Understating Analytics: Breaking down Reporting and Analysis Options for the Financial Close

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

Originally published on SAP Analytics, 10 April 2015. Reposted with permission.

As part of our ongoing accounting and financial close series, today we’ll discuss reporting and analysis for the financial close.

In my last blog, we began to discuss financial reporting at a high level. We discussed how to get stuff out of a consolidation reporting tool. But the topic of reporting and analysis, as it relates to the financial close, is a lot broader than just basic financial statements. When financial reporting is mentioned, external reporting is the first thing that comes to mind – statutory and regulatory reports that are required by external stakeholders.

But just as important are the internal stakeholders. Examples of stakeholders:

External stakeholders

  • Statutory reporting to government agencies
  • Auditors
  • Financial lending institutions
  • Stockholders and stock exchanges

Internal stakeholders

  • Board members
  • Business owners
  • Executives, managers, and analysts

External stakeholders have standard consolidated reports that are required, but the internal stakeholders need more analytics. They need more ways of slicing and dicing information, often not only from consolidation systems but from operational systems. Analytics solutions from SAP are grouped as follows:

RA_1

 

  1. Enterprise performance management (EPM) encompasses strategy, planning and consolidation solutions (like SAP Business Planning and Consolidation as we discussed in some of our previous blogs) and SAP Disclosure Management (which we’ll cover in our next blog).
  2. Governance, risk and compliance (GRC) as it relates to the close will be covered in an upcoming financial close governance blog.
  3. Predictive analytics is an interesting one as it relates to the financial close process. The close process allows an organization to report what happened in the past. This is not “predictive” at all. However, being able to analyze why things happened in the past is where the close gets interesting and predictive analytics can help. As we collect more and more financial data at lower levels of granularity, we can then start to do predictive analytics and statistical analysis on the correlation and relationship of data to help figure out why things happened and what decisions can be made to affect financial information favorably in the future.
  4. Business intelligence (BI) is all about taking business data and making it consumable. There are various tools discussed below that help you anayze information to support your organizations to make informed decisions.

RA_2

As seen above the SAP BusinessObjects Business Intelligence platform allows you to collect data from multiple sources, which could include financial consolidation data, and layer a Business Intelligence layer on top of it in order to standardize reporting across your organization.

Agile Visualization Solutions

Leveraging solutions such as SAP Lumira and SAP BusinessObjects Explorer allow you to discover trends, outliers, and areas of interest in your business. You can tell your story with self-service visualizations and analytics. This will allow you to easily adapt to business scenarios by combining, manipulating, and enriching data.

Dashboards and Apps

SAP BusinessObjects Dashboards and SAP Design Studio enable you to create powerful environment to build interactive and visually appealing analytics. You’re provided with a rich set of controls, like buttons, list boxes, drop-down, crosstabs, and charts. This allows you to create those pretty dashboards that our C-level executives love so much.

RA-Dashboard

 

Reporting Solutions

SAP Crystal Reports and SAP BusinessObjects Web Intelligence help you to create high productivity designs for reports. Users can quickly build formatted reports on any data source. You can securely distribute reports both internally and externally and minimize IT support costs by empowering end users to easily create and modify their own reports.

Bringing It All Together

When addressing financial reporting concerns, there are many stakeholder requirements that need to be addressed. As such, there are many reporting options that are available. To bring up our recurring theme of “People, Process and Technology:”

  • People – Consider who’s consuming the reports and what’s the best format to share the information with them.
  • Process – Decide which process the data is collected by, and how you can best standardize it for consumption.
  • Technology – Asses your people and process requirements and work with a software specialist to help identify the best tool to support you.

Discuss All These and More at SAPPHIRE NOW
Please join us at SAP’s SAPPHIRE NOW conference May 5 – 7 in Orlando, Florida. SAPPHIRE NOW and ASUG Annual Conference is the ultimate opportunity to maximize your SAP investment and find solutions to your most pressing business challenges. Through face-to-face interactions with executives, industry experts, peers, and SAP partners, you’ll be able to leverage diverse points of view as you expand your business network. Learn best practices, explore cutting-edge solutions, and discover ways to reduce complexity in your business. With hundreds of sessions, you have the ability to customize your experience based on what’s most important to you.

I will be there with all of our guest bloggers from this series. If you’d like to discuss any of the topics in this series in more detail please stop by the Demo Station LB209: Simplify Accounting and Financial Close Processes and ask our experts. I look forward to seeing you there.

Read the previously published blogs in this series and stay tuned for upcoming blogs in the accounting and financial close series, where we will go into much greater detail on reporting. Learn more on our recent blog on the corporate close.

Elizabeth Bio & Pic

Standardize, Centralize and Automate Your Corporate Close – Step 3 of 3

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

Originally published on SAP Analytics, 8 April 2015. Reposted with permission.

As part of our ongoing accounting and financial close series, today we’ll discuss best practices in the corporate close. Since this is quite a comprehensive topic, I’ve spilt this into three steps wrapping up today with “Get stuff out.”

As mentioned in our previous blogs in this series, some key aspects to think of when trying to identify areas of improvement in the close process are to consider where can I centralize, automate, or standardize. Then you need to cross reference those aspects with people, process, and technology. And to continue with our groups of three, the financial consolidation process has three major components: collecting data, performing calculations on that data, and reporting on the calculated data.

In other words:

close2

Get Stuff Out: Financial Reporting

The end game in financial consolidation is the production of financial reports, and the three biggies are: Statement of Financial Position (the balance sheet), Income Statement (the profit and loss or P&L statement) and the Statement of Cash Flows (what happened to all my money). These reports are the result of all the collection and calculations discussed so far in this blog series. But reporting is required not only at the aggregate level but at the disaggregate level as well. In other words, you need consolidating reports as well as consolidated reports.

step-three

It’s nice to get to the total, but the real value comes from being able to analyze how you got there, not only by entity as in our example above, but also by multiple dimensions mentioned earlier such as Account, Period, Category (Actual & Budget), Product, and Customer.

If the process of creating aggregated reports is very manually the disaggregating of such data also tends to be manual. Such manual processes are very time consuming and also quite error prone. Reporting software can be extremely helpful in automating the slicing and dicing of information, increasing speed of reporting and reducing errors. An implementation of reporting software can help put a key focus on the data which needs to be reported on and how best to standardize your information to make consumption that much easier.

Our next two blogs in this series will also focus on the “get stuff out” step as we focus on Reporting and Analysis and then Disclosure Management.

In summary, take a look at your people, processes and technology and figure out where you can standardize, centralize and automate your corporate close and financial consolidation.

Discuss All These and More at SAPPHIRE NOW
Please join us at SAP’s SAPPHIRE NOW conference May 5 – 7 in Orlando, Florida. SAPPHIRE NOW and ASUG Annual Conference is the ultimate opportunity to maximize your SAP investment and find solutions to your most pressing business challenges. Through face-to-face interactions with executives, industry experts, peers, and SAP partners, you’ll be able to leverage diverse points of view as you expand your business network. Learn best practices, explore cutting-edge solutions, and discover ways to reduce complexity in your business. With hundreds of sessions, you have the ability to customize your experience based on what’s most important to you.

I will be there with all of our guest bloggers from this series. If you’d like to discuss any of the topics in this series in more detail please stop by the Demo Station LB209: Simplify Accounting and Financial Close Processes and ask our experts. I look forward to seeing you there.

Read the previously published blogs in this series and stay tuned for upcoming blogs in the accounting and financial close series, where we will go into much greater detail on reporting.

Elizabeth Bio & Pic

Standardize, Centralize and Automate Your Corporate Close – Step 2 of 3

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

Originally published on SAP Analytics, 6 April 2015. Reposted with permission.

As part of our ongoing accounting and financial close series, today we’ll continue the discussion with step two of best practices in the corporate close. Last time I talked about “put stuff in” all about collecting data and this time the topic will be about “do stuff” focusing on performing calculations.

Do Stuff: Performing Calculations

The driving principle of this step is automation. Many calculations and adjustments are required as part of the financial consolidation process. Any calculation that is repeatable can typically be automated. As long as you can define a math equation that can be programmed, most consolidation applications, such as SAP Business Planning and Consolidation, can automate that calculation.

Let’s discuss three major calculations that occur during consolidation.

1) Currency Conversion

If you have different entities that do business in different currencies, those currencies need to be translated into a group reporting currency for standardization purposes. Sometimes, organizations have more than one group currency if they have regulatory or management reporting requirements in multiple regions.

There are various exchange rates that need to be considered, most of the balance sheet is calculated using the exchange rates in effect at the date of the report. Certain accounts in the equity section will be translated at historical rates. Currency translation adjustments are also captured in the equity section. The income statement, on the other hand, is typically translated at the monthly average rate.

Since different accounts and entities are all translated at different rates, translation can get somewhat complicated. But they can be easily automated leveraging consolidation software.

2) Calculations of Ownership

Part of the consolidation process involves identifying which entities to consolidate at what percentages. Direct and indirect ownership need to be taken into consideration. Consider the following organizational structure:

step-two

“A” directly owns 50% of “B”, and “B owns 80% of “D”. “A”, therefore, has a 40% indirect ownership in “D”. This is a simple example, but you can imagine the complexity in which multiple entities own a percentage of multiple other entities, which is possible in some countries. The percentage at which entities are consolidated determines the method for consolidation. Standard thresholds along with consolidation methods are as follows:

Step-two-A

Different methods require different calculations, which – given the proper software tool – can easily be automated.

3) Consolidating Adjustments

This step is where automation is the driving principle. Many calculations performed during the consolidation process are the same every period. Not all consolidating adjustments can be automated, but many can.

Some examples of consolidating adjustment that may be able to be automated:

    • Elimination of Intercompany Transactions
    • Elimination of Investments
    • Elimination of Dividends
    • Elimination of Internal Provisions
    • Elimination of Goodwill
    • Equity: Group / Minority split
    • Currency Translation Adjustment (CTA) Reserves

We’ve reached the stopping point for “Do Stuff”. In my next blog I’ll cover the final step, “Get Stuff Out.”

Discuss All These and More at SAPPHIRE NOW
Please join us at SAP’s SAPPHIRE NOW conference May 5 – 7 in Orlando, Florida. SAPPHIRE NOW and ASUG Annual Conference is the ultimate opportunity to maximize your SAP investment and find solutions to your most pressing business challenges. Through face-to-face interactions with executives, industry experts, peers, and SAP partners, you’ll be able to leverage diverse points of view as you expand your business network. Learn best practices, explore cutting-edge solutions, and discover ways to reduce complexity in your business. With hundreds of sessions, you have the ability to customize your experience based on what’s most important to you.

I will be there with all of our guest bloggers from this series. If you’d like to discuss any of the topics in this series in more detail please stop by the Demo Station LB209: Simplify Accounting and Financial Close Processes and ask our experts. I look forward to seeing you there.

Read the previously published blogs in this series and stay tuned for upcoming blogs in the accounting and financial close series, where we will go into much greater detail on reporting.

Elizabeth Bio & Pic

Standardize, Centralize and Automate Your Corporate Close – Step 1 of 3

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

Originally published on SAP Analytics, 3 April 2015. Reposted with permission.

As part of our ongoing accounting and financial close series, today we’ll discuss best practices in the corporate close. There is much to discuss on this topic so I will split this topic into three blogs as detailed below. After each entity in an organization has closed their books, accounts have been reconciled, revenue recognition and leasing appropriately accounted for, then it’s time for corporate to take all the information and consolidate it together. At the base foundation is aggregation of all the information – if only it was just purely addition! The corporate close requires financial consolidation which involves much more than addition: currency calculations, ownership calculations, intercompany eliminations, dividend eliminations, and so on and so on. As if that weren’t enough, the calculations may vary based on where the information needs to be reported because various jurisdictions have different generally accepted accounting principles (GAAP).

As mentioned in some of our previous blogs in this series, some key aspects to think of when trying to identify areas of improvement in the close process are to consider where can I centralize, automate, or standardize. Then you need to cross reference those aspects with people, process, and technology. And to continue with our groups of three, the financial consolidation process has three major components: collecting data, performing calculations on that data, and reporting on the calculated data.

In other words:
close2

Let’s walk through each one of those in more detail. I’ll cover “Put stuff in” in the remainder of this blog and cover each of the other steps in subsequent blogs.

Put Stuff in: Collecting Data
When collecting data, standardization is fundamental. In order to consolidate data together you must identify like transactions together, therefore a standard chart of accounts is needed. In the most idyllic setting a company would have one general ledger system with one chart of accounts used by all entities. But not all companies operate in such a manner, and when new entities are acquired they come with their own chart. So there are two basic options, convert every entity to a standard chart of accounts or have a corporate chart of accounts. Then each entity maps their chart of accounts to the corporate chart.

Many software applications leverage the concept of dimensionality to organize data. Dimensions allow you to slice and dice data into different component levels. One way to think about dimensions is as the axes needed for analysis. Imagine a financial report and think of what is in the rows and columns (X and Y axis). For example, one axis could be accounts down the rows the periods across the columns. Account and periods are dimensions. Other examples of dimensions: Account, Period, Category (Actual & Budget), Product, and Customer.General ledger systems often manage dimensionality with their account structure:

close3

Once data is standardized and collected it needs to be checked for accuracy. Balance sheets need to be balanced; detail needs to tie to totals and so on. Many software solutions, such as SAP Business Planning and Consolidation, can help to automate the control process.Let’s stop here and digest. In my next blog, I’ll discuss the second step, “Do Stuff,” followed by “Get Stuff out.”

Discuss All These and More at SAPPHIRE NOW
Please join us at SAP’s SAPPHIRE NOW conference May 5 – 7 in Orlando, Florida. SAPPHIRE NOW and ASUG Annual Conference is the ultimate opportunity to maximize your SAP investment and find solutions to your most pressing business challenges. Through face-to-face interactions with executives, industry experts, peers, and SAP partners, you’ll be able to leverage diverse points of view as you expand your business network. Learn best practices, explore cutting-edge solutions, and discover ways to reduce complexity in your business. With hundreds of sessions, you have the ability to customize your experience based on what’s most important to you.

I will be there with all of our guest bloggers from this series. If you’d like to discuss any of the topics in this series in more detail please stop by the Demo Station LB209: Simplify Accounting and Financial Close Processes and ask our experts. I look forward to seeing you there.

Read the previously published blogs in this series and stay tuned for upcoming blogs in the accounting and financial close series, where we will go into much greater detail on reporting.

To view all the blogs in the series, click here.

Elizabeth Bio & Pic

Improving on the Entity Close Process

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

Originally published on SAP Analytics, 27 March 2015. Reposted with permission.

As part of our ongoing accounting and financial close series, today we’ll discuss best practices in entity close management.

So far in our blog series, we’ve addressed a number of different things that need to be addressed during the close process. Managing the entity close process is about keeping track of each of these different things that need to happen during the close process.

Many organizations manage this process with a check list, typically in Excel. Each entity within an organization needs to close their books and this involves many steps and often multiple people. Often different parts of an organization will manage subsets of the close, like by division or by geographical location. As such, many excel checklists are used to manage the process. As with most steps of the financial close process, such manual activities are error prone and time consuming. Managing the entity close process is one that can benefit from standardizing, centralizing, and automating.

Peter Drucker said “What gets measure gets managed.” Measuring and monitoring the close process is the best first step in improving the process as a whole. With manual processes like Excel, check lists measuring can be difficult – not impossible, but not necessarily easy. There are several technology tools available, such as SAP Financial closing cockpit, that can help to standardize, centralize, and automate the entity close process.

Let’s walk through four steps of entity close management:

Close Management Graphic

Step One: Plan

Centralizing and standardizing are key to the planning step. Assess all the different checklists that exist in your organization and design templates for each closing process (monthly, quarterly, and annually). Cross referencing each entity’s close process can help identify best (and worst) practices. Templates all may vary by entity type or regional differences. For example, they may handle local tax processes or handle a plant close for different types of manufacturing methods.

Asses all different types of tasks, including the following:

  • Notes to document instructions for manual tasks outside of any system or for sign-off tasks.
  • Calling up a transaction that needs to be executed, such as opening the next period for posting or posting journal entries for accruals
  • Calling up programs that you want to run online, such as a balance sheet report
  • Batch jobs, such as fixed asset depreciation
  • Process flows that include dependencies between programs and system jobs, for example, in product costing where the sequence of calculating work in process (WIP), then calculating variances, then a settlement run for posting the results to the appropriate accounts must be maintained.

Step Two: Execute

Once the plans have been made it’s time to execute. Based off of the templates created in the previous step, now create a task like with absolute dates and start cracking. Automation is a key factor in this step. Evaluate what steps could possibly be automated. Leveraging a scheduling tool such as SAP Central Process Scheduling by Redwood can be extremely valuable to help with automation of tasks. With such tools you can schedule task execution and monitor the results to ensure there were no issues running tasks.

Entity close management tools such as SAP Financial Closing cockpit have the ability to send notifications via e-mail once tasks are complete to streamline the execution of the next step. Additionally, such tools make it easy to track detailed status information on each task (who, what, when).

You can gain access to all system-created documentation (job logs, spool lists, application logs) and users can add additional external documentation to tasks. While you can manually track all these things in an Excel document entity close management tools can securely store all results with comprehensive audit trail.

Step Three: Monitor

By monitoring the entity close closely, you can identify issues, overdue tasks, and resource bottlenecks early in the close cycle before the overall close schedule is impacted. With tools such as SAP Financial Closing cockpit you can drill down on each task to view its status and other details that have been documented about the task. You can use notes and attachments to document any collaboration or the resolution of any issues that you encountered. For automated tasks, such as programs that were run, you can directly access system logs and spool lists from the SAP Financial Closing cockpit without needing to search for them. Plus the system provides a complete audit trail for configuration and execution. You can easily analyze any kind of status change, how often a task was executed, or who added or changed notes and attachments.

Whether leveraging an automated tool or not, creating a graphical dashboard to obtain an overview of the financial close can be a useful way to monitor the close process. You can create key performance indicators (KPIs) and calculate statistics, such as the percent of completion of the close, to allow you to quickly monitor the overall progress across regions and time frames. This enables managers, at head-quarters, shared service centers, or subsidiaries to monitor the closing process on their levels of responsibilities. Being able to monitor effectively helps the whole process run smoothly.

Step Four: Analyze

Being able to effectively analyze the results of a close process with a manual process leveraging Excel can be extremely difficult. Entity close management tools can automatically record the results. By results in this case, I don’t mean the financial statements that are produced by the close process, but the actual time it took to execute each task. You can analyze how long it took to complete each task and also compare it to the plan that you created with how long you expected that task to take.

Having the ability to analyze this makes it easy to identify bottlenecks in the process, and thus areas for improvement. You can also compare across entities and see which entities are closing faster than others and they can then share best practices with each other to improve their close processes. And lastly you can trend performance over time to see where you’re improving and where you’re losing efficiency.

In conclusion, “What gets measured gets managed.” Whether you leverage a manual process or leverage a tool such as SAP Financial Closing cockpit, measuring the close process itself is the first step to improvement.

To view all the blogs in the series, click here.

Elizabeth Bio & Pic

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!

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.