Five Minutes on Modern Finance: The Modern Close - Brochure ...
6
Minutes on Modern Finance The Modern Close Does Your Finance Organization Measure Up?
Transcript of Five Minutes on Modern Finance: The Modern Close - Brochure ...
Minutes on Modern Finance
The Modern CloseDoes Your Finance Organization Measure Up
Closing the books reporting more efficientlyhellip those are just table stakes for a modern CFO You canrsquot ask for a more strategic role in the organization if you canrsquot deliver on the basicsrdquo
Jeff Henley Chairman of the Board and former CFO Oracle Corporation
Moving From a Classic to a Modern Close
Although the close process may not rank at the top of C-suite priorities smart finance
their finance teams to perform key functions in parallel during the close process A company
ldquo
Improve Your Close Processes to Improve the Business Modern CFO Best Practices
According to a new global survey commissioned these new demands according to the American by Oracle and Accenture the expectations Productivity amp Quality Center reducing the close on finance to deliver insights to the business process by two days increases the resources are increasing especially among high-growth available for other high priority projects by companies which typically use data-driven 24 days a year3 The following best practices information to boost customer loyalty and can help you close the books faster and more market share2 Smart finance executives are accurately focused on reducing the close process to meet
Streamline Your Choose Technology Adopt an Integrated Processes to Achieve that Supports Your Business Services Ruthless Standardization Processes Model
Overarching these three leading practices is a Governance amp Data Management fourth critical component governance and data management ldquoAt the end of the day it all comes Process down to processes and governancerdquo says Stone Standardized processes are inextricable Technology from strong governance and managing data to ensure quality Shared Service Model
2 ldquoEmpowering Modern Finance the CFO as Technology Evangelistrdquo Oracle and Accenture March 2014 3 Kaigh Elizabeth ldquoSix Excuses Companies use to Avoid Fixing the Financial close Processrdquo February 5 2014 (cited in httpwwwapqcorgblogsix-excuses-companies-use-avoid-fixing-financial-close-process)
executives know that a well-designed technology-enabled close has become a critical best practice by which modern CFOs and their teams are measured The faster you can close the books and deliver right-time insights to key decision makers the more strategic your finance organization can be to the business
According to Les Stone Managing Director -Finance amp Enterprise Performance Accenture a world-class close can be defined as a three-day close for legal entities and then an additional two days for consolidation and reporting for a total of 5 days Yet today only 38 of companies appear to close their books in 5-6 days down from 47 in 20071 While some would like to attribute slower closes to growing business complexity and increased regulatory burdens Stone and other industry experts believe that the more likely culprits are poorly-designed manual finance processes and inconsistent data sourced from multiple systems
To become world-class finance organizations need to evolve from a traditional close process in which the steps are sequential to a modern more strategic close that allows CFOs and
1 ldquoTrends in Developing the Fast Clean Closerdquo Ventana Research 2012
with a more nimble close process for example can take care of a significant number of account reconciliations outside the critical path of the close rather than right in the middle of it which is a traditional mdashand problematicmdashway to handle reconciliations If you can achieve such efficiencies and modernize your close process you can redeploy resources to planning and analytics providing much greater value to the business
In what I would call the classic close ldquonothing significant happens until the end of the month I think where the move has been over the last few years has been towards a more modern close where you cut off your sub ledgers and transactional systems early then look at material transactions that may have happened between the date of that early close and the true month end When you close this way you can then redeploy finance staff to work on the financial planning and analysis component of the closerdquo
Les Stone Managing Director - Finance amp Enterprise Performance Accenture
2 3
1 Streamline Processes to Achieve Ruthless Standardization
With regard to the close process it is critical to take a hard look at processes with an eye toward achieving ldquoruthless standardizationrdquo The key is to establish processes that are repeatable predictable and scalable and then ensure that those processes are overseen with a governance layer without which things will very quickly unwind Follow these steps to help ensure a well-governed close
Designate a global process owner who makes the decisions about whether and when process changes must occur for account reconciliation allocations chart of accounts materiality thresholds etc
Ensure that the ldquotone from the toprdquo reinforces the processes you have established The corporate CFO and rest of the C-suite must support and make it clear that the processes are to be followed no exceptions
Appoint a ldquoclose czarrdquo who is the owner of the close establishing a schedule and making sure it is communicated and enforced
ldquoI like to think about a world-class close as similar to Olympic gold medal execution a process that you execute with athletic precision and that is flawlessrdquo
Les Stone Managing Director - Finance amp Enterprise Performance Accenture
The goal is to streamline your close through standardization You should set limits to cap the volume of manual journal entries that can be made late in the close for example You can do this by defining what types of entries can be made on certain days in the close process both in terms of materiality and reporting impact For example you might allow any type of entry to be made on day one But by day three you can only make an entry of $50000 or more that impacts more than one financial statement reporting line The definitions will vary based on your companyrsquos controls and financial structure but having rigorous standards is the only way to keep up with the pace of business When setting materiality thresholds be sure to synchronize the timing with the budgeting and forecasting process
Allocations can be another bottleneck in the close process that you can minimize through process improvement Allocations are primarily done to support statutory (tax transfer pricing) purposes If allocations are made beyond this they should be done in a manner so people can be held accountable This is typically done by segmenting responsibility statements between non-controllable versus controllable allocations or by moving to a COP concept (contribution to overhead and profit)
4
Intercompany accounting is another area that can cause a bottleneck during the close primarily because of lsquoout of balancersquo situations between two legal entities The ldquobook now dispute laterrdquo process will help minimize these out of balance situations This will then be governed by a robust dispute resolution process that allows for dispute escalation from accounting managers up through to the corporate CFO if business units cannot agree on the intercompany charges A meeting with the corporate CFO to resolve intercompany disputes is probably a meeting that most will try to avoid
You must look at every component of the close process - aggregating transactions foreign currency manual interfaces intercompany accounting allocations journal entries account reconciliations and more - and establish repeatable predictable and scalable processes for them all
Scaling back the chart of accounts makes a tremendous difference as well Stone helped one company reduce its chart of accounts by about 80 so they could speed up the close process ldquowithout killing their peoplerdquo Clear definitions of each chart segment were developed and communicated thus reducing manual journal entries since there were fewer mispostings It also helped reduce the excessive number of account reconciliations that were being performed - a great example of how process improvements go hand in hand with data management and governance Companies often hesitate to thin out their chart of accounts but itrsquos critical to achieving data harmonization across the enterprise and simplifying transaction entry
5
2 Choose Technology That Supports Your Streamlined Processes
There are a host of technology tools that facilitate a faster close First and foremost a global accounting integration and reporting platform allows you to standardize the accounting from multiple third-party transactional systems The ability to bring together financial information from a variety of systems without disrupting those existing offers great benefit to companies with a complex IT environment that have grown through acquisitions such as Oracle The ability to adopt such a platform over time without disrupting current processes is also key Oracle for example deployed its Fusion Accounting Hub product as a first step toward moving to a full instance of Fusion Financials and in the process streamlined the close process by one day
Integrating Acquisitions at Oracle with Fusion Accounting Hub
Legally combining companies is a very complicated process especially for acquisitions governed by unique laws and regulations The acquirer must roll in the acquired companyrsquos legacy systems ndash including vital operations such as accounts receivable and general ledger -without disrupting day-to-day operations
These were just some of the accounting challenges facing Oracle which had acquired over 100 companies since 2005 as part of its strategy to become the 1 software provider worldwide Oraclersquos finance team decided to standardize on Fusion Accounting Hub (FAH) to design a global chart of accounts to manage its business more uniformly and to lay the foundation for moving to a full Fusion Financials instance In conjunction Oraclersquos finance team is using Oracle Hyperion Data Relationship Management (DRM) to centralize and automate governance of its global chart of accounts and related hierarchies which will help the company lower costs and greatly reduce risk
FAH has simplified the process of consolidating general ledger data Oraclersquos finance teams can submit primary ledgers running in E-Business Suite (EBS) R12 directly to FAH eliminating the need for more than 90 redundant consolidation ledgers With FAH it is also possible to submit incrementally so if an adjustment needs to be booked in a primary ledger after close it can be done without reopening it and resubmitting This affords earlier visibility to period-end actuals during the close providing management with valuable performance information for decision-making purposes
You can also use tools that are easy to use andor already familiar to everyone involved to speed up the close process For example the close owner could establish a schedule for close tasks by setting up deadlines in the corporate calendaring app A certain journal entry must be made by a specific date and timemdashpossibly with a 30 minute grace period If that entry isnrsquot booked by the date and time required that triggers an alert up the chain of command
Similarly collaboration tools to enhance communication and accountability can help facilitate a faster close and support other finance activities At Oracle the finance team
is phasing out email altogether as a means of communicating around a variety of critical functions such as the close process and finance transformation initiatives Instead they use a next-generation internal collaboration hub the Oracle Social Network (OSN) Social networks such as OSN that are tied to the transactions themselves can be exponentially productive since finance personnel can immediately see the status of exceptions within context Responsibility is clearly assigned and schedules can be closely adhered to and learnings and best practices can be continuously monitored and refined
6 7
3 Adopt an Integrated Business Services Model
Modern CFOs can dial up the effectiveness of the finance function which includes improving the close process by leveraging shared services centers and centers of excellence Start by asking ldquoWhat needs to be very close to the business and what can be handled by a shared services centerrdquo Accenture sees leading companies moving towards the integrated business services (IBS) model which expands on the traditional shared services foundation of solid service management and focuses on multiple functions with process standardization throughout the organization With the IBS model it is not uncommon to find 60-65 of transactional activities in a shared services environment
An added benefit to shared services can be lowered costs through reduced resource requirements but the true endgame is to increase efficiency and become a better business partner To accomplish this leading companies are moving from shared services to an IBS model The operational decisions made by IBS organization are no longer focused solely on cost management but are now balanced with the responsibilitymdashshared jointly with the businessmdash for managing risk and driving growth4 The goal is to provide the analytics infrastructure discipline and expertise necessary to cope with market volatility and associated risks With that foundation modern CFOs can make an impact far greater than streamlining the financial close process
4 ldquoCFOs Benefit from Shared Services Shakeuprdquo David Axson CFOcom March 13 2013
8
Any mechanism that reinforces ruthless standardization without introducing unnecessary complexity and risk can help finance teams play a more strategic role in shaping the business that goes beyond the necessary but less glamorous
financial close Following the best practices outlined here will help you modernize and speed up your organizationrsquos financial close and help stay nimble in the face of volatile markets and ever-more-complex regulatory demands
9
Modern Finance Best Practice Guide Series April 2014 Author Anne Ozzimo
Oracle Corporation World Headquarters 500 Oracle Parkway Redwood Shores CA 94065 USA
Worldwide Inquiries Phone +16505067000 Fax +16505067200 oraclecom
Oracle is committed to developing practices and products that help protect the environment
Copyright copy 2014 Oracle andor its affiliates All rights reserved
Accenture is a global management consulting technology services and outsourcing company with approximately 275000 people serving clients in more than 120 countries Combining unparalleled experience comprehensive capabilities across all industries and business functions and extensive research on the worldrsquos most successful companies Accenture collaborates with clients to help them become high performance businesses and governments The company generated net revenues of US$286 billion for the fiscal year ended August 31 2013 Its home page is wwwaccenturecom
This document is intended for general informational purposes only and does not take into account the readerrsquos specific circumstances and may not reflect the most current developments Accenture disclaims to the fullest extent permitted by applicable law any and all liability for the accuracy and completeness of the information in this document and for any acts or omissions made based on such information Accenture does not provide legal regulatory audit or tax advice Readers are responsible for obtaining such advice from their own legal counsel or other licensed professionals
Closing the books reporting more efficientlyhellip those are just table stakes for a modern CFO You canrsquot ask for a more strategic role in the organization if you canrsquot deliver on the basicsrdquo
Jeff Henley Chairman of the Board and former CFO Oracle Corporation
Moving From a Classic to a Modern Close
Although the close process may not rank at the top of C-suite priorities smart finance
their finance teams to perform key functions in parallel during the close process A company
ldquo
Improve Your Close Processes to Improve the Business Modern CFO Best Practices
According to a new global survey commissioned these new demands according to the American by Oracle and Accenture the expectations Productivity amp Quality Center reducing the close on finance to deliver insights to the business process by two days increases the resources are increasing especially among high-growth available for other high priority projects by companies which typically use data-driven 24 days a year3 The following best practices information to boost customer loyalty and can help you close the books faster and more market share2 Smart finance executives are accurately focused on reducing the close process to meet
Streamline Your Choose Technology Adopt an Integrated Processes to Achieve that Supports Your Business Services Ruthless Standardization Processes Model
Overarching these three leading practices is a Governance amp Data Management fourth critical component governance and data management ldquoAt the end of the day it all comes Process down to processes and governancerdquo says Stone Standardized processes are inextricable Technology from strong governance and managing data to ensure quality Shared Service Model
2 ldquoEmpowering Modern Finance the CFO as Technology Evangelistrdquo Oracle and Accenture March 2014 3 Kaigh Elizabeth ldquoSix Excuses Companies use to Avoid Fixing the Financial close Processrdquo February 5 2014 (cited in httpwwwapqcorgblogsix-excuses-companies-use-avoid-fixing-financial-close-process)
executives know that a well-designed technology-enabled close has become a critical best practice by which modern CFOs and their teams are measured The faster you can close the books and deliver right-time insights to key decision makers the more strategic your finance organization can be to the business
According to Les Stone Managing Director -Finance amp Enterprise Performance Accenture a world-class close can be defined as a three-day close for legal entities and then an additional two days for consolidation and reporting for a total of 5 days Yet today only 38 of companies appear to close their books in 5-6 days down from 47 in 20071 While some would like to attribute slower closes to growing business complexity and increased regulatory burdens Stone and other industry experts believe that the more likely culprits are poorly-designed manual finance processes and inconsistent data sourced from multiple systems
To become world-class finance organizations need to evolve from a traditional close process in which the steps are sequential to a modern more strategic close that allows CFOs and
1 ldquoTrends in Developing the Fast Clean Closerdquo Ventana Research 2012
with a more nimble close process for example can take care of a significant number of account reconciliations outside the critical path of the close rather than right in the middle of it which is a traditional mdashand problematicmdashway to handle reconciliations If you can achieve such efficiencies and modernize your close process you can redeploy resources to planning and analytics providing much greater value to the business
In what I would call the classic close ldquonothing significant happens until the end of the month I think where the move has been over the last few years has been towards a more modern close where you cut off your sub ledgers and transactional systems early then look at material transactions that may have happened between the date of that early close and the true month end When you close this way you can then redeploy finance staff to work on the financial planning and analysis component of the closerdquo
Les Stone Managing Director - Finance amp Enterprise Performance Accenture
2 3
1 Streamline Processes to Achieve Ruthless Standardization
With regard to the close process it is critical to take a hard look at processes with an eye toward achieving ldquoruthless standardizationrdquo The key is to establish processes that are repeatable predictable and scalable and then ensure that those processes are overseen with a governance layer without which things will very quickly unwind Follow these steps to help ensure a well-governed close
Designate a global process owner who makes the decisions about whether and when process changes must occur for account reconciliation allocations chart of accounts materiality thresholds etc
Ensure that the ldquotone from the toprdquo reinforces the processes you have established The corporate CFO and rest of the C-suite must support and make it clear that the processes are to be followed no exceptions
Appoint a ldquoclose czarrdquo who is the owner of the close establishing a schedule and making sure it is communicated and enforced
ldquoI like to think about a world-class close as similar to Olympic gold medal execution a process that you execute with athletic precision and that is flawlessrdquo
Les Stone Managing Director - Finance amp Enterprise Performance Accenture
The goal is to streamline your close through standardization You should set limits to cap the volume of manual journal entries that can be made late in the close for example You can do this by defining what types of entries can be made on certain days in the close process both in terms of materiality and reporting impact For example you might allow any type of entry to be made on day one But by day three you can only make an entry of $50000 or more that impacts more than one financial statement reporting line The definitions will vary based on your companyrsquos controls and financial structure but having rigorous standards is the only way to keep up with the pace of business When setting materiality thresholds be sure to synchronize the timing with the budgeting and forecasting process
Allocations can be another bottleneck in the close process that you can minimize through process improvement Allocations are primarily done to support statutory (tax transfer pricing) purposes If allocations are made beyond this they should be done in a manner so people can be held accountable This is typically done by segmenting responsibility statements between non-controllable versus controllable allocations or by moving to a COP concept (contribution to overhead and profit)
4
Intercompany accounting is another area that can cause a bottleneck during the close primarily because of lsquoout of balancersquo situations between two legal entities The ldquobook now dispute laterrdquo process will help minimize these out of balance situations This will then be governed by a robust dispute resolution process that allows for dispute escalation from accounting managers up through to the corporate CFO if business units cannot agree on the intercompany charges A meeting with the corporate CFO to resolve intercompany disputes is probably a meeting that most will try to avoid
You must look at every component of the close process - aggregating transactions foreign currency manual interfaces intercompany accounting allocations journal entries account reconciliations and more - and establish repeatable predictable and scalable processes for them all
Scaling back the chart of accounts makes a tremendous difference as well Stone helped one company reduce its chart of accounts by about 80 so they could speed up the close process ldquowithout killing their peoplerdquo Clear definitions of each chart segment were developed and communicated thus reducing manual journal entries since there were fewer mispostings It also helped reduce the excessive number of account reconciliations that were being performed - a great example of how process improvements go hand in hand with data management and governance Companies often hesitate to thin out their chart of accounts but itrsquos critical to achieving data harmonization across the enterprise and simplifying transaction entry
5
2 Choose Technology That Supports Your Streamlined Processes
There are a host of technology tools that facilitate a faster close First and foremost a global accounting integration and reporting platform allows you to standardize the accounting from multiple third-party transactional systems The ability to bring together financial information from a variety of systems without disrupting those existing offers great benefit to companies with a complex IT environment that have grown through acquisitions such as Oracle The ability to adopt such a platform over time without disrupting current processes is also key Oracle for example deployed its Fusion Accounting Hub product as a first step toward moving to a full instance of Fusion Financials and in the process streamlined the close process by one day
Integrating Acquisitions at Oracle with Fusion Accounting Hub
Legally combining companies is a very complicated process especially for acquisitions governed by unique laws and regulations The acquirer must roll in the acquired companyrsquos legacy systems ndash including vital operations such as accounts receivable and general ledger -without disrupting day-to-day operations
These were just some of the accounting challenges facing Oracle which had acquired over 100 companies since 2005 as part of its strategy to become the 1 software provider worldwide Oraclersquos finance team decided to standardize on Fusion Accounting Hub (FAH) to design a global chart of accounts to manage its business more uniformly and to lay the foundation for moving to a full Fusion Financials instance In conjunction Oraclersquos finance team is using Oracle Hyperion Data Relationship Management (DRM) to centralize and automate governance of its global chart of accounts and related hierarchies which will help the company lower costs and greatly reduce risk
FAH has simplified the process of consolidating general ledger data Oraclersquos finance teams can submit primary ledgers running in E-Business Suite (EBS) R12 directly to FAH eliminating the need for more than 90 redundant consolidation ledgers With FAH it is also possible to submit incrementally so if an adjustment needs to be booked in a primary ledger after close it can be done without reopening it and resubmitting This affords earlier visibility to period-end actuals during the close providing management with valuable performance information for decision-making purposes
You can also use tools that are easy to use andor already familiar to everyone involved to speed up the close process For example the close owner could establish a schedule for close tasks by setting up deadlines in the corporate calendaring app A certain journal entry must be made by a specific date and timemdashpossibly with a 30 minute grace period If that entry isnrsquot booked by the date and time required that triggers an alert up the chain of command
Similarly collaboration tools to enhance communication and accountability can help facilitate a faster close and support other finance activities At Oracle the finance team
is phasing out email altogether as a means of communicating around a variety of critical functions such as the close process and finance transformation initiatives Instead they use a next-generation internal collaboration hub the Oracle Social Network (OSN) Social networks such as OSN that are tied to the transactions themselves can be exponentially productive since finance personnel can immediately see the status of exceptions within context Responsibility is clearly assigned and schedules can be closely adhered to and learnings and best practices can be continuously monitored and refined
6 7
3 Adopt an Integrated Business Services Model
Modern CFOs can dial up the effectiveness of the finance function which includes improving the close process by leveraging shared services centers and centers of excellence Start by asking ldquoWhat needs to be very close to the business and what can be handled by a shared services centerrdquo Accenture sees leading companies moving towards the integrated business services (IBS) model which expands on the traditional shared services foundation of solid service management and focuses on multiple functions with process standardization throughout the organization With the IBS model it is not uncommon to find 60-65 of transactional activities in a shared services environment
An added benefit to shared services can be lowered costs through reduced resource requirements but the true endgame is to increase efficiency and become a better business partner To accomplish this leading companies are moving from shared services to an IBS model The operational decisions made by IBS organization are no longer focused solely on cost management but are now balanced with the responsibilitymdashshared jointly with the businessmdash for managing risk and driving growth4 The goal is to provide the analytics infrastructure discipline and expertise necessary to cope with market volatility and associated risks With that foundation modern CFOs can make an impact far greater than streamlining the financial close process
4 ldquoCFOs Benefit from Shared Services Shakeuprdquo David Axson CFOcom March 13 2013
8
Any mechanism that reinforces ruthless standardization without introducing unnecessary complexity and risk can help finance teams play a more strategic role in shaping the business that goes beyond the necessary but less glamorous
financial close Following the best practices outlined here will help you modernize and speed up your organizationrsquos financial close and help stay nimble in the face of volatile markets and ever-more-complex regulatory demands
9
Modern Finance Best Practice Guide Series April 2014 Author Anne Ozzimo
Oracle Corporation World Headquarters 500 Oracle Parkway Redwood Shores CA 94065 USA
Worldwide Inquiries Phone +16505067000 Fax +16505067200 oraclecom
Oracle is committed to developing practices and products that help protect the environment
Copyright copy 2014 Oracle andor its affiliates All rights reserved
Accenture is a global management consulting technology services and outsourcing company with approximately 275000 people serving clients in more than 120 countries Combining unparalleled experience comprehensive capabilities across all industries and business functions and extensive research on the worldrsquos most successful companies Accenture collaborates with clients to help them become high performance businesses and governments The company generated net revenues of US$286 billion for the fiscal year ended August 31 2013 Its home page is wwwaccenturecom
This document is intended for general informational purposes only and does not take into account the readerrsquos specific circumstances and may not reflect the most current developments Accenture disclaims to the fullest extent permitted by applicable law any and all liability for the accuracy and completeness of the information in this document and for any acts or omissions made based on such information Accenture does not provide legal regulatory audit or tax advice Readers are responsible for obtaining such advice from their own legal counsel or other licensed professionals
1 Streamline Processes to Achieve Ruthless Standardization
With regard to the close process it is critical to take a hard look at processes with an eye toward achieving ldquoruthless standardizationrdquo The key is to establish processes that are repeatable predictable and scalable and then ensure that those processes are overseen with a governance layer without which things will very quickly unwind Follow these steps to help ensure a well-governed close
Designate a global process owner who makes the decisions about whether and when process changes must occur for account reconciliation allocations chart of accounts materiality thresholds etc
Ensure that the ldquotone from the toprdquo reinforces the processes you have established The corporate CFO and rest of the C-suite must support and make it clear that the processes are to be followed no exceptions
Appoint a ldquoclose czarrdquo who is the owner of the close establishing a schedule and making sure it is communicated and enforced
ldquoI like to think about a world-class close as similar to Olympic gold medal execution a process that you execute with athletic precision and that is flawlessrdquo
Les Stone Managing Director - Finance amp Enterprise Performance Accenture
The goal is to streamline your close through standardization You should set limits to cap the volume of manual journal entries that can be made late in the close for example You can do this by defining what types of entries can be made on certain days in the close process both in terms of materiality and reporting impact For example you might allow any type of entry to be made on day one But by day three you can only make an entry of $50000 or more that impacts more than one financial statement reporting line The definitions will vary based on your companyrsquos controls and financial structure but having rigorous standards is the only way to keep up with the pace of business When setting materiality thresholds be sure to synchronize the timing with the budgeting and forecasting process
Allocations can be another bottleneck in the close process that you can minimize through process improvement Allocations are primarily done to support statutory (tax transfer pricing) purposes If allocations are made beyond this they should be done in a manner so people can be held accountable This is typically done by segmenting responsibility statements between non-controllable versus controllable allocations or by moving to a COP concept (contribution to overhead and profit)
4
Intercompany accounting is another area that can cause a bottleneck during the close primarily because of lsquoout of balancersquo situations between two legal entities The ldquobook now dispute laterrdquo process will help minimize these out of balance situations This will then be governed by a robust dispute resolution process that allows for dispute escalation from accounting managers up through to the corporate CFO if business units cannot agree on the intercompany charges A meeting with the corporate CFO to resolve intercompany disputes is probably a meeting that most will try to avoid
You must look at every component of the close process - aggregating transactions foreign currency manual interfaces intercompany accounting allocations journal entries account reconciliations and more - and establish repeatable predictable and scalable processes for them all
Scaling back the chart of accounts makes a tremendous difference as well Stone helped one company reduce its chart of accounts by about 80 so they could speed up the close process ldquowithout killing their peoplerdquo Clear definitions of each chart segment were developed and communicated thus reducing manual journal entries since there were fewer mispostings It also helped reduce the excessive number of account reconciliations that were being performed - a great example of how process improvements go hand in hand with data management and governance Companies often hesitate to thin out their chart of accounts but itrsquos critical to achieving data harmonization across the enterprise and simplifying transaction entry
5
2 Choose Technology That Supports Your Streamlined Processes
There are a host of technology tools that facilitate a faster close First and foremost a global accounting integration and reporting platform allows you to standardize the accounting from multiple third-party transactional systems The ability to bring together financial information from a variety of systems without disrupting those existing offers great benefit to companies with a complex IT environment that have grown through acquisitions such as Oracle The ability to adopt such a platform over time without disrupting current processes is also key Oracle for example deployed its Fusion Accounting Hub product as a first step toward moving to a full instance of Fusion Financials and in the process streamlined the close process by one day
Integrating Acquisitions at Oracle with Fusion Accounting Hub
Legally combining companies is a very complicated process especially for acquisitions governed by unique laws and regulations The acquirer must roll in the acquired companyrsquos legacy systems ndash including vital operations such as accounts receivable and general ledger -without disrupting day-to-day operations
These were just some of the accounting challenges facing Oracle which had acquired over 100 companies since 2005 as part of its strategy to become the 1 software provider worldwide Oraclersquos finance team decided to standardize on Fusion Accounting Hub (FAH) to design a global chart of accounts to manage its business more uniformly and to lay the foundation for moving to a full Fusion Financials instance In conjunction Oraclersquos finance team is using Oracle Hyperion Data Relationship Management (DRM) to centralize and automate governance of its global chart of accounts and related hierarchies which will help the company lower costs and greatly reduce risk
FAH has simplified the process of consolidating general ledger data Oraclersquos finance teams can submit primary ledgers running in E-Business Suite (EBS) R12 directly to FAH eliminating the need for more than 90 redundant consolidation ledgers With FAH it is also possible to submit incrementally so if an adjustment needs to be booked in a primary ledger after close it can be done without reopening it and resubmitting This affords earlier visibility to period-end actuals during the close providing management with valuable performance information for decision-making purposes
You can also use tools that are easy to use andor already familiar to everyone involved to speed up the close process For example the close owner could establish a schedule for close tasks by setting up deadlines in the corporate calendaring app A certain journal entry must be made by a specific date and timemdashpossibly with a 30 minute grace period If that entry isnrsquot booked by the date and time required that triggers an alert up the chain of command
Similarly collaboration tools to enhance communication and accountability can help facilitate a faster close and support other finance activities At Oracle the finance team
is phasing out email altogether as a means of communicating around a variety of critical functions such as the close process and finance transformation initiatives Instead they use a next-generation internal collaboration hub the Oracle Social Network (OSN) Social networks such as OSN that are tied to the transactions themselves can be exponentially productive since finance personnel can immediately see the status of exceptions within context Responsibility is clearly assigned and schedules can be closely adhered to and learnings and best practices can be continuously monitored and refined
6 7
3 Adopt an Integrated Business Services Model
Modern CFOs can dial up the effectiveness of the finance function which includes improving the close process by leveraging shared services centers and centers of excellence Start by asking ldquoWhat needs to be very close to the business and what can be handled by a shared services centerrdquo Accenture sees leading companies moving towards the integrated business services (IBS) model which expands on the traditional shared services foundation of solid service management and focuses on multiple functions with process standardization throughout the organization With the IBS model it is not uncommon to find 60-65 of transactional activities in a shared services environment
An added benefit to shared services can be lowered costs through reduced resource requirements but the true endgame is to increase efficiency and become a better business partner To accomplish this leading companies are moving from shared services to an IBS model The operational decisions made by IBS organization are no longer focused solely on cost management but are now balanced with the responsibilitymdashshared jointly with the businessmdash for managing risk and driving growth4 The goal is to provide the analytics infrastructure discipline and expertise necessary to cope with market volatility and associated risks With that foundation modern CFOs can make an impact far greater than streamlining the financial close process
4 ldquoCFOs Benefit from Shared Services Shakeuprdquo David Axson CFOcom March 13 2013
8
Any mechanism that reinforces ruthless standardization without introducing unnecessary complexity and risk can help finance teams play a more strategic role in shaping the business that goes beyond the necessary but less glamorous
financial close Following the best practices outlined here will help you modernize and speed up your organizationrsquos financial close and help stay nimble in the face of volatile markets and ever-more-complex regulatory demands
9
Modern Finance Best Practice Guide Series April 2014 Author Anne Ozzimo
Oracle Corporation World Headquarters 500 Oracle Parkway Redwood Shores CA 94065 USA
Worldwide Inquiries Phone +16505067000 Fax +16505067200 oraclecom
Oracle is committed to developing practices and products that help protect the environment
Copyright copy 2014 Oracle andor its affiliates All rights reserved
Accenture is a global management consulting technology services and outsourcing company with approximately 275000 people serving clients in more than 120 countries Combining unparalleled experience comprehensive capabilities across all industries and business functions and extensive research on the worldrsquos most successful companies Accenture collaborates with clients to help them become high performance businesses and governments The company generated net revenues of US$286 billion for the fiscal year ended August 31 2013 Its home page is wwwaccenturecom
This document is intended for general informational purposes only and does not take into account the readerrsquos specific circumstances and may not reflect the most current developments Accenture disclaims to the fullest extent permitted by applicable law any and all liability for the accuracy and completeness of the information in this document and for any acts or omissions made based on such information Accenture does not provide legal regulatory audit or tax advice Readers are responsible for obtaining such advice from their own legal counsel or other licensed professionals
2 Choose Technology That Supports Your Streamlined Processes
There are a host of technology tools that facilitate a faster close First and foremost a global accounting integration and reporting platform allows you to standardize the accounting from multiple third-party transactional systems The ability to bring together financial information from a variety of systems without disrupting those existing offers great benefit to companies with a complex IT environment that have grown through acquisitions such as Oracle The ability to adopt such a platform over time without disrupting current processes is also key Oracle for example deployed its Fusion Accounting Hub product as a first step toward moving to a full instance of Fusion Financials and in the process streamlined the close process by one day
Integrating Acquisitions at Oracle with Fusion Accounting Hub
Legally combining companies is a very complicated process especially for acquisitions governed by unique laws and regulations The acquirer must roll in the acquired companyrsquos legacy systems ndash including vital operations such as accounts receivable and general ledger -without disrupting day-to-day operations
These were just some of the accounting challenges facing Oracle which had acquired over 100 companies since 2005 as part of its strategy to become the 1 software provider worldwide Oraclersquos finance team decided to standardize on Fusion Accounting Hub (FAH) to design a global chart of accounts to manage its business more uniformly and to lay the foundation for moving to a full Fusion Financials instance In conjunction Oraclersquos finance team is using Oracle Hyperion Data Relationship Management (DRM) to centralize and automate governance of its global chart of accounts and related hierarchies which will help the company lower costs and greatly reduce risk
FAH has simplified the process of consolidating general ledger data Oraclersquos finance teams can submit primary ledgers running in E-Business Suite (EBS) R12 directly to FAH eliminating the need for more than 90 redundant consolidation ledgers With FAH it is also possible to submit incrementally so if an adjustment needs to be booked in a primary ledger after close it can be done without reopening it and resubmitting This affords earlier visibility to period-end actuals during the close providing management with valuable performance information for decision-making purposes
You can also use tools that are easy to use andor already familiar to everyone involved to speed up the close process For example the close owner could establish a schedule for close tasks by setting up deadlines in the corporate calendaring app A certain journal entry must be made by a specific date and timemdashpossibly with a 30 minute grace period If that entry isnrsquot booked by the date and time required that triggers an alert up the chain of command
Similarly collaboration tools to enhance communication and accountability can help facilitate a faster close and support other finance activities At Oracle the finance team
is phasing out email altogether as a means of communicating around a variety of critical functions such as the close process and finance transformation initiatives Instead they use a next-generation internal collaboration hub the Oracle Social Network (OSN) Social networks such as OSN that are tied to the transactions themselves can be exponentially productive since finance personnel can immediately see the status of exceptions within context Responsibility is clearly assigned and schedules can be closely adhered to and learnings and best practices can be continuously monitored and refined
6 7
3 Adopt an Integrated Business Services Model
Modern CFOs can dial up the effectiveness of the finance function which includes improving the close process by leveraging shared services centers and centers of excellence Start by asking ldquoWhat needs to be very close to the business and what can be handled by a shared services centerrdquo Accenture sees leading companies moving towards the integrated business services (IBS) model which expands on the traditional shared services foundation of solid service management and focuses on multiple functions with process standardization throughout the organization With the IBS model it is not uncommon to find 60-65 of transactional activities in a shared services environment
An added benefit to shared services can be lowered costs through reduced resource requirements but the true endgame is to increase efficiency and become a better business partner To accomplish this leading companies are moving from shared services to an IBS model The operational decisions made by IBS organization are no longer focused solely on cost management but are now balanced with the responsibilitymdashshared jointly with the businessmdash for managing risk and driving growth4 The goal is to provide the analytics infrastructure discipline and expertise necessary to cope with market volatility and associated risks With that foundation modern CFOs can make an impact far greater than streamlining the financial close process
4 ldquoCFOs Benefit from Shared Services Shakeuprdquo David Axson CFOcom March 13 2013
8
Any mechanism that reinforces ruthless standardization without introducing unnecessary complexity and risk can help finance teams play a more strategic role in shaping the business that goes beyond the necessary but less glamorous
financial close Following the best practices outlined here will help you modernize and speed up your organizationrsquos financial close and help stay nimble in the face of volatile markets and ever-more-complex regulatory demands
9
Modern Finance Best Practice Guide Series April 2014 Author Anne Ozzimo
Oracle Corporation World Headquarters 500 Oracle Parkway Redwood Shores CA 94065 USA
Worldwide Inquiries Phone +16505067000 Fax +16505067200 oraclecom
Oracle is committed to developing practices and products that help protect the environment
Copyright copy 2014 Oracle andor its affiliates All rights reserved
Accenture is a global management consulting technology services and outsourcing company with approximately 275000 people serving clients in more than 120 countries Combining unparalleled experience comprehensive capabilities across all industries and business functions and extensive research on the worldrsquos most successful companies Accenture collaborates with clients to help them become high performance businesses and governments The company generated net revenues of US$286 billion for the fiscal year ended August 31 2013 Its home page is wwwaccenturecom
This document is intended for general informational purposes only and does not take into account the readerrsquos specific circumstances and may not reflect the most current developments Accenture disclaims to the fullest extent permitted by applicable law any and all liability for the accuracy and completeness of the information in this document and for any acts or omissions made based on such information Accenture does not provide legal regulatory audit or tax advice Readers are responsible for obtaining such advice from their own legal counsel or other licensed professionals
3 Adopt an Integrated Business Services Model
Modern CFOs can dial up the effectiveness of the finance function which includes improving the close process by leveraging shared services centers and centers of excellence Start by asking ldquoWhat needs to be very close to the business and what can be handled by a shared services centerrdquo Accenture sees leading companies moving towards the integrated business services (IBS) model which expands on the traditional shared services foundation of solid service management and focuses on multiple functions with process standardization throughout the organization With the IBS model it is not uncommon to find 60-65 of transactional activities in a shared services environment
An added benefit to shared services can be lowered costs through reduced resource requirements but the true endgame is to increase efficiency and become a better business partner To accomplish this leading companies are moving from shared services to an IBS model The operational decisions made by IBS organization are no longer focused solely on cost management but are now balanced with the responsibilitymdashshared jointly with the businessmdash for managing risk and driving growth4 The goal is to provide the analytics infrastructure discipline and expertise necessary to cope with market volatility and associated risks With that foundation modern CFOs can make an impact far greater than streamlining the financial close process
4 ldquoCFOs Benefit from Shared Services Shakeuprdquo David Axson CFOcom March 13 2013
8
Any mechanism that reinforces ruthless standardization without introducing unnecessary complexity and risk can help finance teams play a more strategic role in shaping the business that goes beyond the necessary but less glamorous
financial close Following the best practices outlined here will help you modernize and speed up your organizationrsquos financial close and help stay nimble in the face of volatile markets and ever-more-complex regulatory demands
9
Modern Finance Best Practice Guide Series April 2014 Author Anne Ozzimo
Oracle Corporation World Headquarters 500 Oracle Parkway Redwood Shores CA 94065 USA
Worldwide Inquiries Phone +16505067000 Fax +16505067200 oraclecom
Oracle is committed to developing practices and products that help protect the environment
Copyright copy 2014 Oracle andor its affiliates All rights reserved
Accenture is a global management consulting technology services and outsourcing company with approximately 275000 people serving clients in more than 120 countries Combining unparalleled experience comprehensive capabilities across all industries and business functions and extensive research on the worldrsquos most successful companies Accenture collaborates with clients to help them become high performance businesses and governments The company generated net revenues of US$286 billion for the fiscal year ended August 31 2013 Its home page is wwwaccenturecom
This document is intended for general informational purposes only and does not take into account the readerrsquos specific circumstances and may not reflect the most current developments Accenture disclaims to the fullest extent permitted by applicable law any and all liability for the accuracy and completeness of the information in this document and for any acts or omissions made based on such information Accenture does not provide legal regulatory audit or tax advice Readers are responsible for obtaining such advice from their own legal counsel or other licensed professionals
Modern Finance Best Practice Guide Series April 2014 Author Anne Ozzimo
Oracle Corporation World Headquarters 500 Oracle Parkway Redwood Shores CA 94065 USA
Worldwide Inquiries Phone +16505067000 Fax +16505067200 oraclecom
Oracle is committed to developing practices and products that help protect the environment
Copyright copy 2014 Oracle andor its affiliates All rights reserved
Accenture is a global management consulting technology services and outsourcing company with approximately 275000 people serving clients in more than 120 countries Combining unparalleled experience comprehensive capabilities across all industries and business functions and extensive research on the worldrsquos most successful companies Accenture collaborates with clients to help them become high performance businesses and governments The company generated net revenues of US$286 billion for the fiscal year ended August 31 2013 Its home page is wwwaccenturecom
This document is intended for general informational purposes only and does not take into account the readerrsquos specific circumstances and may not reflect the most current developments Accenture disclaims to the fullest extent permitted by applicable law any and all liability for the accuracy and completeness of the information in this document and for any acts or omissions made based on such information Accenture does not provide legal regulatory audit or tax advice Readers are responsible for obtaining such advice from their own legal counsel or other licensed professionals
