Energy and enthusiasm … SAPinsider Financials 2015

By Karuna Mukherjea, Sr Director Product Marketing, SAP

SAPinsider Financials continues to be one the most important events for our Finance and EPM Community. As always the conference surpassed our expectations in terms of attendance, customer interactions and partner participation. Starting with the Keynote on the first day which included a stellar panel – Thack Brown, Bill McNee and Celina Rogers to the several product presentations and product demos, all talked about the innovation that SAP was doing for Finance and EPM and really focusing on “Simplicity”, “Consumer grade UI” and “Real Time.

Keynote panel at Insider

The term that resonated really well with the attendees was around “The Perfect Enterprise” which is really about solutions being built for the business users to effectively manage organizations.

I also noticed how well attended were sessions around Financial Planning & Analysis and Accounting and Financial Close. We had a very busy Solution Center with meetings scheduled with the experts starting at 8:00 AM every morning and going on till past 5:00 PM every day. The customers and partners came with enthusiasm to hear all the phenomenal stories about innovations from SAP and other fellow customers as well. I also personally think that the beautiful venue, Wynn Las Vegas, contributed to the positive energy. After all , being surrounded by fresh flowers arrangements does bring a smile! When a customer shows up for a session starting at 4:30 PM in Las Vegas you know they are really interested in the topic. EPM topics continue to stay top of mind for customers.

My key takeaways from the event from last week

  • Our average EPM customer and prospect has evolved significantly. The same customer 2 -3 years ago was having a conversation around timelines to implementing an EPM solution, where now the conversation is more about when can we take this to cloud and how can we embed collaboration into our EPM system
  • Customers want to secure their investment in EPM solutions and really broaden the scope and deployment of the EPM footprint. While a majority have implemented our flagship product, SAP Business Planning and Consolidation, they would now like to expand to other solutions like SAP Profitability and Cost Management or Accounting and Financial Close.
  • Our recently launched solution, SAP Cloud for Planning, the brand new solution for FP&A in the Cloud, was of high interest to customers, partners and prospects. They were confident in the vision and roadmap that SAP is demonstrating in the EPM space.
  • Partners continue to play a very important role with us whether as implementers of our solutions or as strategic advisors to our customers. We had the pleasure of having several conversations with customers and partners on the product footprint and roadmaps.
  • Sessions around Business Planning and Consolidation and Accounting & Financial Close had standing room only! We also had a really good chance to hear customer success stories with these solutions as well.

As we wind down from this year, compare notes with our fellow colleagues and de-brief with the conference organizers, the wheels are already in motion for the next event planning in June 2015, SAPinsider Financials Nice.

We look forward to seeing you in Nice soon!

Tried and Died? One and Done? Don’t let this be your EPM epitaph

By Gary Cokins, Founder of Analytics-Based Performance Management LLC

One of the frustrations I experience is when managers or analysts share with me that their organizations tried to implement progressive management methods, and they either failed or abandoned them. A prominent example is an unsuccessful attempt to implement activity-based costing to measure and manage costs and profit levels of products, services, channels and customers. Other examples include risk management, customer analytics, enterprise resource planning (ERP) systems, and the balanced scorecard.

What causes these failures or the quick loss of an organization’s interest in them?

Experiencing failure is a foundation for success

What we are discussing here is a topic few wish to discuss – failure. I advocate having a positive view of failure and leveraging disappointing or botched implementations of an advanced managerial method or system as a learning experience. Failure can be a great teacher. Perseverance and determination is important for success. Don’t believe that one needs to avoid failure. You have to accept risk when taking on improvement projects.

There are some inspirational lessons about early career failures by individuals who ultimately succeeded. Consider these:

  • Winston Churchill failed sixth grade, and he was subsequently defeated in every election for public office until he became prime minister at the age of 62.
  • Charles Schultz, the creator of Peanuts, had every cartoon he submitted rejected by his high school yearbook staff.
  • Twenty-seven publishers rejected Dr. Seuss’s first book, To Think That I Saw It on Mulberry Street.
  • After film star Fred Astaire’s first screen test, the memo from the testing director of MGM, dated 1933, read, “Can’t act. Can’t sing. Slightly bald. Can dance a little.”
  • Henry Ford went broke five times before he succeeded.
  • Thomas Edison’s teachers said he was “too stupid to learn anything,” and he was fired from his first two jobs for being “non-productive.”
  • Albert Einstein’s PhD thesis was rejected as being “irrelevant and fanciful.”
  • In 1981 the USA’s NBA basketball star Michael Jordan was cut from his high school team.
  • In 2000 Barack Obama ran for the US Congress and failed.

Is this not enough evidence that failure is just another name for experience?

Failures with improving measurement and monitoring systems

In my introduction I mentioned the example of activity-based costing (ABC) as an example of a “tried-and-died” managerial method. I have a substantial amount of experience with implementing ABC. I was a pioneer implementing ABC systems in the 1980s during ABC’s takeoff when I was a consultant with Deloitte and KPMG and subsequently I wrote books about it. Since ABC is a proven and reliable method with value for most organizations, yet some fail implementing it. Let’s use it as an example from which to generalize.

A common problem with implementing ABC is excessively over-sizing and over-engineering the size of the ABC model. This is due to the accountants’ misplaced quest for precision, detail and accuracy. The result is their model is too complex to be understandable and becomes unmanageable to maintain. Yes, if accountants report wrong information for external regulatory reporting with financial accounting, they risk going to jail. But ABC is primarily intended as managerial accounting for internal decision making. So if the ABC information is approximately correct rather than precisely inaccurate, they don’t risk going to jail! Financial accounting is for valuation, like for inventories, whereas in contrast managerial accounting is for creating value – for both customers and shareholders.

But there are other obstacles. If the sponsors for ABC do not secure in advance organizational buy-in from managers and the planned purposes for using the information, there is a likelihood there will be less interest. Lack of proper training is another obstacle. I recall a user looking at the ABC information and saying, “I feel like I am a dog watching television. I do not know what I am looking at!” Finally, after the sponsors for ABC have achieved buy-in to pursue the implementation, they need to remain involved. In particular, they need to motivate their colleagues to use the ABC information to generate previously unasked questions and stimulate conversations as to what changes to make.

There are also misperceptions about the level of involvement by employees to provide input data. They fear they must complete daily time sheets and record counts on anything that moves. Although it is counterintuitive, the accuracy of the output costs, such as for products or customers, is much more determined by the design of ABC’s cost assignment network. With a good cost model design, the costs are good enough for gaining insights and making better decisions.

There is also the “one and done” syndrome. This occurs when there is a problem, like understanding which customers are more or less profitable; and an ABC model is constructed as a one-time study rather than as a repeatable and reliable production system. If the information is needed once, there should be interest in regularly refreshing the model to monitor progress with improvement initiatives.

Lessons learned: Valid methods don’t die but go dormant

To generalize from this single example, there are dozens of books available about project management that can provide useful information. However, when I step back and look at the big picture, the ultimate lesson is that implementers should not underestimate the importance of behavioral change management and overcoming people’s natural resistance to change. This includes employees who are afraid of others knowing the truth or they do not want to be held accountable or measured.

My advice is to consider how much emphasis to place on three factors that, when combined, overcome resistance to change: discomfort with the current situation; a vision of what a better state looks like; and first practical steps (e.g., a pilot project or a rapid prototyping exercise). Many project champions dwell on the second one, a vision, by explaining the benefits of their proposed project. The key is to focus on the first factor by creating discomfort in managers and co-workers. Constantly ask, “How long do we want to continue to make decisions with flawed, misleading or incomplete information?” That creates the interest in the vision – a solution with a software system that will provide it.

After a “tried-and-died” project fails, the need that triggered interest typically does not go away. Like a hibernating bear, the project simply goes dormant. Inevitably managers will repeat the same questions, like “Where do we make or lose money?” There will always be a second chance to successfully implement the project or system. The need for better information remains high.

As an example, I recall an ABC implementation at a bakery goods producer. The product manager for the Danish pastries killed the project. Why? Before ABC his products were the most profitable. With ABC all the sugar and jellies for his products caused extra work for cleaning pans and ovens. He realized that other product managers would now be the more profitable ones. He said to the leadership, “We should be doing six sigma quality management. This ABC is a waste of time.” The project was then terminated. Until a few months later when the management still did not have visibility to where they were making or losing money – and why. The Danish pastries product manager cared more about himself than his organization and its shareholders.

Learn from your failures. Do not underestimate the value of experience. Never lose hope.


About the Author: Gary Cokins, CPIM


Gary Cokins (Cornell University BS IE/OR, 1971; Northwestern University Kellogg MBA 1974) is an internationally recognized expert, speaker, and author in enterprise and corporate performance management (EPM/CPM) systems. He is the founder of Analytics-Based Performance Management LLC . He began his career in industry with a Fortune 100 company in CFO and operations roles. Then 15 years in consulting with Deloitte, KPMG, and EDS (now part of HP). From 1997 until 2013 Gary was a Principal Consultant with SAS, a business analytics software vendor. His most recent books are Performance Management: Integrating Strategy Execution, Methodologies, Risk, and Analytics and Predictive Business Analytics.; phone +919 720 2718 contact:

6 Stories to Give You the Finance Buzz at SAPinsider

SAPInsider Financials Logo

It’s going to be a busy time this week for many of my colleagues and the visitors to SAPinsider Financials 2015 in Las Vegas, so I decided to give you my thoughts on some interesting sessions to see, if you’re attending, given that you’re spoilt for choice with such a comprehensive agenda. And I’m bucking the trend with this blog post – because instead of talking about products, I ‘m talking about customers and thought leaders, and in particular the stories that you’ll be able to see and hear at the event this week.

Excited yet? I am! And with good reason, because many valued SAP customers have decided to make the trip to Las Vegas to give an account of their experiences with SAP solutions for Finance…stories of implementation approaches, best practices, and where they have found business benefits.

So for anyone embarking on a software implementation project, or even just considering approaches to solving some of their finance department and process issues, these are key SAPinsider Financials 2015 sessions to attend.

Six in Focus – But Don’t Forget the Rest!

My six focus sessions are chosen not because I know the customer stories particularly well, but rather because they’ll give attendees a good flavor across a range of finance topics. And my apologies to the many other customers not listed here – whose sessions are equally as valuable – but I just couldn’t fit you all into one short blog post.

I would, however, encourage readers attending Financials 2015 to take a look at the many other customer-led sessions at the event this week, as well as those detailed here, just so that you select sessions that will be most relevant to you.

Ready to learn about some of the exciting sessions ahead? Then let’s go:

  1. Keynote address, TODAY, Tue 17 March at 8:30 am – Okay, it’s strictly an SAP-led session, but there’ll be a panel discussion in which thought leaders will be asked to give their view about challenges and opportunities facing CFOs. It’s sure to be an interesting discussion – and let’s face it, no-one wants to miss the keynote!
  2. Sun Products, Wed 18 March at 8:30 am – A session where you should learn some best practice advice on implementing credit, dispute, and collections management.
  3. Velux, Wed 18 March at 10:30 am – I really like the sound of this session, in which you’ll hear how Velux moved from a traditional to “beyond budgeting” approach.
  4. McKesson, Thu 19 March at 8:30 am – For anyone seeking advice on implementing SAP ERP Financials then this is a session for you!
  5. Bentley Systems, Thu 19 March at 1:00 pm – Hear how Bentley Systems automated and shortened the payment processing lifecycle with SAP Bank Communication Management.
  6. Telephone and Data Systems, Thu 19 March at 4:30 pm – This is one for those of you interested in financial consolidations, with particular focus on project planning.

Don’t Be Shy – Get Networking!

All of these customers are attending the event to share their knowledge and experience with you, and I know that if you have questions for them after hearing their sessions that they’ll be delighted to speak with you…so do take advantage of this in the event networking sessions.

And remember to also take a look at the full agenda, so that you can plan your sessions and make the best use of your time. I hope you have an interesting and informative week, and that you return to work buzzing with the excitement of the potential to put in practice what you have learned at the event.

Have a great week!

Improve Intercompany Reconciliation with People, Process and Technology

By Elizabeth Milne, Sr. Director, EPM Product Marketing

Originally posted on SAP Analytics 13 March 2015. Reposted with permission.

As part of our ongoing accounting and financial close series, today we’ll be covering how you can improve your intercompany reconciliation process thus improving your close process.

Intercompany reconciliation can be extremely time-consuming during the close process. Working with people, processes and technology can help improve upon this process. Let’s talk through three steps:

  1. What is intercompany reconciliation?
  2. Two different approaches to process
  3. SAP solutions for intercompany reconciliation 

What Is Intercompany Reconciliation?

In preparation for creating financial reports ,organizations must reconcile activity between its reporting entities. During the consolidation process these amounts must be eliminated so as not to overstate these amounts at the consolidated level.

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If one entity reports it has a payable with another entity, that entity must record the corresponding receivables. But why, you ask, wouldn’t that be done automatically? Well, in a perfect world it would, but in many organizations it isn’t. Differences may occur for many reasons, including timing of recording transactions, currency exchange rates, or mistakes.

Intercompany Reconciliation Process – The Traditional Approach

Traditionally, corporations will wait until the close of the month when corporate headquarters will collect all intercompany data and run a reconciliation report that matches all entities intercompany activity against each other. Some organizations have consolidation tools that do this, others will do this process manually in Microsoft Excel. Usually this is done at the account level, either at the general ledger (GL) account level or at a summarized intercompany account level.

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Once the reconciliation report is compiled, it’s then sent back to the individual entities, who then review the report and determine which other entities they don’t agree with, contact them and figure out why they don’t agree. The detail must be reviewed to determine why the discrepancies occurred. This involves going back to the transactional systems and pulling invoices to see which transactions don’t match. Individuals at each of the entities then contact each other by phone or e-mail and decide who will make the corresponding adjustment in order to correct the discrepancy.

Data is then returned back to corporate headquarters for inclusion in the consolidation process. This process is time consuming with manual escalation procedures. It creates a corporate bottleneck with inefficient vertical flow of information.

Intercompany Reconciliation Process – The Peer-To-Peer Approach

This process allows for entities to deal directly with one another in a peer-to-peer fashion. The first key difference is a change in process, with the traditional approach corporate waits until the day of the close (Day 0) to run reconciliation reports to identify discrepancies. With a peer-to-peer approach, entities can start reconciling intercompany balances a week before the close, for example. This shift in the time line removes the reconciliation process from the close’s critical path.

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In order to facilitate such peer-to-peer interaction, a tool is required to let them share intercompany data. Ideally, such a tool would include the transactional data so that the entities don’t need to go back to the source systems, but can review the detailed level data in a sharing tool. A more manual solution would involve creating a shared server spot where entities could load their data to reconcile; alternatively, there are software solutions available to address such requirements. This new process involves people, process, and technology. Each aspect of the change must be addressed in order to be successful. A new process must be defined, and then shared with the individuals at each entity who oversee intercompany reconciliation. Those people need to embrace the process and execute accordingly. Technology needs to be leveraged to identify the most efficient way to share data.

A peer-to-peer process removes corporate as an obstacle and frees time for central finance staff, allowing for more value-added activities.

SAP Solutions for Intercompany Reconciliation

SAP offers two main solutions:

  1. Intercompany Reconciliation in SAP ERP. This solution is part of the SAP ERP Central Component and thus included in the ERP license.
  2. SAP Intercompany. This solution is part of the SAP Enterprise Performance Management suite. It is included with the license of SAP Financial Consolidation, SAP Business Planning and Consolidation, and the SAP Accounting and Financial Close Bundles.

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Both solutions can facilitate a peer-to-peer intercompany process that will help provide these benefits:

  • Reliable data – Perform large volumes of balance and invoice matching
  • Faster reporting cycles – Eliminates bottleneck at corporate finance by providing tools to enable business units to resolve differences earlier in the financial close process. The value increases with the number of entities to reconcile.
  • Greater productivity – Resulting in more time for more valuable activities, such as analyzing data and measuring and improving performance

People, processes and technology are all key factors when considering improvement in the close process. All need to be considered dependently to identify the most effective path to success.

Read the other blogs in the accounting and financial close series:

  1. You Want to Improve Your Financial Close Process – Where Do You Start?
  2. The Financial Close and Simple Finance – How Fast Is Fast Enough?
  3. 5 Things to Look for in Lease Accounting Software in Light of New Regulations
  4. 5 Steps to Help Your Organization Prepare for the New Revenue Recognition Standards


What Do Words Tell Us about Analytics and Enterprise Performance Management?

By Gary Cokins, Founder of Analytics-Based Performance Management LLC

What trends have developed over the past century for enterprise and corporate performance management (EPM/CPM) methods and business analytics?

One way to find an answer is if we performed research using a Google database that was unveiled in 2011. It includes 5.2 million books published between 1500 and 2008. With this database, one can input search words and phrases and discover how frequently those different terms were used during different past time periods.

Asian woman looking at book in bookstore

With this Google database, researchers have been learning about interesting and possibly relevant shifts in social values or cultures. For example, one study revealed that between 1960 and 2008 self-centered phrases about an individual increased while group-related communal phrases declined. That is, phrases like “I come first” increased as “community” and “common good” decreased.

What Might Words Tell Us?

Imagine that we had access to this massive database of books to investigate shifts over time in what organizations, especially for commercial businesses, emphasize and pay attention to. Here are my best guesses:

  • “Big data” up and “IT department” down. This shift is a no-brainer. References to big data are recent and growing. The simple explanation of big data is with the five Vs – volume, variety, velocity, value, and veracity. Regarding an “IT department,” users of technology are increasingly self-sufficient. The IT department of the past is today viewed by analysts more as a back office service. What analyst users want is easy and flexible access to data and the ability to manipulate it.
  • “ROI on customer” up and “sales reporting” down. Companies are realizing that it is no longer their objective to just increase their market share and grow sales but rather to grow profitable sales and maximize the return on investment from their marketing efforts. There is a trend for customers to increasingly view suppliers’ products and standard service-lines as commodities, resulting in customers who seek special services and differentiated treatments. Consequently, many suppliers have actively shifted their sales and marketing functions from being product-centric to customer-centric. This shift is accomplished through analytics – specifically through the use of data mining, business intelligence and analytics tools to understand their customers’ behavior. These include their preferences, purchasing habits and customer affinity groups. “Sales reporting” does not reflect the trend of viewing customers as investments like in a portfolio. Maximizing the ROI on customers leads to maximizing a company’s shareholder wealth creation.
  • “Balanced scorecard” up and “management by objectives” down. I was fortunate in my career to have been trained by (and to have become friends with) two luminaries in the management sciences, Harvard Business School Professor Robert S. Kaplan and Dr. David Norton. They are the co-creators of the balanced scorecard[1]. They will likely agree that their strategy map diagraming method of linked and causally related strategic objectives is relatively much more critical than the balanced scorecard instrument. The balanced scorecard display merely serves as a feedback mechanism. The more important navigation resides in the strategy map. The balanced scorecard’s KPIs monitor the progress toward accomplishing the strategic map’s typical 10 to 25 strategic objectives defined by the executive team. On the other hand, the “management by objectives” phrase has declined because in its heyday there was no conscious integration of each manager’s or employee’s MBOs. Each manager’s objective was like a random piece of a jigsaw puzzle thrown on to a table. The strategy map and its companion balanced scorecard bring order, structure and, most importantly, alignment of the KPI measures for the primary purpose of strategy execution. An executive’s biggest frustration is strategy execution. Executives are well-skilled with strategy formulation but have substantially lower control with its execution. The achievable targets of KPI measures align employees’ priorities and work activities to achieve the executive team’s strategy.
  • “Driver-based rolling forecasts” up and “annual budgets” down. This shift may not be that apparent. Does it surprise you that organizations are increasingly frustrated with the annual budgeting process? Many are backing off from the cumbersome task (which is arguably of decreasing value) of producing the annual budget due to a number of reasons. One is that the budget is often obsolete a few months after it is completed and approved by the senior management team. Also, the budget is often a fiscal exercise performed by the accountants, but is not connected to the strategy-related required projects and initiatives. The budget method often simply increments each department’s expenses up or down a few percentage points with little or no consideration for valid estimated demand volume changes in future periods. In contrast, driver-based financial projections start with forecasts of the demand volume and mix of products and services placed on an organization’s processes and workload. The forecast is the primary independent variable to project the required capacity, workforce headcount and spending – which are dependent variables. When analysts have constructed reliable models with reasonably accurate unit level consumption rates based on recent performance and outcomes, then the accountants can calculate and project the estimated required capacity, workforce headcount and spending levels with suppliers.
  • “Risk management” up and “contingency planning” down. Stock market equity share prices of publicly owned companies have become more volatile and sensitive to every new bit of information that might even modestly affect a company’s future cash flow. With financial scandals like Enron, WorldCom and the JP Morgan substantial write-offs from bad financial derivative investment bets, systematic enterprise risk management (ERM) is now becoming institutionalized in organizations. ERM attempts to identify every possible type of risk event, its probability of occurrence, and its impact if it were to occur. Deep analytics are now pervasive in assessing various types of risks, such as bank loan credit scoring of individuals and companies. In contrast, “contingency planning” had temporary popularity in the past, typically based on a brief exercise to describe the reactions to a few unplanned but potentially possible adverse events, such as a fire at a primary production facility.

Words and Phrases as Indicators of Interests

These are my best guesses of how shifts in the references to words and phrases in books might indicate changes in what organizations pay greater or less attention to manage. Use of analytics is central to each word or phrase shift that I mentioned.

Are my guesses correct? You may have some thoughts on this yourself, and if so I’d be delighted to hear them. Perhaps a researcher might analyze the Google book database and surface the truth. That is what analysts are known for; Facts, not guesses.

[1] Kaplan, Robert S; Norton, D. P. (1992). “The Balanced Scorecard – Measures That Drive Performance”. Harvard Business Review (January–February): 71–79.


About the Author: Gary Cokins, CPIM


Gary Cokins (Cornell University BS IE/OR, 1971; Northwestern University Kellogg MBA 1974) is an internationally recognized expert, speaker, and author in enterprise and corporate performance management (EPM/CPM) systems. He is the founder of Analytics-Based Performance Management LLC . He began his career in industry with a Fortune 100 company in CFO and operations roles. Then 15 years in consulting with Deloitte, KPMG, and EDS (now part of HP). From 1997 until 2013 Gary was a Principal Consultant with SAS, a business analytics software vendor. His most recent books are Performance Management: Integrating Strategy Execution, Methodologies, Risk, and Analytics and Predictive Business Analytics.; phone +919 720 2718 contact:

5 Steps to Help Your Organization Prepare for the New Revenue Recognition Standards

By Pete Graham, Director, Finance Solutions, SAP

Originally posted on SAP Analytics. Reposted with permission.

As part of our ongoing accounting and financial close series, today we’ll be covering how you can prepare your organization and your financial close process for the upcoming revenue accounting changes expected to become effective on January 1, 2017. The solutions SAP Revenue Accounting and Reporting (in Ramp-Up) and SAP Lease Administration are mentioned.

All companies track and report revenue. Organizations worldwide will need to start complying with new regulations for revenue accounting that have been approved by the FASB and the IASB. This will be a very big change for many companies both public and private.

The burning question is, “What are the best practices to help your organization become ready to meet the approved revenue accounting standards?

SAP had been building accounting software for many years and has a very thorough process for tracking new accounting standards changes around the world.

Here are five things that we have learned on approaching the new revenue accounting standard based on the feedback of the Ramp-Up program for SAP Revenue Accounting and Reporting (for automating and simplifying revenue accounting) and SAP Lease Administration by Nakisa (for documenting the results of technical accounting assessments):

  1. This time things are different – use an iterative approach

The timing and nature of the new revenue accounting standards have yielded a very interesting observation among the involved companies. Those companies taking an iterative approach are making better progress than those taking the “big bang” approach. So, this has led us to the conclusion that this is not a “big bang” project. To be successful, organizations will need to work in iterations across accounting, technology (systems), and people (processes). So, for example, as the accounting teams are working on the technical accounting requirements, the IT teams can be working on portions of the systems based on requirements that are defined to date, and the business owner can be working on identifying the additional new business processes not already defined.

  1. Learn the new accounting standards now

The new revenue recognition standard will have an effective date of January 1, 2017 for most companies in all industries. The new revenue recognition standard will dramatically change the process of revenue recognition.

The upcoming five-step process for revenue recognition must be followed and is a brand new accounting process. So, start preparing now for this standard – it will affect all industries, not just high technology which currently already uses some aspects of the new regulations.

As shown in the picture below, the technical accounting assessment has to be done in advance of implementing any systems. Customers have asked us to provide software, but when they don’t yet have the accounting and parallel reporting requirements finalized, they end up not being able to implement the software. And as explained in #1, this technical accounting assessment will probably be broken down into smaller work segments and iterated with other IT systems and business process work streams.

So our recommendation is to start training your revenue recognition personnel now on the new standard. From my experience, it takes an US GAAP trained accountant about 6-12 months to really get comfortable with an IFRS like standard (i.e. principles based) such as the new revenue accounting standard. We also recommend using an accounting advisor to help accelerate this process as well as provide your organization with a broader set of experience.

For even more information on this topic, make sure to attend the SAPinsider Financials2015 session, “Best practices for customer adoption of the new revenue recognition standard using SAP solutions and services” on March 17 or the expert panel discussion among SAP and several Big 4 firms on March 18 to find out more details and best practices for adopting the new revenue accounting standard.

The implementation overview for the new revenue accounting standard

The implementation overview for the new revenue accounting standard

  1. Excellent collaboration among the stakeholders for a pre-release implementation: IT Corp Fin, Audit

The nature of adopting this new standard is iterative as explained in item 1. In order for companies to successfully navigate the activities and tasks needed to be successful, excellent teamwork and collaboration is needed across IT, corporate finance, and the accounting advisor. We cannot stress this point enough. Teams should be co-located as much as possible with regular check points. Individual teams will of course have to work on certain activities independently, but usually not for very long. The teams will frequently have to communicate their results to the other team members so that the whole team can make progress on the overall project.

  1. The technical accounting assessment has to be completed up-front or in advance of implementing the system or any parts of the system solution

We have had several customers ask for a software solution only to realize that their requirements were’ntt mature enough for a successful software implementation. This brings us to recommendation number 4. The new standard has to be understood and transformed into requirements before any IT system improvements can be made. As noted in item 1, this will probably occur in an iterative approach, and as noted in item 2, an accounting advisor can help accelerate this process.

Moving forward organizations will be required to capture key data from all sales contracts related to revenue with a customer. Revenue recognition, however, can be extremely fluid, especially as contract terms get amended or new performance obligations are added. Judgments and estimates will require periodic updating.

Companies can use SAP Lease Administration by Nakisa to help with recording of the technical accounting assessment.   SAP Lease Administration by Nakisa has been built from the ground up to abstract accounting contracts for regulatory compliance needs and contract portfolio visibility. SAP Lease Administration was recently updated for the new revenue standard so it can act as your single source of truth for all contract attributes including the upcoming five steps for revenue contracts. The result is a global view of revenue contract data in digital format – with all the insight you need to quickly identify the impact on financial statements. It also provides an audit trail on decisions made regarding applying the new five-step process to specific revenue contracts.

  1. Remember that revenue recognition will also have impacts on parallel reporting and on the financial close. Be well prepared to handle such situations in advance.

We have had some customers figure out the technical accounting assessments of the new standard, but then they didn’t have a clear parallel reporting strategy completed. Now, there is some dependency between the two, meaning, choices under the new standard may impact your parallel accounting strategy. But, companies need to be aware of how these choices impact their parallel accounting strategy and consider various options as part of their overall planning.  Our recommendation is to include the parallel reporting considerations and potential impacts up front as soon as possible during your project.

The new standards for revenue recognition are being considered as the biggest accounting change in years. For a smooth transition, early preparation is not only recommended by experts, but crucial for successful compliance.

Start considering your process early to ensure your accounting team can hit the ground running come January 2017.

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