Can Running in Real Time Make Finance a Major Player?

by Chris Grundy, Director Product Marketing, SAP

In a constant quest for maximum efficiency, much of finance is now automated. The new challenge facing finance professionals is becoming a more valuable and essential part of proactive decision making. Many wonder if real-time processes can help expedite reporting and analysis that give innovative thinkers a competitive edge.

Panelists Celina Rogers, VP and editorial director for CFO Publishing; Tony Rogan, senior manager from Accenture; and Birgit Starmanns, senior director for product marketing with SAP discussed all this and more on a recent SAP Game-Changers radiocast.

Near-real time doesn’t cut it anymore

If you think the difference between real time and near-real time comes down to just a few seconds here and there, think again. According to Starmanns, it can actually be a matter of days, especially where batch processes are concerned. Those are run overnight and typically require adjustments – which then require another night to register.

Rogers understands the importance of real-time processes and sees data integrity as a concern directly tied to the quest for real time. She asserts that finance teams need to focus on how to interact with and use that data more analytically and wisely to make better-informed decisions.

“This sort of transition in finance technology will create a different kind of feedback. One that rewards the manipulation and analysis of data rather than the processing of data,” she concludes.

Personalization quickens and simplifies finance

What’s one of Google’s greatest features, aside from instantaneous search results? The personalization it provides. Over time, it actually knows your preferences. Rogers sees workers looking for the same convenience in their professional lives. Run in real time to drill down to:

  • Tax jurisdiction
  • Customer
  • Profit center
  • Country

You can pick and choose any combination to see or exclude. And business users can configure it all without having to rely on IT.

As Starmanns points out, “It’s not just making it faster for the sake of being faster, but being able to analyze other business scenarios. Because you’re done faster with the transactional piece, which is never going to go away for finance. But all the sudden you have this extra capacity to analyze other things that you could not analyze before.”

Even more exciting, you can run in real time with external information as well as your own internal data.

Scale and strategize in real time

Rogan highlights the importance of real-time capabilities for large projects and enterprises. For example, nuclear power plants need to run critical what-if analyses at their facilities to prepare for possible outages.

He details the types of questions his clients expect him to answer: “‘What if we start on this day? What if we add more people to it?’ That is getting much easier with the information we’re now able to get.”

The consensus is that a shift is occurring in finance – one that relies on real-time processes to push analytics to the forefront and make finance a true partner to the business. Listen to the full radiocast to find out more.

Clock in train station, Liege, Belgium

Support Finance Operations: Re-invest in Business

By Drew Hofler, Senior Director, Solutions Marketing at Ariba, an SAP Company

For quite some time, CFO Publishing has been documenting an expanding role for finance at companies around the world. Finance functions have been building a reputation as full business and strategic partners, providing insight along with information.

It is a demanding role for finance staff, but they are up to the task. At least, that’s what finance leaders think, according to a global survey conducted by CFO Research and sponsored by SAP. The survey of more than 300 finance executives found nearly nine in ten respondents expressing full confidence that their staffs embody the knowledge and expertise they need to succeed.

A number of respondents went out of their way to give their people glowing reviews. One senior vice president in the chemicals/energy sector in Australia wrote, “Finance has a can-do attitude. Their work ethic is excellent.” Another executive from the chemicals and energy industry in Singapore praised the “strong technical know-how and hardworking, capable employees” in finance operations.

However, the survey also raises the question of whether deep skills and hard work are enough. Despite their confidence in their people, four in ten respondents also believe that they are understaffed. And more than half of the respondents—58%— say that finance operations staff often are overwhelmed by the demands placed upon them. A finance manager from a technology company in Singapore says simply that finance is “unable to meet deadlines due to overload.”

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Many companies apparently are falling short in the support they provide finance operations, which execute the core financial transactions and processes for a company. Processes are too complex and cumbersome, and the disparate and disconnected technology tools they currently use cannot always keep up with the demands.

The consequences can be disastrous. For example, the controller of a construction company in Asia notes that one of the most serious weaknesses at his company are “payments that lack [sufficient] detail and do not go through, which chokes up the entire system.”

In contrast, the payoffs for better supporting finance operations activities drive directly to the success of a company. A finance transformation leader in the survey points to the ability to “re-invest savings in higher-value business support and analysis activities.” And a CFO from the media/leisure sector writes, simply, “Less time chasing payables would enable more focus on the business operations.”

Read the full report “Build High Performaning Finance Functions”.

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This story originally appeared on the SAP Business Trends community.

 

 

 

 

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

 

Design Symphony: Developing cloud-based planning software around the user experience

By Nico Licht, UX Lead, SAP Cloud for Planning

When designing SAP Cloud for Planning we embraced some basic design principles. In this blog I’d like to share the principles we challenged our global management team with:

It’s not just about function but also DESIGN. About ten years ago Apple published a set of user experience guidelines for their developers. For me, four basic design principles stood out: simplicity, availability, familiarity and forgiveness. Focus on the main use case and have additional features, like previews or preferences, just one click away. Meet the users’ expectations and mental models and allow them to make mistakes without losing data or breaking the system. The designer, Frank Chimero, summarized these basic UX rules quite nicely “People ignore design that ignores people.”

SIMPLICITY

Focus on the users’ job to be done! When I would argue about what development wants, my first UX manager at SAP told me I should always ask “Why is this feature important for the user?” and he added “No use case, no design.” We need to know the job to be done behind a feature request in order to create meaningful mock-ups, screen designs, or code. Ease of use is also a flavour of simplicity. Think of keyboard navigation or a quicker way to maintain access rights. However, simplicity does not mean trivial. Some systems are complex but no system has to be complicated.

AVAILABILITY

Have every additional feature just one click away, and make it easy for the user to determine the location of the next click. For example: the breadcrumb navigation on top, the preferences dialog in the tab bar, or the context sensitive help button we’ll add to the shell. Meaningful titles and labels provide additional orientation and should always appear in the same place. Don’t hide additional features and preferences in unexpected screen areas.

FAMILARITY

Many concepts in our application are universal. Discussions, spreadsheets, icons, dialogs, and so on are all common UI elements. Ensure that these pieces always look and behave the same and meet the mental model of our users. Everything that looks or feels strange contradicts with the concept of familiarity. I really like the term floor plan. When your house is on fire you need to get out quickly. A good floor plan reveals the quickest way to the next exit. A good application floor plan allows the user to always find the missing features in the expected place. Furthermore, customization features like changing user and background pictures, increase the personal touch. A system showing my data, my company logo, and colleagues’ pictures, already looks more familiar.

FORGIVENESS

Allow the user to make mistakes and try things out without breaking the system or losing data. Let’s enable our users to perform a serious task but with a playful approach. Oscar Wilde said once “Life is too important to be taken seriously.” Sure, we can’t always take responsibility for the users actions. But if we can’t be smart enough to prevent user errors we should provide as much information as possible (e.g. meaningful warnings and system notifications). Our system should be tolerant not ignorant.

It’s not just about focus, it’s about DESIGN SYMPHONY. In his book, A Whole New Mind, Dan Pink refers to a globally spread workforce that “requires focus and specialization”. It’s the same thing in our development organization. We have specialized experts in each and every work stream; all of them doing a great job like the musicians in an orchestra. Everybody is an artist with their own instrument but they need a composed score so that they can play together nicely. However, looking at the ratio of developers and designers in our organization, this is something we only can achieve as a team. Everybody should be concerned about design. This is the guideline that is the score for our symphony, the glue that ties all work streams together. Let’s create beautiful user interfaces, with meaningful functionality that people cannot ignore.

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After a relatively short but intensive development process we released SAP Cloud for Planning. And I can truly say I am very proud of the whole team and the design-driven culture that we’ve established. Not every detail is perfectly arranged just yet and we will continue the hard work to enhance the user experience. Nevertheless I believe we’ve delivered an extraordinary application. I’m looking forward to the many exciting conversations to come with users and customers.

 

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Audit and Risk Management – a Winning Combination?

Coffee-break with GameChangers

Don’t stick your nose in someone else’s role – that’s one of the first rules of corporate etiquette. And if you do, be prepared to step up to the plate and take on some of the workload. This is the position internal audit finds itself in as it becomes embedded in enterprise risk management processes. Hear Robert D. Gould, internal audit at Harley Davidson; Thomas Bamberger, chief audit executive at SAP; and Bruce McCuaig, governance, risk, and compliance solutions at SAP, discuss the implications for internal audit’s new role during a recent SAP Game-Changers radiocast.

Allow the role of audit to evolve

Gould makes the case for audit’s evolving position, saying, “Audit can drive heck a lot of value because of our unique insight and role that we play in the voice that we have at the board level.”

Bamberger expands on the change, calling it a natural shift since “Information exchange between the three departments – risk, compliance, and audit – it’s of the utmost imperative to do this on a regular basis. That means the entire audit team is working.” He says they need this symbiotic exchange of information to:

  • Assess early-risk indicators
  • Improve decision preparation
  • Uncover synergy potential
  • Use all these benefits as a method to increase transparency

He goes on to mention new challenges such as cyber security and mergers and acquisitions that challenge the operations and risk management departments.

McCuaig asserts that this is where audit can make the biggest impact – and why this function can’t afford to wait for its invitation to a seat at the table.

Treat audit as a strategic advisor

Changing company culture is no small task – it requires a level of acceptance that starts at the top. Auditors need to bring a high degree of critical and strategic thinking to the role.

McCuaig agrees. “The role of internal audit in risk management is not to just deal with day-to-day operational things. You have to look at the impact on the organization of environmental risk – future risks. I think the role of audit department is to make sure that those emerging external kinds of risks are recognized.”

Gould expands on this point. “I think a critical role we play is to the whole educational awareness side. Management is busy running the business – they don’t have the luxury of stepping back and necessarily seeing the whole process from end to end, and I think that’s a really big value that we can provide from an unbiased perspective.”

In order to understand your business, it is imperative to understand your level of risk. According to McCuaig, “The role of audit in risk management is to identify those events and conditions that can put you out of business slowly.”

The point of this new role for audit is to have the department helping the first line of defense. As this shift takes effect, there is going to be increased demand for advisory services. Companies will see the benefits of assessing risk proactively and bringing insights to help drive change before issues are already there.

Is your business ready to welcome audit into a more strategic role? Listen to the full radiocast to learn more.

The Time Capsule: Part 1

Happy New Year to all readers of the CFOKnowledge blog. I hope that you have all had a good start to 2015. What better way to commence a new blogging year than with a blog from Gary Cokins, who so kindly contributed much to our site in 2014. In a kind of “future-retrospective” Gary takes us to a time long after most of us will have long-finished our own working lives…

 

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

Total Immersion Corpcast – Looking Back at Your Job 50 Years From Now

The year is 2060, and today is the long-awaited day when our company’s time capsule, sealed back in the dark days of 2015, was finally opened. In the capsule we found, as you might expect, a treasure trove of old products, quaint logos and uniforms, and faded photographs of employees. But we also found some fascinating documents of the period: budgets, strategic plans, performance reports, and, perhaps most interesting of all, letters written by executive managers and addressed to the managers who would be responsible for guiding the company’s performance in 2060.

We asked our team leaders to respond to their predecessors’ letters in their daily meta-net sensecasts. Here are some of their responses:

Maia Bischoff, Chief Value Creation Officer (in 2015, this role was Chief Financial Officer): “My poor predecessor CFO…! She must have been pulling her hair out every day in frustration. My interpretation of her letter to me is that she was primarily worried about getting her external compliance financial reporting right so she and her C-suite team wouldn’t end up in jail. For us today, the universal accounting rules from the Global Accounting Federation (created in 2023, thank goodness, to clean up that IFRS reporting mess) are all automated and directly integrated to every legal enterprise on the planet. And with our single global currency — the yeneurodollarrupee — foreign currency translations are a relic from the past.

Financial reporting is effortless and incorruptible. My staff rarely spends a minute thinking about the ‘how-to’ of financial valuations for investors and government regulators. Our attention and energy is almost exclusively focused on internal managerial accounting and analysis for economic value creation for our stockholders, achieved by quasi-optimal decision-making prescriptive analytics software tools used by all of our employees.

Also, our job is much simpler since the shrinkage of that behemoth, economic-bubble-creating-and-bursting financial sector that mushroomed at the beginning of this century, with its exorbitant and unjustified high salaries. Banking today is like the buggy-whip manufacturing industry of 1910. Now companies compete on products and services, resulting in real, not artificial, economic wealth creation that banks can no longer drain from the real economy.”

Jamal O’Keefe, Zen Innovation Officer (responding to our 2015 Vice President of Research and Development): “My predecessor’s staff had more fun than our innovation team today. Back then it was a wild time of discovery. Continuous innovation had become the prerequisite entry-ticket to compete, similar to what quality control had become in the 1980s. Today, although constant innovation remains an absolute given requirement, every competitor in every industry is near parity in their rate of innovation. It’s not the competitive edge it once was.

Our learning and knowledge systems fused with our predictive analytics are essential, or we would fail. To be sure, our new depth-intuition techniques and insight incubation processes show great promise. But since the shift to customer relationship optimization as our company’s key driver, my staff’s work of creating new products, services and processes has become largely routine. It’s like a marathon run without a finish line.”

Donna Pugliese, Chief Customer Acquisition Officer (in 2015, Chief Marketing Officer): “Judging from the letter to me from the CMO back then, I’d say he wasn’t actually doing marketing — he was just throwing money at any prospective customer that had a heartbeat. My older staff members still refer to it as “spray-and-pray” advertising.

The letter claimed the company had improved the “targeting” of customers in its marketing campaigns. But his marketing plan reminds me of those wooden contraptions in the Middle Ages that lobbed boulders against castle walls. Occasionally they had an impact.

My predecessor would be impressed by our laser-like customer intelligence and marketing spend optimization tools. We not only identify and acquire new customers based on maximum potential financial return through our communication channels (all compliant with the Global Citizen Privacy Pact), but we also ensure that our growth rate is in perfect harmony with our asset and employee capacity addition plans. We acquire only the highest rank-ordered net profit lift lifetime value customer leads. For us, customers are investments — like the components of a stock portfolio — and we’ve solved the optimization challenge of converting customer equity to shareholder wealth creation. My predecessor appears clueless that such a relationship even existed.”

Andrew T. Huntingdon III, Chief Customer Relationship Officer (in 2015, Vice President of Sales): “My predecessor wasn’t selling; he was bribing. No, I’m not talking about illegal bribes like those we remember from the Great Corruption era of the late 2040s. I mean wasting the shareholders’ potential for higher wealth by offering ridiculously huge price discounts, deals and giveaways.

He’d be impressed by how we optimize our time and spending today with finely tailored, minutely differentiated services for each of our 2,700 customer micro-segments. We never wastefully overspend on our most loyal customers, nor do we underspend on marginally less loyal customers who might otherwise defect to our competitors.

In the 2030s, we learned the painful lesson that customer retention, while a key lever to shareholder wealth creation, is not enough. You have to refine retention — you have to retain the correct type of customer and then grow high-profit-margin sales from that base. We realized that in almost all industries, products and standard service lines had become commodities, neutralizing any competitive advantage. Differentiating services for different types of customers had to become a science.

The turning point came when we made a true commitment to two sales growth principles: First, nurture customer relationships. Second, use thought leadership to bring customers new ideas and innovations that help them to achieve their own strategic objectives and to better serve their customers.”

(Note: The capsule also contained a letter from the Director of Information Technologies. As we all know, this function became obsolete in the 2050s when the company implemented a software program that prioritizes and fulfills requests made directly by the line managers. The letter also refers to another rather obscure job title: CIO. One of our young new hires has posted a meta-net enquiry ‘What was a CIO?’ — to which an older worker responded, ‘Career Is Over.’ ”)

Interested in learning more? Plug into part 2 of this Total Immersion Corpcast to experience more Time-Capsule revelations.

 

About the Author: Gary Cokins, CPIM

Gary_Cokins

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 www.garycokins.com . 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.

gcokins@garycokins.com; phone +919 720 2718

http://www.garycokins.com

Linkedin.com contact: http://www.linkedin.com/pub/gary-cokins/0/15a/949.

Signs that Your Financial Close Process May Be Broken

From Elizabeth Milne, Senior Director Product Marketing EPM, SAP

Print

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