PowerPoint Presentation 1 Hour Live - HANDOUT 2018.pdfIdeal Architecture for Financial Close? Layer...
Transcript of PowerPoint Presentation 1 Hour Live - HANDOUT 2018.pdfIdeal Architecture for Financial Close? Layer...
7/16/2018
1
1Silicon Valley Accountants © 2018
Agenda / Goals
◦ Part I - Dynamics of Accounting Close and Financial Reporting.
Discussing the Whys - Overview
◦ Part II - Complete Solution Approach to Optimization
Methodology
Best Practices
Technology
◦ Part III - Complete Solution Approach to Optimization
Focused Resources and Strategies
2Silicon Valley Accountants © 2018
Course materials will provide a structured solution and practical insights
Specific objectives include:Identify the core close and why it is referred to as “Last Mile.”
Identify a relevant improvement methodology why used.
Identify 5 key challenges to improving the close.
Define an Optimized Close.
List the top priorities of an efficient close and how do they relate to the speed of the close.
3Silicon Valley Accountants © 2018
7/16/2018
2
Introducing “The Close”
“Core close” versus “Extended Close”
◦ Cycle time (days): From a)Start of pre-close to b) Last J/E
◦ Where is electronic data stored? (excel, e-mails, pdf reports)
◦ Are binders used to store paper documents?
◦ What technology manages the close?
4Silicon Valley Accountants © 2018
What is the Accounting Close and Financial Reporting?
a) An event
b) A process
c) A rite of passage
d) A fun time
e) All of the above
f) None of the above
Why does it seem as such a unique process?
5
Definition Question
An important financial process
Silicon Valley Accountants © 2018
Uniqueness Questions
Why is the close different from other processes?
◦ Changes frequently
◦ Catcher of the miscellaneous
◦ Generally has not been an actively managed or highly visible
process
◦ 100% ONLY based Grading Scale
◦ “Last mile” of the Financial close process
On Day 3 of a 6-day close, if the CFO asks,
“Where are we in the close?” – What do you say? Why?
6Silicon Valley Accountants © 2018
7/16/2018
3
Manageability Questions
How is the Close process managed?
Should the accounting close rely on Excel as a process management tool? Why?
What technologies are used to manage other complex financial processes? Why?
7Silicon Valley Accountants © 2018
G/L
Time
Pro
gre
ss o
ver
tim
e
A/RRev
Payroll Accounting Close
Financial Reporting
Paper /Manual
Spreadsheets/Simple systems
So
ph
isti
cati
on
ERP
X
ChecklistExcel
WHY ?
Process Control Systems -Feature Functionality
Silicon Valley Accountants © 2018
Timing Questions
Q.) Do you have the time to improve the close?
A.) You do not have the time NOT to improve the close.
Improving saves time.
Q.) When should you start?
A.) Start it now, before its mandated by someone else!
Goal of over 50% of audit committees
9Silicon Valley Accountants © 2018
7/16/2018
4
Q. Why is the Close often referred to as the “Last Mile”?
Q. How and Why is the Close so unique?
A. Pictorial analysis of the problem.
10
Visualize the Close
Silicon Valley Accountants © 2018
MAS200
FAS
Softrax
Hyperion
ADP
ERP/GL
Fixed
Assets
Revenue
Reporting
Payroll
Accounting System
Merger Tax
Options
FMV
COGS
ADJ
EPS
XBRL
Sales
PeopleProcessesSystems
Accounting Environment
Silicon Valley Accountants © 2018
Accounting Environment
MAS200
FAS
Softrax
Hyperion
ADP
ERP/GL
Fixed
Assets
Revenue
Reporting
Payroll
Merger Tax
Options
FMV
COGSADJ
EPS
XBRL
Sales
PeopleProcessesSystems
How many activities?
Silicon Valley Accountants © 2018
7/16/2018
5
Aug Sept Oct Nov Dec
Awaiting Prep 0 0 0 0 9
Prep 0 0 0 0 3
Review 0 0 0 0 22
Addl Review 0 0 0 0 81
Posting N/A N/A N/A N/A N/A
Closed 481 857 524 514 684
Total 481 857 524 514 799
Company C
Silicon Valley Accountants © 2018
CFOs & Managers asked to describe top priorities:
5. Assign responsibility for resolving discrepancies
4. Establish clear accountability for closing tasks in a closing schedule and enforce deadlines
3. Establish clear and regular close communication
2. Develop and monitor close performance metrics
1. Continuously improve closing processes
14
IOMA survey “Improving the Financial Close”
Silicon Valley Accountants © 2018
Methodology
Focused Resources
and Strategy
Best Practices Technology
Survey Needs Analysis of Complete Solution
Approach
Assign responsibility for resolving discrepancies
Establish clear accountability for closing tasks in a closing schedule and enforce deadlines
Establish clear & regular close
communication
Develop and monitor close performance metrics
Continuously improve* closing processes
15Silicon Valley Accountants © 2018
7/16/2018
6
Methodology
16
PART II
Complete Solution Approach
Silicon Valley Accountants © 2018
Four Basic Principles of Lean Six Sigma
1. End-User Focused
2. Improve Process
3. Teamwork Focused
4. Facts Based
Reference: What Is Lean Six Sigma by Mike George, Dave Rowlands, and Bill Kastle
17Silicon Valley Accountants © 2018
Who are customers of the financial close process?
What do they value? What do YOU value?
◦ Eliminate defects Accuracy / Completeness
Visibility / Manageability
Compliance / No surprises
◦ Optimized process yields “good” Speed
18
Quality
1) End-User Focused
Silicon Valley Accountants © 2018
7/16/2018
7
If I ask, “Why do we do things this way during the close?”
“That’s the way we have always done it” which is based on historical constraints, not on efficiency.
Make incremental process improvements, measure effectiveness [get data], continue iterations towards improvement objective.
Continually improve by repeating optimization process to achieve increased sigma levels of quality
19
2) Improve Process
Silicon Valley Accountants © 2018
Teamwork evolution:
Individual
Contributor Groups Teams Optimized Teams
Requirements for effective teamwork◦ See: Visibility to identify need
◦ Decide: Communication to process, determine & disseminate
◦ Do: Manageability for effective execution
Use teamwork to set goals, assign accountability, handle conflict, hold effective meetings, enable continuous learning, collaborate with other groups
20
3) Teamwork Focused
Silicon Valley Accountants © 2018
Find “Relevant Measures” to set goals, measure progress and track effect of improvements
Visible, useful, quantifications of discrete actionable results
What is measured today?
No measure will be perfect No one measure is a magic bullet
The story is told by many measures considered together
Customized, so must be based on your measures on your unique systems, processes, and people
21
4) Facts Based
Silicon Valley Accountants © 2018
7/16/2018
8
Focused Resources
and Strategy
Best Practices Technology
Methodology
22
Complete Solution Approach
Silicon Valley Accountants © 2018
Gary Simon describes the “Reporting Supply Chain” as “all the events around the entire group reporting
process including the extremities of the process.”
“Fast Close to the MAX” by Gary Simon, 2007
23
especially
Silicon Valley Accountants © 2018
-3 0 ME 3 6 9
Tasks
Review
Analytic Review
Error : Day 2 Find: Day 2Scenario 1: Effect: Minimal
Find: Day 8Scenario 2: Effect: Larger
𝐷𝑎𝑦 2
𝑇𝑎𝑠𝑘𝐷𝑜𝑛𝑒𝑂𝑝𝑡𝑖𝑚𝑎𝑙 𝑅𝑒𝑣𝑖𝑒𝑤? ?Day 2/3 review
BestReview ??
Close day
Nu
mb
er
of
Tasks
Analysis of the Close
Silicon Valley Accountants © 2018
7/16/2018
9
What are the optimization goals for efficiency and effectiveness?
= Speed
No1 Accuracy
+Predictability
+Manageability
+Visibility
+Accountability
+Compliance
+Increased analysis
& Reduced cost
25
Can you do them all?
Yes!
You MUST DO THEM ALL!
Fast close is not necessarily efficient, but an efficient
close is faster!
Silicon Valley Accountants © 2018
Focused Resources
and Strategy
Best Practices Technology
Complete Solution Approach
Methodology
26Silicon Valley Accountants © 2018
1) What solution do we need?
2) What is available?
3) What is the future of close technology?
4) How do we evaluate and select?
27Silicon Valley Accountants © 2018
7/16/2018
10
Top Characteristics of a Solution
• Component of an enterprise architecture
• Leverage standard corporate technologies
• Leverage packaged software capabilities
• Web enabled for data capture, validation, and reporting
• Utilize the intranet for process management, knowledge sharing, and training
• Provide personalized analysis and performance management
• Multi-dimensional – accommodate global data view
White Paper – BPM International
28Silicon Valley Accountants © 2018
Continuous Improvement Enablers
• Workflow and collaboration
• Document management
• Automated metrics measurement
• Visibility
• Compliance evidence
• Bridging multiple systems
• Easy to deploy during Close period
• Configurable to your Close process
29Silicon Valley Accountants © 2018
ERP Not Meeting the Need
◦ Organizations are not standardized on “wall-to-wall” ERP systems
◦ Physical layers of group consolidation add complexity
◦ Limitations of ERP in task management, controls documentation, reporting, team collaboration
◦ Inflexibility and ability to respond to new localized regulatory requirements, group level processes
Reference: Mastering the Financial Close, A Trintech White Paper by Gary Simon, 2010
30Silicon Valley Accountants © 2018
7/16/2018
11
Established Tools◦ Excel
Collaboration Tools◦ Access
◦ Sharepoint
Dedicated Programs ◦ Trintech - governance
◦ Blackline - recons
31
ERP platform modules– Oracle - Hyperion
– SAP
ECM platform modules– Hyland Software OnBase
AFRM (Accelerated Financial
Reporting Management)
Silicon Valley Accountants © 2018
Ideal Architecture for Financial Close?
◦ Layer of governance, risk management, and compliance applications over the existing myriad of operational systems
◦ Seamlessly connect period close, financial close, external filings and controls across the environment
◦ Merge required closing information and processes with workflow, measurement, and reporting
◦ Implement enterprise-wide using the Internet
◦ Provide linkage to ERP systems and data to facilitate close
◦ Provide close activity tracking and reporting
32
Reference: “Mastering the Financial Close,” A Trintech White Paper by Gary Simon, 2010
Silicon Valley Accountants © 2018
~ 9 users
~40 sub-processes
Multiple process groups ~2700 activities managed
~5400 activities managed – including
qtr, year and operating
Scope of system – example after one yearScope of system – example after one year
~2800 activities completed
~ 60 users
~800 deactivated
Silicon Valley Accountants © 2018
7/16/2018
12
Real-Time Status by Due Date
Silicon Valley Accountants © 2018
By User
Silicon Valley Accountants © 2018
By Activity TypeSilicon Valley Accountants © 2018
7/16/2018
13
The Finish Line - All Done!Silicon Valley Accountants © 2018
Prior period
binders
Due date
File Share
Desktop
procedures
Workflow
Alerts
Security
Accounting notes
Manager notes
Linked Activities
Silicon Valley Accountants © 2018
Links to SOX Testing
Silicon Valley Accountants © 2018
7/16/2018
14
Electronic Signatures
Electronic Support
Silicon Valley Accountants © 2018
Methodology
Focused Resources
and Strategy
Best Practices Technology
Complete Close Optimization Solution
41Silicon Valley Accountants © 2018
Preparing for an optimization project
Senior management commits to find a comprehensive solution with continuous improvement
Strategic plan and project management: consider deadlines, project approach (pilot, division, enterprise, etc.)
Prioritize change management
Deploy focused resources
Identify and adapt current and best practices
Evaluate existing technology
Adopt a culture of continuous improvement
42
Reference: “Optimizing Financial Reporting in an increasingly Dynamic World” by Silicon Valley Accountants
Silicon Valley Accountants © 2018
7/16/2018
15
Planning
Discovery
Technology Selection
Workflow and Measurement
Training
Configuration and Testing
Month One Close
Optimization
Lessons Learned
43Silicon Valley Accountants © 2018
Planning
Discovery
Technology Selection
Workflow and Measurement
Training
Configuration and Testing
Month One Close
Optimization
Lessons Learned
44Silicon Valley Accountants © 2018
Timing (Schedule)
Between Closes
Incremental Continual Monthly Improvement Steps
Goal: Do not disrupt the ongoing close
People
Unless internal resources available, outside help needed
Goal- Positive implementation
Manage expectations
No initial reengineering
Never slow the close
45Silicon Valley Accountants © 2018
7/16/2018
16
• August (3 days X 2 weeks)
• Detailed discovery, training and conference room pilotImplementation/CRP/Training
• September (75% support during close period)
• Assistance during close activitiesGo-live
• October
• Preparation & close activity; (75% support during close period)Month 1
• November
• Analyze data, lessons learned, advanced feature training (50% X 3 days)Month 2 optimization
• December
• Analyze data, process improvement, optimization ( 50% X 2 days)Month 3 optimization
• January
• Process improvement and optimization (25% X 2 days)Month 4 optimization
Silicon Valley Accountants © 2018
Silicon Valley Accountants © 2018
Scope: Closing Process
Phase Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun
Consolidations 4 2
Corporate Accounting 9
Fixed Assets 5
Tax 3
FP & A 3
External reporting 3
Treasury 2
Accounts receivable 1
Accounts payable 1
System Operations 1
Payroll 2
Inventory and cost accounting 7
Next Group ? 1
Next Group ? 2 1
Cumulative Uses 4 18 24 32 44 46 47 47 47 47 47
Phase Implementation Plan
Discovery, Training and CRP
Lessons Learned, Analysis, Optimization, Data Analysis
Go-Live, On Site Support
SEC, Management Reporting
Planning
Discovery
Technology Selection
Workflow and Measurement
Training
Configuration and Testing
Month One Close
Optimization
Lessons Learned
48Silicon Valley Accountants © 2018
7/16/2018
17
Principle: What do you do now?
Capture the current state as a starting point
Documentation - Where are the documentation and electronic files?
Current process – Can you leverage current Close Calendar and Checklist?
Source data - Trace information links back to other functions or source.
Other documentation - Review all SOX binders, Audit procedure documents, and other systems implementation reports
Observe and interview – Trust but verify
Use food
49Silicon Valley Accountants © 2018
Planning
Discovery
Technology Selection
Workflow and Measurement
Training
Configuration and Testing
Month One Close
Optimization
Lessons Learned
50Silicon Valley Accountants © 2018
Technology Selection
Requirements for implementation, and how much disruption?
How much IT involvement – define hardware, software, support, network, budget, etc.?
Can the technology extend beyond the core accounting close to internal reporting, tax, other processes or people?
Is deep integration required or can it link easily to existing Company technology?
51Silicon Valley Accountants © 2018
7/16/2018
18
Planning
Discovery
Technology Selection
Workflow and Measurement
Training
Configuration and Testing
Month One Close
Optimization
Lessons Learned
52Silicon Valley Accountants © 2018
Training- Key to Successful Implementations
Change Management Selling Need Address Objections Provide Clarity and
Leadership
Tools Familiarity training Adoption/transition assist Special needs
New processes & workflow Design assistance User acceptance testing Rework assistance
53
Review/Approval Cycle Controls and review
design Design testing
Best practices Initial best practice
metrics
Challenges to Status quo
Continuous Improvement –key to lasting value
Initial training Several cycles of support
in all the listed areas
Silicon Valley Accountants © 2018
Planning
Discovery
Technology Selection
Workflow and Measurement
Training
Configuration and Testing
Month One Close
Optimization
Lessons Learned
54Silicon Valley Accountants © 2018
7/16/2018
19
Planning determines success
• Over-plan – expect delay, distractions, and diversions
• Build an adaptable plan
• Never slow the close!
Plan for much more than promised and extra training
55Silicon Valley Accountants © 2018
Scope selection is key
• Smaller faster wins = build momentum
• Don’t start with hardest
• Link the benefits
Scope will creep, plan on it
56Silicon Valley Accountants © 2018
Change management
• Under-promise & Over-communicate
• Nothing is easy
This is a significant change to an established critical practice
57Silicon Valley Accountants © 2018
7/16/2018
20
Continuous improvement
Adopt a mentality of continuous improvement
Tesco Property actively and explicitly pursues improvements in its close.
“We have monthly management meetings where we think about how we can do it better. Not just to get to a four-day close, but…how to make our information better.”
“Accelerating the Financial Close” – CFO Research Services
58Silicon Valley Accountants © 2018
Upcoming Free WebinarsPresented by EITF Member
Tony Sondhi
Register at www.SVACPA.com/Sondhi
Revenue Recognition & Other current topics
“Tuesday with Tony”
Silicon Valley Accountants © 2018
• Mastering the Audit
• Mastering Financial Reporting SOX & Controls
• Mastering SOX IT
• Mastering SEC Reporting
• Mastering Tax
More Information at www.SVACPA.com
Classes available
Silicon Valley Accountants © 2018