Let me paint a familiar scenario I’ve seen a lot in my years in industry and as a consultant. A large multinational company with disparate ERP systems and separate finance and accounting groups are going through their closing process. It’s quarter end and corporate is anxiously awaiting for results to come in. All numbers are due in on day four by 5 PM local time with I’s dotted and T’s crossed. So at 5:15 PM, corporate finance starts running reports. Something doesn’t look right; sales figures look lower than normal, there are inter-company balances that aren’t eliminated, the balance sheet is out of balance!
The search begins, who did this? Has everyone really submitted their numbers? There are 60 separate companies to comb through to figure out where the issue is? Maybe an e-mail will need to go out asking if anyone is still working through close, can everyone check their balance sheets? Will anyone respond because it’s after business hours? This needs to get figured out quickly because the corporate controller is looking for a report to be on his or her desk first thing in the morning. Halfway through the next day you find out one of the Canadian subsidiaries and a plant in Arizona didn’t get their numbers inputted in time. In addition at least three companies have intercompany issues and there are a number of balance sheets out of balance after submission. Finally, after an additional day of work, putting you a full day behind schedule, the issues are resolved, the financials look normal, everyone says they are in, ready to run reports for the controller.
The corporate controller reviews the financials and says they would like to see another report that compares actuals to the plan and another that trends out from the trailing four quarters. You get those reports hammered out and onto the controller’s desk. All is good, but wait, the controller shows up and asks, “Why did OPEX change?” A blank stare is on the analyst’s face, thinking “Why did it change?” “Who changed their numbers?” “Why did they change their numbers?” “Did they do it on purpose?” Back to the search, another e-mail may need to go out, how else will you know what happened? After another half day of research, more companies, more problems, a missed entry, an accidental change, on and on….
Two days after the original deadline and you may finally have a set of numbers that is stable and won’t change again. Unfortunately controllers and CFO’s all over are used to this iterative cycle; businesses with so many moving parts and pieces they have trouble getting it all right, things get missed, and too often the issues get passed into consolidation and everyone has to scramble to figure out what happened. The same thing often happens during the planning process. Sound familiar? I have been through it myself during my time in the industry.
Implementing an EPM System
Fortunately, a good EPM system has a number of tools available to help tighten up the financial close process and reduce or eliminate these iterations so many companies go through on a monthly basis. Specifically, SAP BusinessObjects Planning and Consolidation (BPC) eliminates many of these issues by implementing a combination of Auditing, Controls, and Work Status functionality. With these tools in place, any company can put controls around any financial process to help prevent the scenario discussed above from happening.
First there’s Auditing. Auditing in BPC provides two levels of tracking, one for data and one for administrative activity. The data audit feature will tell the administrator of the system who changed what, when, and how. Flexible filtering allows filtering by user, date/time range, dimension intersection, and more. This means if a number changes unexpectedly, a report can be run on the spot to explain exactly what happened. The report will provide user name, time of change, what the number was before the change, and what it was changed to. Sounds a little better than sending out e-mails and digging through detailed reports (if you’re even lucky enough to have them) to figure out what happened? The administrative audit function helps facilitate change management as it shows any changes to dimensions, logic calculations, security, and more. So if the system change causes a hiccup during any financial process, it is easy to track down and remedy the issue. External and internal audit features like this also show user security profiles are being controlled and not changing without the proper tracking and approvals.
Controls in BPC can be set up by the system administrator to ensure that when users complete a financial process, that the transactional data submitted meets certain standards as set by the administrator of the system. This means that a user will receive a warning, or be stopped from promoting data to the next step if, for example, their balance sheet is out of balance, if there is a negative cash account balance, or if there is an issue with inter-company accounts. Separate sets of controls can be defined by process, so you can have one set for consolidations, another for the budget, yet another for the strategic plan, etc.
A combination of dimensions, operators, and calculations can be defined by the administrator and the rules can be as simple or complicated as needed to effectively prevent data quality issues before they reach the central office. Tolerance thresholds can be set so a user isn’t stopped for having a balance sheet that is one cent out of balance, or so some other immaterial issue doesn’t bring the process to a halt. The controls monitor feature provides a convenient interface for the process owners to see exactly where they stand in terms of passing required control checks for their companies. It also provides a “snapshot” for the central process owner to see where all companies stand and how close companies are to being done with their process.
Finally, work status is a feature in BPC that allows users to promote data through stages in a process. This enables the tracking of companies’ progress through a process, so you don’t have to send e-mails or make a phone call to figure out if a company has passed controls and completed a process. Work status is normally set up for a particular Company, Category, and Time. So for instance, the ACTUAL category for all companies for December 2017 may start out in the “UNLOCKED” stage. In this stage all users who have the right to submit data to the system can do so using any of the data load methods available. Normally this would be either Import, Input Template, or BPC Journal Entry. Once the user has submitted all data necessary to complete the given process, they run the Controls monitor to be sure they have passed all control checks. If they have, they will be able to go into the work status interface and “promote” data to the next stage.
At the next stage, for this example, we’ll say is “SUBMITTED”, the finance manager can now go in and review the data, and make data modifications if necessary. At this stage only the finance manager is allowed to submit data, the accountant is locked out and is in read only mode. The finance manager also has the ability to “reject” the submitted data and demote it back to the accountant for additional changes if necessary. Once the finance manager makes any necessary adjustments and is good with the data, they promote the data to the next stage, something like “APPROVED”. The person sitting at the corporate level can run a user friendly work status report using the BPC web interface or directly out of the EPM Excel add in to see if all companies have moved their data to the APPROVED status. Once all companies have been changed to APPROVED all the way up to the top member of the company dimension, the data is officially locked down and nobody can accidentally or purposefully change the data. Work status allows for a tiered process where the data can move through phases, which limit access to those who did the work in the previous phase. So no more unwanted changes to data after a process has been finished and “final” reports have been run.
All of these items, when implemented with your financial process in mind, will help reduce inefficient iterations related to low data quality, the inability to control data access, and lack of visibility into transaction or master data changes. We hope you now have an understanding of how you can utilize these tools to assist you with your financial process. To learn specifics on how SAP BusinessObjects Planning and Consolidation can help accelerate your close process view our on-demand videos on speeding up your intercompany reconciliations or on automating your cash flow.