Reinventing the Record-to-Report Process for Worry-Free Governance, Risk & Compliance
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Video & Slides: http://www.proformative.com/events/reinventing-record-report-process-worry-free-governance-risk-compliance Statutory financial reporting and filing has experienced profound change of late. Unrelenting regulatory pressure, shortened deadlines, digital mandates, and accounting complexity make the Record-to-Report (R2R) process extremely expensive, inefficient, and fraught with risk for the Office of the CFO. This educational session will focus on highlighting the current state of the record-to-report process and understanding the expense impact of R2R on the bottom line. It will also show attendees how to identify critical R2R efficiency opportunities while minimizing risk across the financial close, compliance and disclosure management efforts. Lastly, attendees will learn best practices and things to avoid in the R2R process. Speakers: Mike Duderich, Finance Director, Americas R2R Operations, Unilever Ken Fritz, Executive Vice President, Trintech Presentation delivered at CFO Dimensions 2013 - www.cfodimensions.com Track: Governance, Risk, Compliance | Session: 1
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Reinventing the Record-to-Report Process for Worry-Free Governance, Risk & Compliance
- 1. 1© 2013 Ask, Share, Learn www.proformative.com #CFOD13 Gaining Complete Confidence in your Numbers: Reinventing the Record-to-Report Process Kenneth Fritz Executive Vice President, Trintech Mike Duderich Finance Director, Americas R2R Operations, Unilever
- 2. 2© 2013 Ask, Share, Learn www.proformative.com #CFOD13 AGENDA Why Record-to-Report? Record-to-Report Challenges Reinvention Approach Solution-in-Action: The Unilever Case Study Summary Q&A Kenneth Fritz – Trintech Mike Duderich – Unilever
- 3. 3© 2013 Ask, Share, Learn www.proformative.com #CFOD13 “ ” “Out of intense complexities intense simplicities emerge.” Winston Churchill
- 4. 4© 2013 Ask, Share, Learn www.proformative.com #CFOD13 PROFORMATIVE: Professional Development For Everyone In The Office Of The CFO Visit Proformative.com
- 5. 5© 2013 Ask, Share, Learn www.proformative.com #CFOD13 Myth Busters Myth: Highly educated finance personal are working on value added activities Reality: Many expensive controllers/FP&A professionals spending 2/3 of their time or more on low value information activities
- 6. 6© 2013 Ask, Share, Learn www.proformative.com #CFOD13 Improving the Record-to-Report Process William Marchionni, The Hackett Group • Focus relentlessly on driving Process Simplification & Standardization to combat increasing business & regulatory complexity. • Invest in Integrated Close to differentiate from peers relative to business performance & financial reporting • Broad organizational value (through reliable information and business directed focus) provided by efficient and effective consolidation and close process. • Integrated Systems & Single version-of-the-truth are critical to success for R2R process; enterprise-wide data standards & associated governance are requisite foundations. • All Top Performing R2R organizations leverage technology extensively as an important component of the Integrated Close
- 7. 7© 2013 Ask, Share, Learn www.proformative.com #CFOD13 Top R2R performers, on average, reduce process cost as a percentage of revenue by 51% much of the savings result from automating manual processes and eliminating duplication. Source: “Account-to-Report Leaders: Achieving and Sustaining Top Performance” – Hackett Group, May 2012 $0.0 $50.0 $100.0 $150.0 $200.0 $250.0 $300.0 Year 1 Year 2 Year 3 Year 4 Year 5 $53.56 $109.80 $168.85 $230.85 $295.95 Millions Peer Group vs. Top Performer Finance as a % of Revenue Savings Annual Savings Cumulative Note: Assumes 5% Annual Growth Improving the Record-to-Report Process William Marchionni, The Hackett Group
- 8. 8© 2013 Ask, Share, Learn www.proformative.com #CFOD13 Financial crisis & recession Response to Sarbanes- Oxley act World-Class to Peer Gap 31% 45% 48%World-Class to Peer Gap Source: Hackett Finance Benchmarks Superior Ability To Respond To Volatility…
- 9. 9© 2013 Ask, Share, Learn www.proformative.com #CFOD13 Cost Reduction is a Key Driver in R2R Investment… The results: minimized risk, resources and costs shorter cycles
- 10. 10© 2013 Ask, Share, Learn www.proformative.com #CFOD13 Gartner View on R2R Market Adoption Accelerating for Financial Solutions Gartner continues to define Financial Governance as a whole and also in two subsections, with a strong emphasis on Financial Governance Suites. Financial Governance Suites Advantage 0 to 2 This is an emerging area and financial governance suites offer a strategic solution with new solutions entering the market in the last year. Evaluate against disclosure management and close management solutions. Disclosure Management Choice 0 to 2 If your current disclosure processes are manual and rely on spreadsheets, evaluate within the next 12 months. These offerings are maturing in depth and scope. Close/Reconciliation Management Choice 2 to 5 If your current close processes are manual and rely on spreadsheets, evaluate within the next 12 months. Evaluate the whole close process. Try to avoid tactical purchasing of reconciliation management solutions. Source: Gartner IT Market Clock for Financial Management Applications, August 2012
- 11. 11© 2013 Ask, Share, Learn www.proformative.com #CFOD13 Current Challenges The role of finance is changing and executives are faced with increased need for fast and reliable information while meeting new regulatory requirements. One Source Of the Truth People & Governance Regulatory Requirements Efficiency & Effectiveness
- 12. 12© 2013 Ask, Share, Learn www.proformative.com #CFOD13 What Chief Accounting Officers Find Challenging “Our goal is to remain on the constant improvement curve because there will be persistent cost pressure on finance.” – Intel CAO “What I do not know (unknown risk) and lack of communication between key departments” – General Motors Controller and CAO “Risks of things falling through the cracks as things are handed off between shared service centers” – J&J VP, Controller and CAO “Changing regulatory environment” – Best Buy SVP, Controller, CAO
- 13. 13© 2013 Ask, Share, Learn www.proformative.com #CFOD13 The CFO’s Perspective Evaluating Record-to-Report risk & performance: 1. Manage Risk 2. Increase Effectiveness 3. Increase Efficiency • What is our R2R risk? • Do our processes complement our risk appetite? • Are we doing the “right things” – in the right order? • Are we missing critical steps? • Are these steps auditable? • Are they sustainable? • Are we “doing things right?” • Are we leveraging technology, people and processes for maximizing value and ROI?
- 14. 14© 2013 Ask, Share, Learn www.proformative.com #CFOD13RISK RISKRISK RISK RISK Reduce Risk
- 15. 15© 2013 Ask, Share, Learn www.proformative.com #CFOD13 RISK Reduce Risk IncreaseEffectiveness
- 16. 16© 2013 Ask, Share, Learn www.proformative.com #CFOD13 RISK RegulatoryDeadlineRegulatoryDeadline Transformation&Process Improvement RegulatoryDeadline Reduce Time & Mitigate Risk
- 17. 17© 2013 Ask, Share, Learn www.proformative.com #CFOD13 Transformation&Process Improvement RegulatoryDeadline Reduce Time & Mitigate Risk Transformation&Process Improvement RegulatoryDeadline Reduce Time & Mitigate Risk
- 18. 18© 2013 Ask, Share, Learn www.proformative.com #CFOD13 Record-to-Report Process Timeline
- 19. 19© 2013 Ask, Share, Learn www.proformative.com #CFOD13 PROFORMATIVE: Professional Development For Everyone In The Office Of The CFO Visit Proformative.com
- 20. 20© 2013 Ask, Share, Learn www.proformative.com #CFOD13 How the R2R Process Often Works
- 21. 21© 2013 Ask, Share, Learn www.proformative.com #CFOD13SAP® Close Cockpit Legacy Systems Outsourced External How the R2R Process Often Works
- 22. 22© 2013 Ask, Share, Learn www.proformative.com #CFOD13 How the R2R Process Often Works SAP® Close Cockpit Legacy Systems Outsourced External
- 23. 23© 2013 Ask, Share, Learn www.proformative.com #CFOD13 How the R2R Process Often Works SAP® Close Cockpit Legacy Systems Outsourced External
- 24. 24© 2013 Ask, Share, Learn www.proformative.com #CFOD13 The first, unified financial governance solution to reinvent the entire Record-to- Report process How Trintech Helps
- 25. 25© 2013 Ask, Share, Learn www.proformative.com #CFOD13 Cadency Record-to-Report
- 26. 26© 2013 Ask, Share, Learn www.proformative.com #CFOD13 Cadency gives financial executives a newfound “controlled agility” A configurable console allows each participant to focus on specific responsibilities and areas critical for success.
- 27. 27© 2013 Ask, Share, Learn www.proformative.com #CFOD13 Unilever: Record-to-Report Case Study Mike Duderich Finance Director, Americas R2R Operations
- 28. 28© 2013 Ask, Share, Learn www.proformative.com #CFOD13 Fast Facts - 2012 €1 BILLION INVESTED IN R&D WORLDWIDE 190 COUNTRIES IN WHICH OUR PRODUCTS ARE SOLD TURNOVER OF €51 BILLION AT END OF 2012 EMPLOYEES AT THE END OF THE YEAR 173,000 EMERGING MARKETS NOW REPRESENT 55% OF TURNOVER
- 29. 29© 2013 Ask, Share, Learn www.proformative.com #CFOD13 Our € 1 Billion Brands Home Care Refreshment Foods Personal Care
- 30. 30© 2013 Ask, Share, Learn www.proformative.com #CFOD13 PROFORMATIVE: Professional Development For Everyone In The Office Of The CFO Visit Proformative.com
- 31. 31© 2013 Ask, Share, Learn www.proformative.com #CFOD13 Enterprise Support - MISSION Providing excellent services globally – enabling Unilever to win in the market Better serve consumers and customers Translate global scale into local cost competitiveness Creating maximum Agility
- 32. 32© 2013 Ask, Share, Learn www.proformative.com #CFOD13 Enterprise Support - FINANCE SERVICES Excellent Services At Benchmark Costs Finance Services Performance Process Performance Harmonised Processes Automation Centralisation Satisfied Users Engaged Team Continuous Improvement Levers Transformation Programmes End to End Ownership Re-tendering Project Outsourcing Footprint Operating Centers
- 33. 33© 2013 Ask, Share, Learn www.proformative.com #CFOD13 Our R2R Transformation Journey 2011 5 week reporting, inconsistent & complex processes Risk reduction through greater compliance driven by end-to- end, standard global processes Embrace one single finance services organisation Enhancing effective business partnering to drive virtuous circle of growth Leveraging Information as a strategic asset to drive effective commercial decision making Tomorrow 2014 2 Week reporting, streamlined & end to end aligned processes globally Accelerated financial reporting Agile and scalable finance services organisation
- 34. 34© 2013 Ask, Share, Learn www.proformative.com #CFOD13 What Have We Changed One Global Process Blueprint • Externally benchmarked best practices • Facilitates continuous improvement • Implemented across all geographies One set of Unilever Selected Tools • Externally benchmarked automation • Embedded controls • Workflows for status follow up Globally Harmonised Three Tier Organisation • Limited country team members • Unilever Operating Centres • Harmonised outsourcing footprint New Service Provider Contracts
- 35. 35© 2013 Ask, Share, Learn www.proformative.com #CFOD13 New Global R2R Process 35 Global Process Blueprint • Streamlined, single best practice process adopted globally • 68 sub-processes supported by detailed desktop procedures • Embedded into all reporting systems and supported by a new toolset Process Flows Policy & Procedures Master Data Transact - Sub Ledger Transact - Judgmental Transact - Non Judgmental Intercompany Local Reporting Narratives Desktop Procedures
- 36. 36© 2013 Ask, Share, Learn www.proformative.com #CFOD13 Journal Entry & Workflow Workflow G/L to Reporting System Interface Account Reconciliation & Workflow Close monitoring Intercompany Transactional System - SAP Used by all levels of the 3 tier model Used by Service Providers and Operating Centres New Global R2R Tools
- 37. 37© 2013 Ask, Share, Learn www.proformative.com #CFOD13 New GLOBAL R2R Organisation Activities cannot be transferred out of country due to fiscal or legal requirement ENTERPRISE SUPPORT ENTERPRISE SUPPORT BUSINESS FINANCE Activities where economy of scale can be leveraged and global expertise developed Transactional, rule-based activities Tier 1: COUNTRY Tier 2: OPERATING CENTRES Tier 3: SERVICE PROVIDER • Fully Aligned KPIs with Business Finance and Providers • Process Ownership at Operating Centres • 3 Tier Governance Managed by Operating Centres
- 38. 38© 2013 Ask, Share, Learn www.proformative.com #CFOD13 Where are we on the Journey 2,500 Users of the new R2R Tools 61% of Unilever’s annual turnover Western Europe North America Germany & CEE South Africa India China Japan Indonesia Intercompany Hub
- 39. 39© 2013 Ask, Share, Learn www.proformative.com #CFOD13 Key Takeaways Transformation integral part of overall business strategy Business case cost/benefits clearly articulated Large scale change agenda while still delivering business as usual (closing books, reporting results) Driving global scale by centralizing expertise and doing things ONE way (process, systems) across 190 countries
- 40. 40© 2013 Ask, Share, Learn www.proformative.com #CFOD13 Summary Cadency reinvents, transforms and shortens the entire R2R cycle By establishing a repeatable “Rhythm of Finance” through orchestrating all stakeholders, activities and interoperable processes in a collaborative, real time workflow environment Cadency reduces costs & improves efficiency enterprise-wide By optimizing resources, costs, risks and activities across the entire finance organization worldwide through: Transparency and control across the governance model for the R2R cycle Empowering continuous process improvement methods across the entire cycle Cadency enables “controlled agility” By facilitating easy realignment for an ever-changing business and regulatory environment
- 41. 41© 2013 Ask, Share, Learn www.proformative.com #CFOD13 Why That’s Good: Cost Savings Top R2R performers, on average, reduce process cost as a percentage of revenue by 51% much of the savings result from automating manual processes and eliminating duplication. – The Hackett Group Source: “Account-to-Report Leaders: Achieving and Sustaining Top Performance” – Hackett Group, May 2012 $0.0 $100.0 $200.0 $300.0 Year 1 Year 2 Year 3 Year 4 Year 5 $53.56 $109.80 $168.85 $230.85 $295.95 Millions Peer Group vs. Top Performer Finance as a % of Revenue Savings Annual Savings Cumulative Note: Assumes 5% Annual Growth
- 42. 42© 2013 Ask, Share, Learn www.proformative.com #CFOD13 “ ” “To improve is to change; to be perfect is to change often.” Winston Churchill
- 43. 43© 2013 Ask, Share, Learn www.proformative.com #CFOD13 Where to Start Quick Wins: - Centralize reconciliations - Standardize JE process - Automate the disclosure management process - Eliminate duplicate tasks Standardize: - Create Workflow for entire record to report process - Reviews and approvals for all R2R process activities - Standardize production of Statutory Reports Automate: - Consolidate close tasks across the organization within Shared Services - Automate reconciliations to a risk-based process - Bring XBRL in-process within the R2R cycle - Accelerate data collection and timeliness of judgment based decisions - Electronic records for entire record to report cycle for Audit Optimize: - Orchestrate the entire record to report process - Leverage benchmarks for process measurement from period to period - Optimize share of effort between Shared Service Centers and specialized functions - Agility to absorb acquisitions and other new business conditions - Effective and empowered collaboration throughout the R2R cycle 1. CRAWL Start with quick wins based on highest priority 2. WALK Establish entire R2R process; target white space 3. RUN Automate key bottlenecks 4. SPRINT Optimize entire process and supply chain Process Cost and Cycle time Quality, Transparency & Visibility
- 44. 44© 2013 Ask, Share, Learn www.proformative.com #CFOD13 Who Can Help Our Strategic Partners KPMG – Global Deloitte – Global E & Y – Global Accenture Cap Gemini Hackett – UK, Europe, US
- 45. 45© 2013 Ask, Share, Learn www.proformative.com #CFOD13 PROFORMATIVE: Professional Development For Everyone In The Office Of The CFO Visit Proformative.com
- 46. 46© 2013 Ask, Share, Learn www.proformative.com #CFOD13 Thank You!
Notas del editor
- Got Confidence in your numbers? How to make a huge impact on your Record-to-Report Process This slide will be up on the screen when people walk into the room Next Slide
- PURPOSE OF SLIDE – ENGAGEMENT AND TELLING AUDIENCE WHAT’S TO COME The obvious point of this slide is to introduce yourself and the Trintech team in attendance, as well as to learn about any prospect attendees in the room who are new to you and Trintech (invariably there will be some who are). END GOAL: Learn about the attendees in the room/on the phone Make sure you understand who they are, what their role is within the organization, why they are in the room, what their expectations are, etc. Welcome and Introductions Next Slide
- PURPOSE OF SLIDE – SHOW POTENTIAL ROI OF REINVENTING RECORD TO REPORT END GOAL This is not just Trintech’s perspective – third-party experts have quantified this problem across 1000’s of companies globally While the potential savings is astronomical, the point is to get the client thinking – even if the savings is ½ of this number, it is still huge! SCRIPT According to The Hackett Group, renown for benchmarking R2R best practices, top R2R performers, on average, reduce process cost (as a percentage of revenue) by 51% - much of the savings result from automating manual processes and eliminating duplication. For example, using Hackett’s findings: If you are in a peer group, you are typically spending 0.164% on R2R processes If you are a top performer, you would spend .08% We calculated the potential savings for a client of ours, a $52B company If they are a peer company, they are spending $85.2M on R2R If they are a top performer, they would spend $41.68 M. Their annual savings would be $43.68 M Really? How? Through: Consolidation of tasks across different geographies Automating manual tasks – especially in reconciliations Eliminating the “white space” gaps and duration of cycle times that drive up costs Reducing audit fees through greater productivity CASE STUDY One of our clients, a Tier One Telecom Company with $54B in revenue and 82,000 employees had over 9,000 accounts, and over 400 staff doing reconciliations on a quarterly basis. Their Sub-ledger and General Ledger data feeds were manually intensive and difficult to coordinate, and their ability to drill-down into the prior period reconciliations was difficult – it required that they sift through numerous spreadsheets, which was very time consuming and error prone. By Consolidating & Automating Just GL Reconciliation 1) 10% Efficiency Savings: By consolidated GL reconciliations, the company saved 10% of processing costs in the first year by removing redundant work in data input and reconciliation automation 2) Streamlining: They enhanced best practices with dynamic risk rating – allowing for changing frequencies of reconciliations dependent on account balances, carry-forward and other criteria 3) More Control: They gained process control by centralizing Management oversight over enterprise-wide reconciliations What if you only saved 10%? Next Slide
- Process cost for the Top Performer group is 50% lower than the Peer Group; a favorable FTE gap / advantage exists across all sub-processes
- PURPOSE OF SLIDE – WHY THE ATTENDEE NEEDS TO CARE ABOUT R2R END GOAL According to The Hackett Group, renown for benchmarking R2R best practices, top R2R performers, on average, reduce process cost (as a percentage of revenue) by 51% - much of the savings result from automating manual processes and eliminating duplication. To point out Hackett’s research discussing that by being simply a “peer group member” your cost of R2R process as a percentage of revenue is .164% versus a top performer being dramatically lower (.08%). Let’s put this in terms of dollars. We calculated the potential savings for a client of ours, a $52B company If they are a peer company, they are spending $85.2M on R2R If they are a top performer, they would spend $41.68 M. Their annual savings would be $43.68 M So the impact to improve the efficiency is quite big on a company’s bottom-line. Next Slide
- PURPOSE OF SLIDE – WHAT GARTNER IS SAYING ABOUT R2R END GOAL The market adoption of R2R solutions is speeding up as companies look to increase the efficiency of their R2R process SCRIPT Gartner has defined the term “Financial Governance Suite” to mean solutions that span the entire record-to-report cycle. They published a report (IT Market Clock for Financial Management Applications) last summer that points out many organizations are spending money in these three areas: Close/Reconciliation management Disclosure management Financial Governance Suites The big take-away from this is that Gartner feel companies are going to start looking at the holistic process which is what the Financial Governance Suites like what we are doing at Trintech for R2R are addressing. The encourage companies to evaluate these solutions versus the point solutions designed to simply address disclosure management and close/reconciliations. Why? NEXT SLIDE ROBERT: The entire report content is below Useful Market Life For each financial management asset class, market life is a relative measure of where the asset class sits in its own life cycle. Measures are stated using the metaphor of a 12-hour clock face, and the full market lifetime of delivery comprises one complete 12-hour cycle, from 12:00 until 12:00. The market life comprises four phases: Advantage — from 12:00 to 3:00, the market typically moves from an emerging status to Adolescent status. Levels of demand and competition are typically low, so the technology is procured for what it delivers, not for its placement in its own market. Choice - From 3:00 to 6:00, the market typically moves from an adolescent status to early mainstream. This is the phase of highest demand growth, when supply options should grow and prices fall at their fastest rate. Cost — From 6:00 to 9:00, the market moves from early mainstream to mature mainstream status. During this phase, commoditization is at its highest level, and costs will be the strongest motivator in most procurement decisions. Replacement — From 9:00 to 12:00, the market moves from mature mainstream status, through legacy and to market end (after which, the technology is no longer viable to procure or use). Procurement and operating costs will steadily rise, and enterprises should seek alternative approaches to fulfilling the business requirement. The market life positions of technology asset classes are based on a consensus assessment of technology and market maturity. Some asset classes also appear in Gartner Hype Cycles, the span of which covers adoption of up to 20% to 50% market penetration, which equates with approximately 5:00 on the IT Market Clock. Financial Governance Applications Analysis By: John E. Van Decker; Neil Chandler Definition: Financial governance offerings (also known as "last-mile-of-finance" solutions) are targeted directly at the needs of the CFO and the finance function, including close management (financial consolidation, financial close process management, reconciliation management, journal entry control, intercompany transaction management) and disclosure management (financial statement product and financial control testing). Increasingly, CPM vendors are including this functionality in their suite offerings. Position and Adoption Speed Justification: Financial governance solutions are a relatively new market segment that will mature during the next two to five years, combining elements of ERP; financial governance, risk and compliance management (GRCM); and corporate performance management (CPM) suites to build additional process controls around financial consolidation to support financial close processes and the production of periodic financial statements for regulators. Since 2007, a distinct market segment for financial governance has emerged that is focused on financial consolidation, financial close management and disclosure management. Still, there are many business applications that can be used in the finance organization to address GRC requirements. Many CFOs wrestle with the issue of improving the governance of financial processes. To improve governance, they have to deploy and integrate disparate applications, usually from different vendors, and this is still the appropriate approach for most firms. These applications typically include elements of the ERP systems, CPM suites, and finance and audit GRC products that address specific tactical needs, but do not provide an overall solution. Consequently, we anticipate that we will continue to see new components merge through 2013 and 2014 that are workflow-focused (e.g., International Financial Reporting Standards and corporate tax preparation/ provisioning) and that extend financial governance suites. These offerings will be targeted directly at the needs of the CFO and finance function. In 2011, we saw acquisitions of vendors and products by megavendors (e.g., IBM and SAP), as well as more market entry of new products (e.g., from Oracle). We have also seen niche vendors (such as BlackLine Systems and Trintech) achieve significant growth. User Advice: Although users may have to wait for vendors to bring integrated financial governance suites to market, they can start their initiatives by finding opportunities for specific solutions in financial governance areas where they do not have a technology solution or where they are overwhelmed with manual processes. Where there is a tactical need for a point solution from a specialty vendor, users should not defer evaluations; instead, they should evaluate the appropriate point solutions. However, they should view such evaluations in two ways. First, the investment should be considered on a five-year basis — the time frame in which more-comprehensive financial governance solutions will become available. Second, users should give preference to point solutions from CPM, ERP, or finance and audit GRCM vendors with which they have a strategic relationship, because these vendors are the most likely sources of more comprehensive offerings. IT professionals must help balance these short-term needs with longer-term strategic investments,and should understand the plans of their ERP, business intelligence (BI) and CPM vendors. Business Impact: Financial governance applications are an emerging market that combines elements of ERP, finance GRCM and CPM suites. They build additional process controls around financial consolidation to support financial close processes and the production of periodic financial statements for regulators. Since we first defined financial governance in 2007, a market is forming that is fundamentally centering around two components — close management and disclosure management. Financial governance applications augment the compliance controls in finance GRCM solutions with broader controls that monitor capabilities, and, when delivered as a comprehensive solution, they will enable CFOs to better manage financial risk. However, while financial governance solutions mature, CFOs will be faced with the challenge of addressing their most pressing governance issues with a variety of point solutions. IT professionals must help balance these short-term needs with longer-term strategic investments, and should understand the plans of their ERP, BI and CPM vendors to provide solutions in this area. Benefit Rating: Moderate Market Penetration: 5% to 20% of target audience Maturity: Emerging Sample Vendors: BlackLine Systems; IBM; Oracle; SAP; Tagetik; Trintech Recommended Reading: "Q&A: Current Issues in Financial Governance" "CPM Financial Consolidation Solutions Are Evolving" "Magic Quadrant for Corporate Performance Management Suites" "Top 10 Findings From Gartner's Financial Executives International CFO Technology Study" "IT Market Clock for Financial Management Applications, 2011" "Top Processes for Corporate Performance Management"
- From a business perspective, organizations are facing greater competition than every before. There is increasing pressure on their margins. In many cases the complexity of their business or operating environment is Increasing. It is changing. And the need for greater agility is paramount. Within this context, there is increasing pressure from stakeholders for faster, more reliable information. Better, more improved information. And there is a constant drum beat from the regulators. The trend has been, and will continue to be, more regulation. First their was SOX, then more recently the XBRL requirements and at some point in the future, IFRS convergence, or at least some changes to the reporting / accounting requirements. In short, the role of finance is changing and executives are faced with increased need for fast and reliable information while meeting new regulatory requirements. One of the areas that we see our clients focusing on, dealing with, wrestling with, what we refer to as the Service Delivery Model. Which is essentially the question of “who should be doing what work, where? With what tools? With what processes?” With what Skills? It is all about how to drive greater efficiency and effectiveness in Account-to-Report.
- PURPOSE OF SLIDE – VALIDATION FROM OTHER PROFESSIONALS END GOAL To highlight what others (their peers) are saying about the R2R process challenges SCRIPT Just read 1-2 of these depending upon the relevancy to the prospects’ industry, size of challenges. Next Slide
- PURPOSE OF SLIDE – TO EXPLORE THEIR R2R PROCESS NOTE: YOU ARE NOT EXPECTED TO BE AN EXPERT ON THIS WHOLE PROCESS, DON’T TRY TO BE. The point of this slide is to discuss their R2R process; to get the audience talking about how their process works. END GOAL Visually introduce the typical R2R process Quickly engage the prospect in describing their process SCRIPT Most companies are reconciling, closing and reporting their results in approximately this process and timeline. To make sure we are on the same page, we’d like walk through your Record to Report process. We would appreciate your comments and corrections on how these processes really flow for you, the titles you use and timeframes for your teams. DESCRIPTION FROM LEFT: The timeline starts after all of the transaction processing and ERP closing has occurred. All of you are engaged in some part of this process: General Ledger reconciliation, analysis and reviews, the Close, auditor testing and compliance, and financial reporting and filing. Your set of steps may be more complex, and even done in a different order, but overall this is what we are seeing a lot of our customers do to get their filings out the door at a high-level. NOTE: Here are a set of questions you should be asking the audience to engage them, and get them telling you about THEIR process: How are you currently organized across the Record to Report Process? What does your current process look like at high level? What systems are you using for transaction processing and how do they fit in? What is the timing for your typical quarter close – what are the key dates and impacted days? Where is the process working well? Where is the process costing you time, inefficiency, and risk? (The goal is to identify as many points of control within the organization for the entire process and where the CFO would need to check for an update on progress.) So let’s look at happens for many Finance teams… Next Slide
- PURPOSE OF SLIDE – GAP ANALYSIS: HIGHLIGHTING R2R COMPLEXITY, CUSTOMER PAIN, & ISSUES WITH EXISTING WAY THEY APPROACH RECORD TO REPORT NOTE 1: This is a set of slides that will BUILD, so the following script assumes you would do so – if you are limited for time, please only use Slide #10 or refer to the executive slide deck where the picture includes all of the steps and the script is merged. Note 2: It is quite possible that some people in the room do not know their entire R2R process, or where the bottlenecks, hand-offs and whitespaces are, so we are going to walk through what we experience with our clients. END GOAL Describe the R2R process beginning with the CFO getting ready to submit the 10K or 10Q 1st Build Slide (e.g., slide 7) SCRIPT Let’s look at the process from a different perspective in order to get a picture of the how the Record to Report process typically works in a lot of companies today. We’ll start at the End. Every quarter there comes a point when, although not every “I” is usually dotted, the CFO and his team of managers must conclude that the filing is ready for submission to regulatory bodies and their internal and external stakeholders. The results represent a reflection of the company’s success in financial terms. When the filing is actually submitted, the expectation is that everything is accurately reflected in accordance with the appropriate accounting and regulatory standards. The CFO and his team oftentimes have some remaining uncertainty about the accuracy of the submit due to the complexity of the processes and number of global interchanges that occur. There is a great deal of late nights, back and forth discussions, and even stomach lining burned just to arrive at this point. For days and sometimes even weeks afterwards, there is a lingering uncertainty - that some unknown will be unearthed, and possibly material enough to cause a restatement. So, let’s take a look at a generic Record to Report scenario and discuss the players and systems involved. Unfortunately we are working in a 2-dimensional view, so recognize that some of the complexity involved in the process cannot be fully illustrated here, but this should help us get a common ground on how things work here at [insert company name here]. Next Slide
- PURPOSE OF SLIDE – GAP ANALYSIS: HIGHLIGHTING CUSTOMER PAIN & ISSUES WITH EXISTING WAY THEY APPROACH THE PROBLEM END GOAL Build out a very generic Record to Report cycle purely from process view (two dimensional view). Build Slide #2 CONTINUING SCRIPT FROM PREVIOUS SLIDE Looking at the far left the process starts with transactions being processed from the company operations in systems such as ERP, Legacy systems or from outsourcing centers. NOTE: Consider asking about their systems at this point if you don’t know their basics or confirm their ERP. At some day before the period end, let’s say Day 8, the period close begins with each business unit closing their books, reviewing their accounts and performing reconciliations. The reconciliations and analytics are reviewed, the balanced are certified and then the consolidation occurs and a corporate close will occur. NOTE: Consider asking about their processes for reconciliations Throughout the year and period, compliance efforts for Sarbanes-Oxley are occurring and some accounts are being reviewed and tested for reasonableness. NOTE: Ask about their compliance process is they are required to comply with SOX Once the accounts are considered validated, financial statements are run and reviewed. The disclosure process is often well underway during the close with footnotes being drafted, however, the drafting and tying out of final numbers with footnotes and Management Disclosure & Analysis (MD&A) can only be finalized and verified when the final statements are submitted. The SEC team creates the final documents in accordance with a myriad of rules and goes through extensive iterations of review until the point at which the CFO and controllers conclude, as we saw before, that the filing can be submitted. NOTE: Ask about their reporting process if the SEC team is there and interactions. We recognize that the process is very complex, and that differences in time zones, holidays, work standards and other things adds an additional layer of complexity that we did not reflect here. Next Slide
- PURPOSE OF SLIDE – VISUALLY EXPLORE THE PROCESS INTERACTIONS (RED LINES) IN THE R2R PROCESS END GOAL This slide is meant to lay out the interactions of the key players involved in the process so we can understand how the process is managed. Build Slide #3 CONTINUING SCRIPT FROM PREVIOUS SLIDE But, we are aware that the real fuel to the Record to Report engine is the brain power of human resources. From the top we have the CFO, CEO and other operations personnel involved in reviewing the efforts – but at times interjecting comments and other estimates such as depreciation or valuations. Operations is a key stakeholder in the final results. The Controllers across the globe are responsible for the review of the results and compliance with required accounting standards. They manage the results for their area, and supervise the team of accountants – the GL team – that ensure the accuracy of results. The GL team is integral to the close, consolidation and reconciliation process, and ultimately the accuracy of final results in the accounts. This team bears the brunt of the fast and furious close process and supports the reconcilers - often in 1000s of balance sheet reconciliations. Sarbanes-Oxley (SOX) Compliance is managed by a designated manager who is often on the SEC team, but there are usually other key compliance initiatives involving the company’s financial data that HR, legal or even the regulatory operations department may manage. The SEC team usually small but mighty and interfaces regularly with legal and tax during the disclosure process. The SEC manager is the company expert in SEC filing regulations. NOTE: For each of these groups – ask the customer: How they are organized? What names do they use at their company? Who is missing? Do teams talk to each other? Know what the others need? And yet there is more. Arrival at the submission does not happen as an assembly line. The process requires extensive integrations and interactions amongst all these players. So what are some of the effects? No end-to-end visibility Inefficient communications Lack of communication between key departments White spaces between people, point solutions & processes Unnecessary time lags and guessing No standardized, global process Next Slide
- PURPOSE OF SLIDE – VISUALLY DESCRIBE THE INTERACTIONS (GREY LINES) AND THE GROWING COMPLEXITY END GOAL This slide lays out the required interactions amongst the groups (Grey lines – notice that many are 2 way communications) This also shows the tools available to manage the process (Word, Excel point solutions) Note: that this will occur in a variety of ways in every organization but the fact that each person has to play their part perfectly and in concert is the key point. Build Slide #4 CONTINUING SCRIPT FROM PREVIOUS SLIDE The interactions between all the parties involved in bringing timely and accurate results to the market place are countless. Each player must perform their specific role with precision and often manage a chain of unique issues and external disruptions as they go. For instance, if a Business Unit can’t Close because their systems were shut down due to a power outage, then the chain starts to break down and timeframes become compressed. If an accounting issue is raised mid-cycle by a Business Unit controller and that is not communicated to the right person in a timely manner then the results are at risk. Currently with only phone calls, e-mail and office productivity tools to manage the global process – and the reliance on point solutions to manage parts of the process – the CFO and Controllers have little to no visibility into the problems, issues, and “white space” risks until late in the process – sometimes when it is too late to do anything about it. The lack of visibility is what often drives the greatest amount of anxiety at Submit time. Additionally, we can all see the inefficiency in the Record to Report cycle. We understand that you are doing the best you can with what you have, with the pressures to meet deadlines and regulatory mandates; and with the lack of a standard, end to end process and tools. The Hackett Group, a third-party R2R benchmarking expert, has quantified the costs of this problem. Hackett found that R2R process complexity and inefficiency costs Finance, on average, 0.164% of their revenue every year. For a $5 B enterprise, that could be costing as much $8 M in process inefficiency every year. Note: (e.g., $5B x .00164 = $8.2M) Next Slide
- PURPOSE OF SLIDE – WHY CADENCY: HOW DO WE MAKE THAT BOLD PROMISE A REALITY? END GOAL Introduce the Cadency as the only true end-to-end solution for the R2R process How we are going to help them SCRIPT Trintech is very excited to introduce Cadency. Cadency is the world’s first financial governance solution to reinvent the entire Record-to-Report process – end to end. WHY CADENCY? We have found from first-hand experience working with our clients In the R2R environment that even though they are applying applications to be more efficient, even though they have deployed point solutions (even ours) – they still can’t get their hands around the whole Record to Report process. Yes, “did we get efficiencies?” - but they are operating 3, 5, 7 different systems, some acquired, some built, some legacy solutions, and are still struggling with managing the entire process Most know they were choosing short term fixes to long term problems. It was a pain point that had to be addressed. They still struggle with a lack of transparency, controls and efficiency end-to-end when they hit the Submit button They haven’t had a strategic option The Office of Finance needs one product that completely manages the Record to Report process from end-to-end Building that one product has been our vision since 2007. Next slide
- PURPOSE OF SLIDE – INTRODUCING CADENCY RECORD TO REPORT (AKA THE GEAR SLIDE) END GOAL: Walk through how Cadency is a completely integrated product that tackles all of the issues associated with R2R SCRIPT Cadency is that strategic solution - a single product that manages all parts of the R2R process. It orchestrates all of the stakeholders involved in the process and is designed to streamline all of the process activities into one seamless environment. And it works with the legacy and point solutions you have. Let’s take a look: It is designed to be a unified collaboration environment for the entire team involved with R2R – and provides an important benefit that senior finance management is missing today – efficiency, transparency, standardization and governance on a real time basis. You will notice that in the middle of the slide, all of the process components – Certification, Compliance, Completion, the Close and Journal Entry - are represented as gears to highlight how tightly integrated each of the components are to optimize the R2R process. CERTIFICATION: From the time transaction data enters the process, Cadency automates all aspects of the Certification process while managing, executing, documenting and reporting aspects of the reconciliation processes. GL reconciliations are performed under a common process across all entities and shared service centers with full review and drill-down into reconciliations, aged analysis and risk on the balance sheet COMPLIANCE: From Certification, Cadency Compliance handles all the oversight and performance of testing, remediation and evaluation of internal controls for compliance with your Sarbanes-Oxley and other regulatory requirements COMPLETION: Full financial disclosure is handled by Cadency Completion. Completion automates the drafting and compiling of the all reports and manages them in real time through a robust workflow system, task cards and XBRL tagging throughout the process. CLOSE: You can see that these three process components are wrapped in Close and Journal Entry activities. The Close manages and manifests all the activities that are required to validate your financial results and ultimately create a set of final consolidated numbers. Close provides transparency to management categorized by day, by process, and by person as it relates to the status of every closing event. JOURNAL ENTRY: Journal Entry supports creating, completing, and uploading JE’s – creating a closed loop for journal entries from preparation to filing. Complete integration removes white space risk Cadency’s integration prevents any duplicated efforts by your team, and provides an integrated view of the entire status at any moment in time. Cadency’s unified, end-to-end process environment improves process efficiency and eliminates the white space risk we discussed on the last slide. Most importantly, it provides for continuous process improvement. Finally, with Cadency, CAOs and CFOs have transparency into the entire R2R process. How? Cadency provides managers with a configurable set of dashboards that monitor the status of the process at any point along the way, measure how well the company is doing versus the desired goal and manage the process efficiently – and do it in real time. NOTE: If you have the ability, this would be a good time to run the Cadency video Let’s look at Cadency from an animated perspective (if applicable) Next Slide
- PURPOSE OF SLIDE – BRING THE CADENCY PRODUCT TO LIFE FOR THE FIRST TIME FOR THE AUDIENCE END GOAL Show then Cadency is a real product Highlight the fact that the dashboard shows them everything in one place Setup for either a demo, or screen shot walk-through SCRIPT Okay, so we have talked about what Cadency can do for a little bit now – I’d like to actually show you it. Welcome to the future of record to report! This is a snapshot of a typical dashboard for a management-level finance professional who needs visibility to the critical processes including Close, Reconciliations and Compliance. Down the left side you can see the status of process laid against current balance sheet accounts to allow management continued perspective on materiality. NOTE: Ask your attendees: How would you garner this information so that you can manage these processes today? How often are you able to get a full view to the details? Do you feel confident that all tasks are being executed when and how you have laid them out? Note that the purpose of these questions is to remind participants of the pain they have today as people tend to readily start asking for even more once they see what is possible. If you know the answer to these questions – remind the participants of how it is done today for instance: “[Person’s name], I recall that you have a daily call during the close to get a sense of where everyone is at. You keep notes and then follow up on the next day’s calls as needed. Some of the call is spent on just getting status of what is completed. Would this be helpful?” Proof Points include: The dashboard gives you the ability see issues as they arise to change course during the process and prevent the inefficiency of fire drills. This decreases the risk of errors The consoles are drillable and configurable Views can be filtered for each viewer (as you will see in the demo, or the next few slides – if applicable) Next Slide
- PURPOSE OF SLIDE – SHOW POTENTIAL ROI OF REINVENTING RECORD TO REPORT END GOAL This is not just Trintech’s perspective – third-party experts have quantified this problem across 1000’s of companies globally While the potential savings is astronomical, the point is to get the client thinking – even if the savings is ½ of this number, it is still huge! SCRIPT According to The Hackett Group, renown for benchmarking R2R best practices, top R2R performers, on average, reduce process cost (as a percentage of revenue) by 51% - much of the savings result from automating manual processes and eliminating duplication. For example, using Hackett’s findings: If you are in a peer group, you are typically spending 0.164% on R2R processes If you are a top performer, you would spend .08% We calculated the potential savings for a client of ours, a $52B company If they are a peer company, they are spending $85.2M on R2R If they are a top performer, they would spend $41.68 M. Their annual savings would be $43.68 M Really? How? Through: Consolidation of tasks across different geographies Automating manual tasks – especially in reconciliations Eliminating the “white space” gaps and duration of cycle times that drive up costs Reducing audit fees through greater productivity CASE STUDY One of our clients, a Tier One Telecom Company with $54B in revenue and 82,000 employees had over 9,000 accounts, and over 400 staff doing reconciliations on a quarterly basis. Their Sub-ledger and General Ledger data feeds were manually intensive and difficult to coordinate, and their ability to drill-down into the prior period reconciliations was difficult – it required that they sift through numerous spreadsheets, which was very time consuming and error prone. By Consolidating & Automating Just GL Reconciliation 1) 10% Efficiency Savings: By consolidated GL reconciliations, the company saved 10% of processing costs in the first year by removing redundant work in data input and reconciliation automation 2) Streamlining: They enhanced best practices with dynamic risk rating – allowing for changing frequencies of reconciliations dependent on account balances, carry-forward and other criteria 3) More Control: They gained process control by centralizing Management oversight over enterprise-wide reconciliations What if you only saved 10%? Next Slide
- PURPOSE OF SLIDE – SHOW POTENTIAL ROI OF REINVENTING RECORD TO REPORT END GOAL This is not just Trintech’s perspective – third-party experts have quantified this problem across 1000’s of companies globally While the potential savings is astronomical, the point is to get the client thinking – even if the savings is ½ of this number, it is still huge! SCRIPT According to The Hackett Group, renown for benchmarking R2R best practices, top R2R performers, on average, reduce process cost (as a percentage of revenue) by 51% - much of the savings result from automating manual processes and eliminating duplication. For example, using Hackett’s findings: If you are in a peer group, you are typically spending 0.164% on R2R processes If you are a top performer, you would spend .08% We calculated the potential savings for a client of ours, a $52B company If they are a peer company, they are spending $85.2M on R2R If they are a top performer, they would spend $41.68 M. Their annual savings would be $43.68 M Really? How? Through: Consolidation of tasks across different geographies Automating manual tasks – especially in reconciliations Eliminating the “white space” gaps and duration of cycle times that drive up costs Reducing audit fees through greater productivity CASE STUDY One of our clients, a Tier One Telecom Company with $54B in revenue and 82,000 employees had over 9,000 accounts, and over 400 staff doing reconciliations on a quarterly basis. Their Sub-ledger and General Ledger data feeds were manually intensive and difficult to coordinate, and their ability to drill-down into the prior period reconciliations was difficult – it required that they sift through numerous spreadsheets, which was very time consuming and error prone. By Consolidating & Automating Just GL Reconciliation 1) 10% Efficiency Savings: By consolidated GL reconciliations, the company saved 10% of processing costs in the first year by removing redundant work in data input and reconciliation automation 2) Streamlining: They enhanced best practices with dynamic risk rating – allowing for changing frequencies of reconciliations dependent on account balances, carry-forward and other criteria 3) More Control: They gained process control by centralizing Management oversight over enterprise-wide reconciliations What if you only saved 10%? Next Slide
- PURPOSE: LET PROSPECT KNOW THAT CADENCY CAN BE DEPLOYED IN PROCESS STEPS – THEY CAN TACKLE ONE PIECE AT A TIME END GOAL: Competitor disabler – takes the air out of competitor Finance team is confident they have a roadmap that fits them SCRIPT So where do we start? Can you just implement one piece? Yes!!! You can start in one place a grow across your R2R process. We think of reinventing R2R through Cadency in 4 steps: CRAWL, WALK, RUN and SPRINT. CRAWL You can start by identifying the Quick Wins: like the easy to standardize / easy to automate manual tasks. You can automate Journal Entry or Reconciliations. WALK Now I can look at the bigger picture. Let’s deploy a real time workflow through the process. Let’s close those white spaces between processes that are the black holes of cost and inefficiency Let’s standardize approvals or orchestrate the Close RUN Now I want to run. Where’s my next bottleneck? Let’s consolidate tasks, let’s automate reconciliations to a risk-based process like Intel does and saves thousands of hours each month. Let’s get creative. SPRINT Now you’re really moving. Now I want to optimize my R2R process – get people working at value-add activities I am capturing that 51% savings in R2R costs that Top Performers gain START NOW Start now with one process. In the end, you have one R2R process environment that connected, real time, and responsive. You have transparency into all the tasks end to end and can see the status of completion. You can control processes and govern risks. You can disclose with complete confidence when you hit the Submit button. As one client said, “you’ve built the dream machine.” Next Slide
- PURPOSE: - INTRODUCE OUR ALLIANCE AND BPO PARTNERS END GOAL: We work with all of the industry Leaders – another validation point We encourage you to speak with KPMG, Deloitte, Ernst & Young, Accenture, or Cap Gemini about financial governance transformation and where to start on reinventing your Record to Report process. All are fluent with Cadency, Record to Report automation, finance moving to the cloud, and becoming a top performer organization. If you are interested in benchmarking R2R best practices, you may wish to refer to The Hackett Group’s R2R research and talk with their advisory group. Next Slide