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Compliance Controls SquareAccording to an article in the Wall Street Journal and a survey from the Institute of Internal Auditors (IIA), companies seem to have a looser grip on their internal controls than they realise.

With recent high-profile stories like Hertz and Toshiba, it is clear that organisations need to increase the use of technology to automate all processes including reconciliation and certification, embed compliance, and ensure authorization and proper signoffs with appropriate documentation are all digitally calculated, directed, and captured.

While overall restatement figures have levelled off through the years, the problem is always that you don’t know what you don’t know.  If companies have not automated their internal controls – they simply don’t know until it is too late what their total restatement exposure is.

And many CFOs and CAEs seem to be aware of the risk, yet automation still falls lower on the priority list than it should.  Some key stats that have come out of the various recent reports:

  • Only 38% of CAEs say their organizations are using technology at an “appropriate” level or higher.
  • Audit-oversight inspections indicate 36% of company audits had internal-control deficiencies as of 2013, and this trend is on the rise.
  • 80% of companies having to restate their financials previously thought their controls were effective.

This suggests some level of disconnect between the Controllers, who are struggling with a lack of automation and extensive effort to meet deadlines and KPIs, and the CFOs who trust that the human intervention delivering the earnings reports is enough.

To find out more, please register to our upcoming webinar around Compliance and Controls by clicking here.

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Metric Of The MonthIt isn’t just us at Trintech who have been evangelising the importance of recording, reporting and continuously managing your Record to Report metrics this August. CFO.com have also got in on the act with their most recent Metric of the Month: Close-to-Disclose Cycle Time.  

In their recent article, which can be seen in full by following the link at the end of this blog, they review APQC’s data which highlights how much further best performing companies are compared to their peers.

In a recent blog, “Should we all be thinking effort to close rather than time to close?“, we questioned the suitability of using time as a metric when it comes to assessing the overall performance of the close process. However, Mary Driscoll from APQC makes a valid argument as to why they feel time is important:

Why the need for speed? Many CFOs feel the need to be one of the first in his or her industry to report earnings each quarter. The notion is that this builds shareholder and analyst confidence. Meanwhile, business unit leaders are typically chomping at the bit to see the official quarter-end tallies for revenues and costs so they can, if need be, adjust growth assumptions, resource allocation formulas, forward forecasts, and hiring plans.

However, APQC found that companies aren’t only realising time savings, they are also seeing cost savings too:

The top performers among these 524 organizations get the job done for one quarter of the cost incurred by the bottom performers, the worst 25% of the group.

So, what’s to be done to achieve this? As Mary points out:

The best-performing companies take a continuous improvement approach, constantly benchmarking their close-to-disclose efficiency and speed. By continuously evaluating processes, timetables, policies, and systems and incorporating best practices, companies continuously improve speed and cost efficiency.

There’s no doubt that the time to close is a popular metric that companies have used for the past few years to improve their close cycle. While we would recommend people continue to gain the benefits that reduced time can deliver, we believe that greater gains can be made from looking at a number of different, interconnected metrics across the whole Record-To-Report process.

To read the CFO article in full, please click here. To download a white paper outline a number of R2R metrics across the close process, please click here.

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Metrics that matter SquareWhat gets measured gets managed, or so the old adage goes, so as finance professionals, what should we be measuring when it comes to the Record to Report process?

The first thing is to understand what we are trying to achieve. The end goal is to prepare and report the overall accounts of the business to provide strategic and operational feedback on how the company is performing.

However, there are a number of sub-processes that go into achieving this, and to be able to give this feedback on company performance effectively, these individual processes need to be measured both separately and as a whole.

As Gartner states “When considering the automation and unification of critical financial processes, such as account reconciliations, compliance and Financial Close, the whole is greater than the sum of its parts. These activities are highly dependent on each other and, when unified, create new insights and return on investment (ROI) savings.”

Often, companies focus the majority of their attention on a single control, that being their reconciliations. While there’s no doubt this is a key control, it’s not the only one and if you are simply focusing on any single process without thinking about the context of the overall financial close, you risk missing the point about why you are doing those activities in the first place. Remember the end goal: To prepare and report the overall accounts of the business to provide strategic and operational feedback on how the company is performing.

So, what metrics are important when it comes to the Record to Report process?

  • Metric 1: P/L Exposure – This metric gives you an indication of your risk exposure. Uncorrected, it gives an indication of the impact on the profitability of the business and is key to understanding the overall health of the accounts.
  • Metric 2: Process Cost – This identifies the cost of managing the entire R2R process as a percentage of the total revenue. If your processes are in silos you may be able to work out the cost of each, but it is only by looking holistically across the whole R2R process that you can calculate and, in turn, manage these costs effectively.
  • Metric 3: Time to Close – A few years ago people became somewhat obsessed with days to close and because what get measured gets managed, we have seen the average number here reduce considerably. It is still a useful metric, however, it just needs to be approached with caution when used on its own and is more relevant when viewed in conjunction with metrics around cost and resources as well.
  • Metric 4: Close Quality – To view the overall quality of the close, this is a function of all the previous metrics and their deviance from the target. By understanding the risks, costs and time to close you can get a holistic view of the whole record to report process and reduced rework and expense.

To find out more about these metrics, and others relevant to each sub processes, please click here to download a white paper that outlines how the metrics are recorded and why they are important.

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ERPsWhen we initially speak to new companies we commonly hear “Why would I need software to manage my close when it’s currently managed in my ERP?”

It is true that ERP solutions go some way to help with the various individual close processes, however, it’s also true that companies such as AstraZeneca, ABB, Siemens, Microsoft, etc. also have ERPs but still wanted to improve their automation through the implementation of made for purpose R2R software.

Why? Because they weren’t happy with their current technology. They still struggled with all of the white space outside the ERP and were heavily reliant on spreadsheets and manual processes to manage their end to end Record to Report (R2R) processes and close their books. They all wanted to reduce the complexity of the close by automating their processes and close more quickly, for less money and with fewer resources. 

Different companies, however, aren’t starting from the same place and we see a number of different landscapes when it comes to businesses’ ERP environments, including:

  • Multiple different ERPs: Through acquisitions and legacy systems many companies have more than one type of ERP, whether these be SAP, Oracle, JD Edwards, or any other. The challenge comes at month end when companies try to pull together all the different close tasks and controls from the different systems, which all manage this information slightly differently. Historically, this means pulling it outside the ERP and working on it manually, often through the use of our best friend, the spreadsheet
  • Multiple Instances of a single ERP: Even when companies have a single ERP they will often have multiple instances which aren’t necessarily talking to each other. Again, different sections of the business will have different standards leading to inefficiencies, a lack of visibility, poor controls, and increased costs
  • A single instance of a single ERP: Even at ERP nirvana, the single instance of a single ERP, improvements can still be made. While all the information might now be in one place, the tools to effectively manage and coordinate the various activities, tasks and controls between the relevant individuals and teams are often missing, again leading to data having to be manually manipulated outside of the ERP itself and shared around the business in offline files

So, what can be done to solve these issues?

The analysts recommend a fully integrated, solution that removes all these white spaces and offers a single view of your close. One that can integrate not only across your ERP landscape for consistent data management, but also across your whole close process, to offer a single view across the business, wherever and whenever.

As Gartner state “When considering the automation and unification of critical financial processes, such as account reconciliations, compliance and Financial Close, the whole is greater than the sum of its parts. These activities are highly dependent on each other and, when unified, create new insights and return on investment (ROI) savings.”

For more information and to see how you can start on this journey, please feel free to download our accompanying eBook which describes the “how” of R2R transformation: Enabling R2R Transformation Through Technology.

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Think-Youve-AutomatedThere is consistency among market leading experts and finance functions that the key driver for financial transformation improvements is technology. As PWC so neatly put it “Improving finance technology is the #1 method that finance professionals identify for making finance processes more effective.”

Bearing this in mind, it would seem to be a fair assumption that most organisations have already got to grips with their systems and implemented the required technology to be as effective as possible. However, Ventana Research’s recent research seems to state otherwise:

“Only half of participating organizations have automated a significant percentage of their finance processes. In particular, just 11 percent have nearly or fully automated their financial close, while almost half (48%) apply some automation and 36 percent little or none.”

If we delve deeper the same is also true to individual processes that seem ripe for automation. For example, Ventana go on to say “Another example is the automation of reconciliation, which is an essential element of the close process. It’s a repetitive task that lends itself to automation, and affordable software for managing the task is mature. Yet just 37 percent of companies have applied automation to their reconciliation process”

So, companies can look at their overall R2R automation or each individual process. To help identify your own, it’s worth performing a maturity analysis on current performance, be they ad hoc, reactive or world class.

  • Ad Hoc: At this level processes lack any automation and companies will experience high costs and a time consuming, labour-intensive manual spreadsheet approach. There is also little integration across the R2R process, leading to a lot of “white spaces”
  • Reactive: At this level companies may have individual processes automated or partly automated. For example, basic reconciliation automation may be in place but without the advance matching with dynamic rules
  • World Class: At this level companies have a single system, often cloud based, which is fully integrated with the companies ERP. This enables a single global dashboard of status and activity to provide the office of the CFO full visibility or areas of risk

Remember, always think big, even if you have to start small and make the most of your vendor’s experience, they will have implemented hundreds of these solutions and that experience is critical for a success project. For more information about automating your R2R processes, click here for a recorded webinar on the subject or click here for an Insight White Paper.

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FinancialDirectorFinancial Director has written an interesting piece about PwC’s annual benchmarking report and highlight how the finance function is improving efficiencies and reducing costs through automating processes. As they state:

“PwC’s annual finance function benchmark report found that the best performing finance functions cost 40% less than their peers and have ditched the traditional focus on book-keeping and information gathering in favour of greater automation, shared services and more efficient use of capacity.”

On top of this, automation is allowing them to focus on the generation of actionable intelligence to add value to the business:

“The best finance professionals today are producing actionable information, not circulating numbers that are likely to be out of date as soon as they’re released.”

To see the full article, please click on the link below:

Financial Director News

The Record to Report or close process is no different in this regard, with technology delivering a number of key functions including Visibility, Collaboration, Insight, Automation and Integration. Click here to view a webinar on how automation can help deliver real value to your business.

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APQCAPQC is running a great series of blogs around the process improvement cycle that follows our experiences of the process management cycle.

Although “Improving finance technology is the #1 method that finance professionals identify for making finance processes more effective¹”, it isn’t a panacea and yet this is commonly the starting point for most companies.

While companies engaging in process transformation may be aware of the seven aspects of process management, what APQC calls the “Seven Tenets of Process Management”, the order in which these are executed on is key to the effectiveness of your transformation.

As APQC put it:

“Don’t buy into the hype that a tool can fix your unmanaged processes. Every dollar you spend upfront standardizing your processes and maturing your process management approaches will save you from the nightmare of having to “customize” your new system to accommodate process inconsistency.”

Now, it may seem odd for a software company to be saying that you should hold off buying software but the aim of a project is never to implement software, it’s to ensure success and value. That can only be achieved if the technology underpins the right processes, increasing efficiency, and reducing risks and costs. As the old adage goes, bad data in, bad data out.  To read the complete blog, go to:


Also, a recent SAP Insider article demonstrates what can happen when it all clicks into place and everyone works together with a single clear, communicated vision whether in the business, Shared Service Centre, BPO, or technology vendor.


¹ PWC, Unlocking Potential: Finance effectiveness benchmark study 2013

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Financial Shared Services CostsFinancial Shared Services initiatives have primarily been undertaken to deliver reduced costs and improved efficiency.  These goals are achieved relatively easily within the first few years of with results most immediately being felt through reducing labour costs and centralization.

When they are first established, standardization and centralization deliver up to 50% savings. During subsequent phases, technology automation and outsourcing cut costs further.  But if cost reduction is the only clearly defined goal, organizations will reach a point of diminishing returns.

As the shift to incremental savings begins to occur the business should, and will, look to the SSO for a different type of value, predominantly around how it can make their business better.  The challenge is to maintain efficiency while shifting the focus to increasing strategic effectiveness.  So what role can information technology play in rising to the challenge?

Take Record to Report improvements for instance, as the effort to close reduced, and quality improved, they were able to reassign their resources to view the data in more detail and spend their time proactively looking for improvements rather than reactively dealing with issues. Time was spent asking questions such as:

  • How can we use KPIs and analytics to improve performance?
  • What are the high risk accounts and how do we focus more effort on these?
  • How do we make the process more robust?
  • What can this tell us about new trends?

While reducing costs might be the ticket to entry, it is only the start of the process and, as is always the case, Financial Shared Services need to continuously improve their processes to demonstrate value to the business beyond simple cost reductions.

For more information about how you can start your R2R journey, please download our eBook:  Shared Services Insights: Improving Record to Report Performance In 2015.

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SpreadsheetsSpreadsheets have been the backbone of finance and accounting for decades, with companies relying on them for financial, analytical, and operational processes.

But, businesses can rely too heavily upon spreadsheets, so as to lose sight of the original purpose and best use of this tool. Instead they are using it to manage – in some cases – multi-billion dollar balance sheets, and subsequently risk making decisions or reporting figures based on manually gathered, erroneous data. The challenge is, how do you convince your CFO that changes need to be made?

As with many things, the first goal is to make the company realise there is an issue that needs addressing. One of our customers achieved this in a remarkably simple way. They went to their CFO and commented “We are currently managing a $9 billion balance sheet in Excel”. This one statement got the board’s attention and opened the door to further discussions.

You can then back this up by focusing on what is strategically important and fit arguments around this. Just a few of many advantages of moving away from spreadsheets to an automated software solution include:

  • Increased productivity with fewer resources: Automating balance sheet reconciliation and verification enables you to flatten the workload, eliminating the high peaks in activity, so that the work can be spread out appropriately across the close. Work is focussed on exceptions and some manual tasks are eliminated entirely.
  • Reduced risks through complete accuracy in the data: By eliminating the “space” between technology silos, disparate teams, and manual spreadsheets/emails/etc, you reduce risk of errors and enable greater collaboration and efficiency.
  • A stronger control framework: Workflows, consoles and audit trails provide a risk based framework that ensures all controls are properly identified, scoped, scheduled, and performed. Additionally, the ability to quickly retrieve and reconstruct an accounting period helps the team breathe easier when auditors ask for files and statements.

A great example of all of these gains being realised is the case of a global communications technology provider. They had focused originally on getting their time to close right with a sophisticated use of spreadsheets. They thought they’d closed the books, but in fact they hadn’t because 30 days later they would find issues. They realised they lacked visibility into the process and controls.

By automating the process in a purpose-built application platform, they gained insight into exactly where and why the misstatements were happening. By correcting the regional issues and strengthening the control framework, they achieved the same workload with fewer resources, eliminated the risk of restatements and delivered a true reflection of their time to close.

As we have commented in a previous blog, what this really means is that if you take care of the quality of the close, the time to close takes care of itself.


R2R Insights Financial Transformation eBook Banner

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3StepsIn our last blog, ‘Should we all be thinking effort to close rather than time to close?’, we demonstrated how companies have been able to have the best of all worlds, providing their business with improved quality, reduced costs, and reduced time across their close process.

So, what can you do to reach this nirvana? While the analysts, such as Aberdeen, Hackett, Ventana and Deloitte, may vary in the number of steps, there are three consistent threads that they all agree on. These are: 

  1. Standardise your processes across your business: Take the opportunity to not only replicate what was being done before but establish best practice. Often this stage will include the development of a Shared Service Centre (SSC) or Business Process Outsourcing (BPO) company. If so, it is vital that the role of these are effectively defined and communicated.
  2. Automate wherever possible: This is across the entire Record to Report processes, including reconciliations, journal entries and close tasks. It is vitally important to ensure you have integration of systems across the whole process to reduce complexities, risks and costs.
  3. Optimise: Once general tasks have been automated, a proactive risk based approach can be implemented to further improve efficiencies. At Trintech we have helped customers to develop a risk rating as a means to drive reconciliation/review schedules, for example: A Medium rating might be given to a low risk account that has open items greater than a certain amount.

One of the main challenges is the order that these are undertaken. Some experts advise using technology to help companies standardise their processes, while others recommend standardising their processes and then automating. In reality, companies will often do a mixture of the two, standardising where possible and then implementing technology followed by further standardisation once everything can be seen.

The key is to talk through with partners and vendors and utilise their experience before and during implementation. They are the ones who have done it before and can lead you in terms of the questions you should be asking internally, and providing best practices from previous companies they have worked with.

For more information on how technology can enable Record to Report (R2R) transformation please click here to download our complimentary eBook.