What Well Cover IntroductionImproving the financial administrative processMain issues of month-end closureImproving month-end processing Managing the month-end closureSystem demoWrap up

Session ObjectivesAfter this presentation you will understand:

Month-end closure as part of the administrative processStreamlining the administration and the closing processHow to do the right thing at the right timeHow to manage the process and keep track of responsibility

Standardization of SAP functionalityHarmonization of SAP structuresTransparency in SAP reportingSAP system maturity life cycleSystem maturityTimeConsistency of SAP structures

What Well Cover IntroductionImproving the financial administrative processMain issues of month-end closureImproving month-end processing Managing the month-end closureSystem demoWrap up

The Month-End Closing RealityNo well-defined month endNo well-defined rolesNo well-defined management

Administrative processesFinal goods issueFinal invoiceFinal outgoing paymentsStop process/start close

Reduce Month-End WorkloadA significant part of the month end workload is quality control and correctionMany activities do not have to wait until month-end

MONTH-END STARTS AT THE FIRST OF THE MONTH!!!!

Process Management in FinanceIf:Financial checks on logistical processes are part of the normal financial administrationCorrections are made through logistics transactions and not in FI/COFinalizing billing, clearing, and payments are weekly activities and not the highlight of your month-endThen:You can focus on the month-end Because:Quality control should be part of financial administration

A Real-Life CaseCompany A:European go-live in blocksNo documented process or closureConsultant-driven month-end during first half year at high cost with low-quality figures due to lack of proceduresGrowing aversion towards new SAP system

After six months, daily, weekly, and monthly actions and responsibilities were definedProcess and month-end thereby became better, faster, and a lot cheaperCompany B:Big bang go-live for all of EuropePredefined month-end process in placeProcess management integrated in system

External support during first financial process and month-endAfter that, little consultant-capacity needed for support High-quality financial figures from the start

What Did We Do in Company B?Prepared a professional survival kit for financial employees:Simple Excel file with daily-weekly-monthly actions plus who is responsible for whatPredefined SAP favorites structured in daily-weekly-monthly tasks. Upload file via Menu>Favorites>Upload from PC Integrated scenarios in SAP for month- and year-end processes detailing task-sequence-responsibility-logSet up centrally-managed frequent batch jobs Set up and use variants!!!!!

A Few Transactions to RememberV23 Documents blocked for billing (often credit notes)VFX3 Document not in FI (often problems in account assignments)SM35/SM37Did the batch job really run?F.14Execute recurring entriesF.81Run reversals in week prior to month-end! Preferably a batch jobF110 Keep payment process and closure apart

A Few Transactions to Remember (cont.)F.13 Regular automatic clearingPrior to month-end, preferably a batch job F.19 GR/IR clearingVKM1 Check credit blocks on a daily basisMRBR Invoices blocked for paymentV.21 Check error log for billing runsFV50, FV65 Check parked documentsMB5S Balances on GR/IR account

Accounts to Check at Least WeeklyCheck GIT account for items older then a week Check GR/IR account for items older then a weekCheck manual correction accounts on stock values and revenues to find manual corrections that could indicate structural weaknesses in the system and/or procedures

Checking: SummaryChecking often and thoroughly will:Improve non-financial processesReduce the workload of single tasksPrevent mounting problems

A Nordic company discovered billing docs not in finance only after two months. The result was massive overtime to correct financial figures

Guidelines for Professional AdministrationAppoint a process ownerProcess owner defines daily, weekly, monthly process, and responsibilitiesDaily, weekly, monthly processes, and responsibilities are publicized and well supported (documentation and favorites)Daily, weekly, monthly responsibilities are audited (no quality without measurements)Review your processes regularly 100% perfection is never achieved on the first attempt!

What Well Cover IntroductionImproving the financial administrative processMain issues of month-end closureImproving month-end processingManaging the month-end closureSystem demoWrap up

Typical Closing Process TransactionsOpening of new posting periodFinal goods issueFinal invoice postingNew pricingSettlements of projects, internal orders, production ordersCost assessments and distributionDepreciationJournals for salaryAccruals and equalizationsForeign exchange currency revaluationProvisions postingReconcile General Ledger (G/L) with Controlling (CO)Reconcile General Ledger with Sales Information System (SIS)Preliminary reporting cycleManagement correction to preliminary P&L and B/S statementsConsolidationBudget evaluation and revision

IssuesClosing standards and quality of figuresTime- and resource-consuming processClosing process is opaque and not well-managedNo central status information on closing process

Closing Standards Are Not Well-Defined!Financial figures are not supplied in a straight and consistent manner due to lack of templates, responsibilities, and auditsReliability of financial figures is questionable in case of multiple sources

Time- and Resource-ConsumingRelevant data is not easily accessible:Too many manual processese.g., manual recurring entries, manual asset accounting, etc.No uniform ways of workingToo much duplicated dataSIS vs. P&L PCA P&L vs. BW P&L vs. BW salesHow to reconcile duplicated data?

Closing Process Opaque, Poorly-ManagedNo uniform process across all entities, no discipline and adherence to guidelines and timetablesComplex tasks in data preparation are person-related (black box: ask Jim)

Unclear Status of the Closing ProcessStatus of the closing processNo harmonization of stepsStatus of the reports producedNo transparency of statements, key figures, and KPIs

Issues

What Well Cover IntroductionImproving the financial administrative processMain issues of month-end closureImproving month-end processingManaging the month-end closureSystem demoWrap up

Standardization of SAP functionalityHarmonization of SAP structuresTransparency in SAP reportingStandardize 2 OptimizeSystem maturityTimeConsistency of SAP structures

Ways to Improve the Month-End ProcessEmbrace process standardsReduce time and resource consumptionUtilize well-defined processesProvide central status information on closing process

Embrace Process StandardsTemplates must be provided for:Month-end process (steps, moments, responsibility)Month-end tasks (transaction, program, batch job, variant, documentation)Month-end responsibility (who, what, when, replacements)Month-end reporting (who has done what, when, with what conclusion)Standards must be defined for:When you want what resultsWhat quality is required (accounting rules)What process reporting is required (Sarbanes-Oxley!)

Standardized ReportingIssue: Global reporting is not standardized

Transparency is missing in corporate reportingImprove by:Harmonizing structures through use ofsingle controlling area/operating concern to lower cost of maintenance

Reduce Time and Resource ConsumptionIssue: More focus on producing figures than on managing the business

Improvements by:Quality of the financial administrative processEnabling central administration to extract the data itself, using BW or EC-CS, e.g.,

Reduce Time and Resource Consumption (cont.)Spread closing activities throughout the monthPosting of salary journal, depreciation run, active users/ authorization reports, audit reports, check intermediate accounts, reconcile intercompany accountsUnify ways of workingMaintain one set of instructions and documentation centrallyUse manual processing only for manual processesBatch for, e.g., Material Management (MM) period move, open FI periods, upload new exchange rates, automatic clearing, recurring entries

Reduce Time and Resource Consumption (cont.)Prepare variants for programs and reportsMake use of variantsReconsider chosen solutions Analyze whether chosen solution has reached a level of maturity still open to improvement

Improving the Closing ProcessAppointing global and local process ownersExperiencedAuthorizedResponsibleDefining global and local processesDocumentation and publicationInclude all steps Transaction execution and operationAssign an operator and a backup for each stepChecking on whether existing procedures are usedLog

What Well Cover IntroductionImproving the financial administrative processMain issues of month-end closureImproving the month-end processingManaging the month-end closureSystem demoWrap up

Managing the ProcessManaging the process is the central issue, not some kind of financial wizardry!

Designing a Month-End ProcessDesign of the closing process involves complete overview of all steps involved:Operational proceduresSAP programs SAP transactionsSAP reportsSAP batch jobsInterfaces from legacy systemsInterfaces to legacy systemsSequence and dependenciesDetailed documentation per stepBusiness process proceduresTiming and dependenciesVariants and variablesAssign operatorsImprove by logging the events and making reminder notes

Implementing and Supporting the ProcessInvolvement of all business disciplines Awareness of the total picture and individual contributionTraining at each separate step -> also for backup operatorsSimulation of total process with all contributorsInvolvement and availability of global and local process owners throughout the implementation phase and afterCommunication plan for hand-over of stepsSupported by a common central system with local flexibility

Define Closing Process DetailsIntegrate itSAP R/3 Enterprise

What Well Cover IntroductionImproving the financial administrative processMain issues of month-end closureImproving the month-end processingManaging the month-end closureSystem demoWrap up

System Demo

What Well Cover IntroductionImproving the financial administrative processMain issues of month-end closureImproving month-end processingManaging the month-end closureSystem demoWrap up

ResourcesExamples of month-ends on the Web:http://web.mit.edu/afs/athena.mit.edu/org/c/cao/www/CG/http://www.mwr.navy.mil/mwrprgms/sap/ch6endofmonth.pdfInformation on the Proxyon Runbook:http://www.proxyon.nlInformation on the Schedule Manager:http://www.sap.com

7 Key Points to Take Home Focus on using harmonized structures in your SAP system and reporting transparency

Use structured favorites for daily and weekly tasks, and assign clear responsibilities

Use variants where possible

Bring control tasks forward to weekly processing to reduce the workload during month-end

7 Key Points to Take Home (cont.) Make a detailed design for closing procedures and assign procedure owners and step operators

Publish your design on a regularly-updated central Web site dont allow faulty hard copies!

Use the Proxyon Runbook or the SAP Schedule Manager to integrate the month-end design in your system and to log your actions (Sarbanes-Oxley)

Your Turn!Questions?How to Contact Me:Rob.leesberg@proxyon.nl