Discuss business intelligence, integration, compliance and a host of other SAP-related topics – implementation, best practices and resources to negotiate the world of SAP better!

« Comparative Analysis between New GL and Classic GL | Main | Optimizing the Design of a Warehouse- Part 1 of 3 »

The Evolving Financial Consolidation Landscape (Part 2 of 2)

In my previous post, I introduced you to the new ‘financial controlling’ order and how SAP has evolved to keep abreast with the ever changing business requirements, especially the CFO’s office.

Moving ahead on the discussion of the evolution of financial consolidation tools, I have listed down some of the major pain points (Past-to-Present) of a financial consolidation process and the provisions of SAP offerings (Need of the hour/ Expected state).

PAST – TO – PRESENT

NEED OF THE HOUR/ EXPECTED STATE

Inefficient Processes
·  Duplication of computations at Corporate and unit level
Leaner Financial Processes
·  Systematically, eliminating all sources of waste using a root-cause analysis
Inaccurate Data
·  Huge variances between Forecasting, Planned and Actual data
·  Intercompany data discrepancies leading to added burden on the corporate team
Data quality checks and Process Governance at each stage
·  Multiple data validation options, through parameters and guidelines, to ensure data quality and accuracy
·  Intercompany reconciliation, before financial consolidation, thus shifting the responsibility from the corporate to the subsidiary
Manual Time consuming activities
·  Manually feeding accounting data
·  Tailoring the layout of Statutory and management reports
Automating Workflow for all consolidation activities
·  Automating data entry from multiple source systems (including NW). Manual Journal entries only for adjustments
·  Automated Process flows for carrying out all consolidation related tasks
·  In-Built reporting tool for all reporting and analytical needs (including built in templates)
Increased compliance pressure resulting in more inefficiencies
Deploying a consolidation system capable of increasing compliance efficiency
·  Multi-GAAP reporting
·  Performance enhancing implementation methodologies including audit reports for better audit trail and compliance
Slow Financial Closing process
·  Average annual Financial closing in Europe is 50 days as compared to 29 days in US (BPMi survey 2008)
Expediting the financial closing process
·  Some of the quickest financial closing is in less than 8 days in US and Europe (BPMi Survey)

Thus, in the mid-to-long term horizon, a consolidation system can drive down compliance costs through automation, increase efficiency by expediting the financial close (while ensuring the audit trail) and improve productivity of financial processes through workflow automation and multi-tasking. In addition to these capabilities, a consolidation system can also bring, the much needed, flexibility to the CFO’s office by bridging certain regulatory requirements especially in the short term -

     1. IFRS reporting alongside local GAAP until the operational/transaction systems are geared up for complete changeover to IFRS

     2. XBRL reporting to meet SEC requirements, until XBRL is adopted for management reporting as well

     3. Building synergies during an M&A or diversification ( or hive off) scenario, until the IT architecture is re-aligned to cater to the new/additional regulatory and business requirements

Comments

Thanks again Bharat, good to see most of the expectations from a financial consolidation application seen at customers listed above. It will also now be good to see how this can be achieved :-). Cheers.

Post a comment

(If you haven't left a comment here before, you may need to be approved by the site owner before your comment will appear. Until then, it won't appear on the entry. Thanks for waiting.)

Please key in the two words you see in the box to validate your identity as an authentic user and reduce spam.

Subscribe to this blog's feed

Follow us on

Blogger Profiles

Infosys on Twitter