based on transactional information, without the need to run batch processes overnight. Therefore, a “soft close” is possible to see the financial position of a company in real time.

Starmanns1

 

Processes that also depend on real-time information include GR/IR reconciliations and intercompany reconciliations, which have historically been bottlenecks into the visibility of cash management and resulting liquidity forecasts. 

Strategic Benefits

You may think that waiting 15 minutes for a report is not a deal-breaker. Yet if you add 15 minutes to each step in the close processes, the impact is not in minutes or hour, but in days. An additional example is profitability analysis. With the many dimensions of profitability – customer, product, geography, channel – any top-down allocations and most reports are processed in batch overnight. And if an error is introduced, finance must wait another day to correct it.

While the speed of the close can certainly help the efficiency of finance organizations, what matters more is the activities that finance can engage in to leverage the saved time. It’s not just the external disclosures that are important, it’s also the managerial information that is captured that is needed to run the business. If the close takes more than a week, there may be lost business opportunities due to a lack of insight into business drivers, which is critical information in making decisions.

Finance is increasingly engaging in strategic activities – advising the business as a whole on the financial implications of business options, from evaluating a merger or acquisition, to introducing new product lines and the potential cannibalization effects to existing products. With the prediction, simulation and analysis capabilities of SAP Simple Finance, what-if analysis can be run on an unlimited number of dimensions.

Benefits of SAP Simple Finance

A recent CFO.com study revealed that 87% of finance executives agreed that managers at their companies need to analyze financial and performance data much more quickly than they do now to meet targets for profitable growth. Translation – speed has an impact on the bottom line.

With SAP Simple Finance, early adopters have already found benefits, from a proof of concept illustrated by Zurich Insurance, to the results found by SAP.

Starmanns2

With the kind of instant insight that is available today, finance organizations no longer need to say, “I’ll get back to you.“

 

10 Things to See and Do at SAPinsider Financials 2015

SAPInsider Financials Logo

By David Williams, Head of EPM and GRC Product Marketing, SAP

We’re already well into 2015 and the first key event for the SAP EPM (Enterprise Performance Management) team, partners, and most importantly, our customers, is just about upon us. SAPinsider Financials 2015, hosted by Wellesley Information Services, and co-located with SAPinsider GRC 2015, runs from March 17 – 20 in Las Vegas. It’s one of the key annual events that features EPM-related content. Given there’s so much to see and do at the event, and I often get asked for an agenda of EPM content, I thought why not put together a list of 10 things to see while attending the event. Think of it as a checklist of don’t miss items/sessions. Here we go:

  1. Cloud for Planning, Cloud for Planning, Cloud for Planning. The latest and greatest cloud-based planning and analysis application has been available since February. Make sure to check out one of the many SAP Cloud for Planning sessions and demos to see why it sets a new standard for planning in the cloud
  2. SAP Business Planning and Consolidation 10.1, version for SAP NetWeaver. “BPC” continues to be one of the most widely deployed planning and consolidation applications on the planet. Discover what’s new in the latest release and see how BPC fulfills integrated business planning for Finance capabilities as part of Simple Finance
  3. Close to Disclose. Closing the books and disclosing results continues to be a highly-manual task for many. Discover how you can accelerate/automate the financial close to disclose in one of the presentation or demo sessions including a Jumpstart deep dive on March 16th
  4. Speaking of Jumpstarts, there are 6 Finance ones and these are a good way to get up to speed on subjects such as SAP Simple Finance, simplifying plan and report deign in SAP Business Planning and Consolidation, and the impact of big data on Finance and GRC security among others
  5. EPM solution center. Go deep into product demos with our solution experts across a range of topics including planning, consolidation and profitability analytics, while not forgetting of course the new SAP Cloud for Planning application
  6. Show floor demos. Have a seat and take a well-earned rest from all that walking around the show floor, while watching one of the EPM solution experts show you the latest and greatest product features
  7. Customer delivered sessions. For many the key attraction of SAPinsider is hearing our customers’ financial transformation stories, in their own words. In 2015 you can hear from Lexmark, Velux, Delicato, IDEXX, Telephone and Data Systems and Applied Materials among others
  8. Simple Finance. It’s bound to be a big draw, and so there’s a number of SAP Simple Finance focused sessions. But of course don’t miss the keynote address to hear about the SAP vision to help simplify finance
  9. Visit our partners. Why not take the opportunity to speak with some of our business partners at the event? This year you’ll find the event global sponsor PwC, premier sponsors EY, KPMG and Z Option, as well as Deloitte, itelligence and BlackLine among others
  10. Say hi to the SAP team. Really please do – we’d be delighted to meet you. There will be a number of our subject matter experts at the event that can discuss topics such as planning and financial consolidations

The complete agenda is available here. Safe travels to Las Vegas and if you’d like to meet send me a tweet @daveswilliams!

You Want to Improve Your Financial Close Process – Where Do You Start?

By Elizabeth Milne, Sr Director, EPM Product Marketing, SAP

Last year I wrote the book Accelerated Financial Closing, and co-authored a white paper with Deloitte (5 Signs That Your Financial Close Process May Be Broken). This year, with a little help from my friends, I thought I’d kick off 2015 with a blog series.

The accounting and financial close process is an ever changing mandatory process. Some call it close to disclose, some call it record to report (R2R), some don’t call it anything but just do it. Organizations with a December 31 year end close have either finished or are still working on their annual close now, which is the biggest one of them all. As with any process there were bound to be bumps and hiccups along the way. Now is a perfect time to review how the annual close went (or is going) and try to identify areas that can be improved.

There are many dimensions to the financial close, three of which are people, process, and technology. While analyzing areas for improvement, each of these areas needs to be assessed. Do my people have the right skills for the tasks they are doing? Could they be better utilized doing other tasks? Are my processes documented? Are they effective and efficient? Am I leveraging technology to automate tasks where possible?

And all of these depend on each other. As Bill Gates so eloquently put it, “The first rule of any technology used in a business is that automation applied to an efficient operation will magnify the efficiency. The second is that automation applied to an inefficient operation will magnify the inefficiency.”

The financial close process itself also has many different steps. We have been working with our customers and analysts over the year trying to compartmentalize some of the different steps to make it a bit more consumable and have developed the following diagram.

C2D
As such, my colleagues and I will be writing a series of blogs to walk you through each of the boxes here in more detail with suggested ways of improving each. Our weekly, 12-part series will cover the following topics:

  • Accounting – Simple Finance and ERP Financials
  • Accounting – Nakia Lease Administration
  • Accounting – Revenue Recognition
  • Entity Close – Intercompany Reconciliation
  • Entity Close – Account Reconciliation
  • Entity Close – Entity Close Management
  • Corporate close – Consolidation and Notes Management
  • Reporting and Disclosure – Reporting and Analysis
  • Reporting and Disclosure – Disclosure Management
  • Financial Close Governance
  • Close to Disclose Recap

Hope you enjoy!

Elizabeth Bio & Pic
Article originally posted on SAP Analytics. Reprinted with permission.

EPM Reflections #7: Changing the game for Citrix

EPMReflections 2014_7

Moving into July 2014 now with our EPM reflections, and here’s a link to a YouTube video of Danielle Bass, Global Director of Accounting Systems at Citrix, who was kind enough to spare some of her time to shoot a short video for us, in which she explains how Citrix uses SAP solutions for EPM to help manage their consolidations process, and at the same time improve their accounting and finance teams’ job satisfaction and performance.

Some of the readers out there who were able to join us in October this year at the SAP Conference for EPM will already know Danielle, as she was also one of our main-stage speakers presenting a full case story of the Citrix use of EPM.

Enjoy the video!

07_Citrix

EPM Reflections #3: A Leader in EPM

EPMReflections 2014_3

For SAP solutions for EPM, the big news in March was the release of the 2014 Gartner Magic Quadrant for CPM (aka EPM) Suites. This Gartner report, as with other Analyst reports, offers unbiased opinion concerning the relative merits of software vendors and their solutions in the EPM space. Gartner’s report is based not only on an assessment of software capability and innovation, but also upon customer feedback, and as such the SAP team always eagerly awaits the results of this annual survey.

Reported in this CFOKnowledge blog post by my colleague David Williams, SAP was once again indicated as a “Leader” in this Analyst report.

03_Gartner

Read David’s blog post here, or if you prefer click the image above to go straight to the short-report, available at the SAP website.

EPM Reflections #1: Drilling to Success with EPM

EPMReflections 2014_1

 

 

It’s hard to believe that we’re now approaching the end of another year. It’s not so much time-flying by – more a case of it being sped along by a jet-propelled rocket pack!

At the end of 2013 @cfoknowledge took the time to reflect on interesting EPM themes and topics that had been reported through various social media and other channels that year. This took the form of our EPM Reflections series of blog posts. 2014 has proven to be another exciting, if somewhat busy year for the SAP solutions for EPM team, and so with this in mind it only seems right to reflect once again on some of the highlights. Over the next few days I’ll be sharing our EPM Reflections 2014 with you. This time round I’m taking a chronological view of our year, so please join me as I walk through each month of 2014 and follow details of this series of twelve blog posts here on CFOKnowledge as well as Twitter also using #EPMReflections.

A quick start to the year with customer success

Let’s begin in January, when we started afresh with new plans in place and a number of internal kick-off events. I’ll begin with a theme which you’ll see repeated in this reflections series, and focus upon customer success.

Print

My colleague John Ward was quick out of the gate in January 2014 with an EPM customer story posted on the SCN Business Trends blog that shared the experience of Concho Resources Inc., and their use of SAP Business Planning and Consolidation to boost the efficiency of its financial reporting and planning process.

Take a look at the full story here.