Industry case study: Retail & Consumer

Enterprise Performance Management helping our clients put information at the heart of their decision making

A world-class consolidationA global retailer grows with EPM

www.pwc.co.uk/epm

We have left a very positive legacy through this project that will be around for a long time.

International Chief Finance Officer

IndustryRetail & Consumer

GeographyGlobal

PwC ServicesEnterprise Performance Management

Benefits of using PwCEPM approach which brings change and people management to finance function and IT implementation expertise.

A world-class consolidation 3

Our client is not one of the worlds leading retailers by accident. For the last decade their focus has been growth, building a presence in new regions and offering new products and services. This diverse, international business, headquartered in the UK, has group sales in excess of 50 billion. In addition to its retail business which supports nearly 5,000 stores worldwide it has achieved great success moving into large, expanding markets at home, such as non-food, telecoms and financial services.

Benefits overviewWe were engaged by our client to benchmark its Group Consolidation vision and to help it create a future blueprint for a world class group reporting system which would establish a single, consistent source of financial information. We also advised on how to reshape the processes, governance and technical accounting framework required to drive the automation of integrated management and legal consolidation and reporting throughout the 500 legal entities and 30 finance teams across their 12 countries of operation. Additionally, our experts worked closely with the client team on the core design and build of the Oracle HFM application which had been selected to deliver the Group Consolidation System.

Executive summary

This transformational Group Finance project was delivered on time and on budget with very little change to the initial scope. It has dramatically reduced the year end intercompany consolidation process to just two days, integrated management and financial reporting for the first time and delivered the first single, integrated system across the group to capture group information in a consistent form. The feedback from stakeholders, from board members to internal and external audit, has been universally positive. And importantly, the project has significantly improved the day-to-day working lives of the Group Finance Team, changing the focus of the function from generating and validating numbers to analysing the business performance.

As the International CFO commented, We have left a very positive legacy through this project that will be around for a long time.

4 A world-class consolidation

Our clients explosive growth was placing a strain on the systems and individuals responsible for Group Consolidation and Reporting. The Director for the Finance Operating Model was asked to lead a Group Consolidation System (GCS) project to replace the manually intensive processes for legal and management reporting with an automated consolidation application and revised business processes.

Despite our awareness that at some point we would need to invest in new systems, there had been little momentum or appetite for change from outside Group Finance. A combination of factors including energetic senior level sponsorship and an intense focus on cash management and efficiency prompted by the global financial crisis, created the perfect opportunity for us to take a significant step forward, said the Director of Finance.

The cross functional team assembled to deliver the project realised that this was not as had been described, a case of slapping a new system in, but an opportunity to reshape and review governance and processes to create a long term, scalable management and financial reporting legacy.

A blueprint for successHaving started the consultation process to produce the GCS operating model blueprint, the team saw the need for external consulting advice to challenge, shape and benchmark their blueprint and assist them with effective system implementation. We were engaged after a competitive selection process, and got to work assessing their processes, policies and systems, and performing a gap analysis against defined goals, establishing critical success factors and making sure the blueprint was in line with world class GCS solutions.

The blueprint defined and documented the five work streams that would need to be completed, in some cases in parallel, for our client to deliver the completed GCS System in time to execute 2010 Year End Statutory Reporting. The Finance Project Manager held the project management responsibility for the GCS project. He was aware that what his team were undertaking was ambitious.

Many organisations may have adopted a gradual transformation we went for the big bang approach. This was ambitious but with clearly defined objectives, agreed Key Performance Indicators, established roles and responsibilities, active stakeholder engagement and PwCs support we succeeded its our culture to get on and do things, he said.

To establish the new policies and processes required for efficient, automated Group Reporting and inter-company processing, we worked with the GCS team to re-engineer our clients chart of accounts. We also established 20 key policy and process principles that would underpin their consolidation process in the future. The project sought to integrate management and financial reporting as well as cash flow, creating a single source of integrated financial information for the first time. The team also wanted to reduce manual adjustments and

Establishing a world class Group Consolidation System

PwC were invaluable in reviewing and shaping the project blueprint, letting us know how we compared with other organisations and ensuring that we understood what world class Group Reporting processes looked like, by putting us in touch with other clients. This really helped us to crystalise our vision.

Director of Finance

A world-class consolidation 5

reconciliation work, include all relevant balance sheet movements and disclosure notes, and deliver a framework of agreed Key Performance Indicators for both management and legal reporting.

Our client set up a Governance board and design authority with senior sponsor representation both of which PwC contributed to with a goal to do it once and do it right.

Communicating a vision across the businessTo produce and agree the blueprint, the GCS team working with PwC had involved many other stakeholders including IT, Tax and Treasury in a series of workshops to define the scope of the project. The team also planned to spend time with the Finance Directors of each of the businesses, explaining the vision and listening to their concerns.

Training sessions were delivered to help entity personal get the most from replacing spreadsheet-based systems with Oracle HFM. Although this was well received, with hindsight this is one area that our client would reconsider.

When thinking about what we would do differently, it would definitely be investing in more training and at different times. In some cases too much time had elapsed between the training sessions and the system going live. This meant that some people needed a refresher session, said the Director for the Finance Operating Model.

The GCS team would also give additional consideration to the reporting requirements of the entities as well as transforming reporting at a Group level. This is now being addressed as part of phase two of the project.

Building a technology and data framework that delivers resultsAlthough other solutions were considered, Oracle HFM was considered to be the most suitable systems fit by the GCS Team. Our client used our Oracle HFM skills for both the design and implementation to help optimise its use within the Group.

Significant changes have also been made in their General Ledger System.

This project highlighted some limitations in our previous General Ledger Structures for example to achieve Fixed Assets roll forward reporting each period we needed to break down data that had previously been consolidated into a single account, the Group Financial Controller commented.

Our client initially planned to migrate a whole years historical data into the GCS application. This proved far more difficult than anticipated due to inconsistencies and mapping issues with historic consolidation journals.

On reflection we were a little too ambitious and we should have been more realistic about the data we really needed to migrate initially. My advice to anyone doing this type of project is, when it comes to data migration, expect the unexpected, said the Director for the Finance Operating Model.

A time when cash was kingThis project was undertaken in the midst of the recent financial crisis. Many of the GCS team believe that these external factors shaped some of the projects investment priorities.

In most retail businesses the focus is on the P&L, there is little focus on the Balance Sheet and Cash Flow just ends up being what happens on the General Ledger at the end of each period. We were suddenly in an environment when cash was king and this atmosphere definitely enabled us to put more investment into the frequency, detail and speed of cash flow reporting, the Group Financial Controller commented.

The GCS teams Statutory Reporting Lead valued the experience of our consultants. In addition to their accounting knowledge, one of the lead consultants had implemented similar systems in a major retail business which meant he could give insights into how to deal with specific issues. In addition to introducing monthly cash reporting, there was eagerness to use our experience to automate the consolidation of foreign exchange reserves from the bottom of the balance sheet. We can now do this at the press of a button, he said.

This project was a marathon effort for our team but also for some of the entities, depending on the scale of change, they needed to execute to align with Group Standards

Director of Finance

6 A world-class consolidation

One of his other major drivers for the project was to change the working practices for his team. The previous system meant that year end had become an overwhelming task involving unacceptable working hours.

I am delighted that we are now able to add so much more value to the output by investing time in analysis rather than data collection, he said.

Greater efficiency and no surprisesThroughout the project, the Group Management Accountant and Management Account Stream Lead has also been pleased with the results that have been achieved, particularly the efficiency gains and improved visibility.

She wanted greater confidence in the numbers, rather than finding at half and year end that the consolidation of numbers led to surprising results when compared to the management result.

Like so many of my colleagues, I wanted to achieve one version of the truth and to eliminate any surprises through more frequent, consistent reporting. I also wanted to drive greater efficiency by eliminating the reconciliation process at half and year end. We have achieved both of these goals and the elimination of any reconciliations is a massive win for my team, she said.

Changes to the business meant that the traditional focus of reporting, around geographical areas, needed to be changed to give the ability to look deeper into all areas and perform comparative analysis. They also wanted to be able to look at the property business separately in the future and took this into consideration when defining the reporting requirements.

Another member of the team, although proud of the results, acknowledges the scale of the task the team undertook. This was too big a project for us to do alone PwC offered a high level of knowledge and expertise and offered solid practical advice, she said.

Enabling future growth and faster reportingThe GCS team understood that it was imperative to establish a scalable consolidation and reporting platform as the business will continue to grow. This was not a cost cutting exercise and all members of the team were clear that this was an investment to enable back office functions to catch up with other areas of the business. Although the improved consistency, integration, control and efficiency were more important outcomes than speed, the faster reporting has allowed more time for analysis, and provided accounts to the auditors three weeks earlier. And ultimately it will place our client higher in the close cycle rankings as a consequence of their investments over the last 18 months.

Future plansThe scope of the project initially included a full review of budgeting and planning. The team realised quite early that including this would be unachievable and moved this element into a second phase, currently underway.

Summing up his views on the success of the project, the International CFO commented, Through this project we have massively simplified and standardised our group reporting process. We now have clear accountability and ownership of the numbers and the speed and robustness that we were seeking, with a single set of figures for Management and Financial accounts. This project has been very positively received by the Group CFO, the non execs, the Audit Committee and our Auditors all have been impressed by how much progress and change we have delivered in such a short time.

This was too big a project for us to do alone PwC offered a high level of knowledge and expertise and offered solid practical advice.

Group Management Accountant and Management Account Stream Lead

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But they all have something in common. They want every management decision they make be it strategic, financial or operational to be based on an accurate understanding of their past performance, their current state and their likely future outcomes. To get that accurate information at the heart of their decision making, they need an integrated set of data and metrics, processes and systems, as well as the right behaviours in the way their people work. And that is what our approach to Enterprise Performance Management focuses on.

There isnt one magic set of information for every organisation. We start with your strategy. We work with you to turn it into tangible metrics identifying the things you can measure that will show you exactly whats going on in your business.

Achieving your goals with Enterprise Performance Management

Our client was experiencing growth on a large scale and across multiple regions. Their focus was the creation of a world class Group Consolidation approach and one that was scalable and would grow with them. Not all our clients are in rapid growth or spread across territories. Others are navigating challenges like increased competition and regulation, pressure on profitability, tighter margins and savvier consumers.

From there, we can plan together how you capture the information, analyse it and forecast it, and how you can set targets for the teams and individuals in your organisation that will support your strategy.

Were seeing a greater demand for higher value business information but it must bring a return on investment. Weve worked with organisations spanning all industries, leading large, complex transformations. We realise theres more to this than just implementing a software tool. Our peoples skills cover the broad EPM transformation skill set. We have the IT implementation and finance function expertise, but we also bring people and change management to make sure your new approach is implemented successfully and permanently.

This publication has been prepared for general guidance on matters of interest only, and does not constitute professional advice. You should not act upon the information contained in this publication without obtaining specific professional advice. No representation or warranty (express or implied) is given as to the accuracy or completeness of the information contained in this publication, and, to the extent permitted by law, PricewaterhouseCoopers LLP, its members, employees and agents do not accept or assume any liability, responsibility or duty of care for any consequences of you or anyone else acting, or refraining to act, in reliance on the information contained in this publication or for any decision based on it.

2011 PricewaterhouseCoopers LLP. All rights reserved. In this document, PwC refers to PricewaterhouseCoopers LLP (a limited liability partnership in the United Kingdom), which is a member firm of PricewaterhouseCoopers International Limited, each member firm of which is a separate legal entity.

Design ML1-2011-07-19-1731-GA

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Richard Wyles+44 (0) 20 7212 6861richard.wyles@uk.pwc.com

Paul Morton+44 (0) 20 7804 3340paul.s.morton@uk.pwc.com

David Jones+44 (0) 20 7212 2090david.jones@uk.pwc.com

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