January 20th, 2010 | Posted by Manufacturing is replete with examples of technology employed to manage and execute processes, since at least the time of Henry Ford. More recently, Customer Relationship Management has moved the effort from sales teams to technology, allowing global coordination of customer relationships and complete visibility into the status of any given sales effort. But Finance is generally the last department to reap the rewards of a Production Platform on which to execute and coordinate the work required to meet deadlines and deliverables. Finance has made progress towards bringing automation to the transactional side of the house, but the administration and management of the key processes required to deliver financial information tends to lean more towards art than science.
Because many of the processes in the finance process are non-linear, it can be difficult to envision how technology can help. Visualizing an example process – such as bad debt reserve preparation – makes it easier to imagine the possibilities.
The following graphic describes a production platform for finance as described below. For reference, an optimized Bad Debt Reserve Analysis is imagined below the illustration.
Click the preview image below for a larger version.
Example Bad Debt Reserve Analysis, Optimized upon an Automated Finance Production Platform:
Transaction Created
- Customer buys product online
- ERP creates receivable and revenue
- Account owner notified by ERP of “out of tolerance” conditions
- Action plan sent to owner, and adjustment or correction made, while all support recorded in system of record
- Bad debt reserve recorded by ERP
- Accounts receivable ledger closed by ERP for period
Accounting Judgment Applied
- ERP and BI tools deliver bad debt reserve analytic
- ERP and BI tools combine operational and transactional data and create the accounts receivable bad debt information in the designed company format
- Automated scheduler sends bad debts reserve task to account owner on scheduled date
- Appropriate accountant receives an email with link to desk procedure and all the related information including the pre-populated spreadsheet, rules, and a predefined work flow
- Automated due-date reminder sent to account owner
- Due-date reminders sent, and late notices escalated to management
- Task reassignment “dragged and dropped” due to change in account ownership
- Task changes due to vacation and changes in personnel are reassigned in bulk
- Full audit trail created with changes
- Bad debt reserve analysis performed in process automation tool
- Bad debt analysis performed and other third party knowledge added to final calculations
- All support attached and recorded in system
Analysis Reviewed and Approved
- E-mail notice of completed bad debt reserve received and approved in work flow
- All comments, consultations, and support recorded
- All attachments moved through approval process
- ERP journal entry used to upload final adjustment
- Any final adjustments recorded via direct interface with the ERP and all supporting documentation
- Internal audit reviews bad debt reserve via web-browser
- All questions and schedules exchanged on the systems and recorded
- Online binder delivered to external auditor via web or CD
Final Numbers Reported
- Integrated reporting technology supports report creation
- A financial reporting hub is used for the creation; roll forward, review and editing of financial statements
- XBRL process automated and embedded in reporting tools
- XBRL process is embedded in financial reporting process
- XBRL tagging and validation are part of the financial reporting hub
- “Push button” financial reports are created
- All of the collected disclosures for a filing are compiled, including XBRL instance documents ready for filing with regulators
