Implementation of EPM for Improved Multi-Business Budgeting and Financial Reporting
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Andy Wickham of A.Y. McDonald Mfg. Co presented on enterprise performance management (EPM) for improved multi-business budgeting and financial reporting during the Loras College Business Analytics Symposium breakout sessions. Enterprise Performance Management (EPM) is the process of monitoring performance across your organization with the goal of improving business performance. From strategy formulation and business planning/forecasting to financial management and supply chain, EPM is the convergence of better data, better tools and better processes to empower people at all levels of the organization to help improve performance. This session helped participants explore the budgeting and financial reporting side of EPM and how its implementation can improve their business.
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Implementation of EPM for Improved Multi-Business Budgeting and Financial Reporting
- 1. EPM for Improved Budgeting and Financial Reporting Andy Wickham, Controller AY McDonald Industries, Inc. Loras College Business Analytics Symposium March 25, 2015
- 2. Who is A.Y. McDonald Founded in 1856 by Andrew Young McDonald Remains family owned – 5th generation Has history of acquisitions Growth will be drive through focus on core businesses while capitalizing on strategic acquisitions The mission of A.Y. McDonald Mfg. Co. in the words of our founder is “To make good products and to sell them honestly.” We, the stockholders and employees, accomplish this by extending the McDonald family culture through excellent customer service and by focusing on our customers’ needs.
- 3. A.Y. McDonald Industries Commercial HVAC Commercial Electrical Commercial Plumbing Injection Molding Water Works Brass OEM Stainless Steel Water Works Brass Pump Plumbing High Pressure Gas 3 About A.Y. McDonald
- 4. Who is A.Y. McDonald Locations Dubuque, Iowa Albia, Iowa Elizabethton, Tennessee Sparks, Nevada
- 6. Water Service Lateral Northern Installation Southern Installation
- 7. Overview A.Y. McDonald’s initiative to implement EPM 1. Organizational Need a) Streamline annual budgeting process b) Develop method to complete mid-year financial forecasts c) Improve monthly consolidated financial reporting d) Implement user interface for reporting 2. Selection process, how did we decide on Oracle Hyperion? 3. Implementation process 4. Benefits of EPM a) Users’ empowerment b) Creating efficiencies c) Best in class tools d) Establishing “go-to” data 5. Lessons learned along the way
- 8. Why EPM? Significant accounting effort didn’t leave time for analysis: Effort to pull together numbers Effort to ensure accuracy of the numbers Method of budgeting created environment where accounting owned the numbers and department manager disconnection Errors created skepticism and lack of ownership Wide assortment of source data with no direct connection to housed data Following up on variances is difficult without source data Common approach to budgeting that allows for leveraging across existing businesses and future acquisitions Establish single data set with direct user interface capability
- 9. Over-reliance on Spreadsheets Annual budgeting process
- 10. Monthly Financial Reporting Separate General Ledgers at each business Different chart of accounts Getting into and understanding details is difficult Different financial statement layout Changes made during consolidation to force consistency Some inconsistency unknowingly remained Little consistency in financial statement presentation at subsidiary level Multiple currencies, USD and CAD Significant review of final reports needed to ensure accuracy
- 11. Reporting & Analysis Requests for new reports or changes to existing reports requires IT effort Reports run on ERP server Transactional work such as order processing, production reporting, and picking/shipping shares system CPU with reporting Much reporting taken from ERP, put into Excel, manipulated and emailed out to decision makers
- 12. Selection Process Review three industry leading solutions along with ERP solution Oracle Hyperion Planning & EPM IBM Cognos Express Infor dEPM EPICOR EPM Implementation Cost Software Solution Implementation Consultant Hardware – Existing VM Server Implementation Effort (Jan – Nov) RFP & approval – (Jan-April) 5 month integration – (June-Oct) 2015 Budget Consolidated Financial Reporting – Nov. 2014
- 14. Implementation Deliverables Development of data cubes Compensation/Payroll Budget Capital Spending Budget Financial Budget & Reporting Comp AYMRptCapX Division Dept Job Employee Scenario Version Year Division Dept Account Product Currency View Scenario Version Period Year Division Dept Asset Class Asset Detail Scenario Version Year
- 15. Implementation Deliverables Establish dimensional hierarchies Identified 10 needed dimensions 1. Division 2. Period 3. Year 4. Scenario 5. Version 6. Department 7. Account 8. Product 9. Currency 10.View Hierarchy aids reporting
- 16. Implementation Deliverables Common chart of accounts Data connection Daily system feeds Monthly file loads
- 17. Implementation Deliverables User security Report creation P&L Balance Sheet Statement of Cashflows Capital Spending Departmental reporting Employee counts KPI reporting
- 18. Benefits of EPM Non-financial managers access Input budgets Headcount/compensation Capital projects Operating expenses, including supporting detail Ability to access results and run reports Excel add-in allows for ad-hoc reporting
- 19. Benefits of EPM Delivers efficiencies Allow for quick entry of data during the planning process Automated consolidation shortens time to close books Less time on assembling data = more time to analyze them
- 20. Benefits of EPM Best in class tools Web based user interface Built in user task lists and instructions Houses supporting detail, notes, attachments Adhoc analysis via Excel add-in Cubed data structure allows for changes to be made at any level of hierarchy Drill through to source data Automated data loading MS Office integration
- 21. Benefits of EPM Data Creates single repository for actual, forecast, and plan data One version of “the truth” for your organization Data hierarchy creates natural inflection points Scenario dimension allows for “what-if” analysis Stepping stone to business intelligence Financial Sales HR Operations Logistics Dashboards Dashboards Adhoc Analysis M.S. Office Report Books Mobile Std Reports EPM & Business Intelligence
- 22. Lessons learned Spend more time on front end planning/scoping Force subsidiaries involvement Drive resolution on hierarchy differences Statement of Cashflows tend to be unique by organization Drill through and data loads Don’t underestimate the technical learning curve Reliance on consultant expertise Identify key items for knowledge transfer Need multiple in-house experts EPM is a truly leveragable investment Not just a financial reporting tool Perfect for complex spreadsheets Detailed reporting Sales Operations
- 23. In summary Use EPM to: Transform accounting staff Provide users direct access to data and tools Establish consistent, agreed upon data sets Leading to better data to improve decision-making EPM implementation can be the first project in a series of effort to become a data driven organization Financial data Multiple data sets, e.g. Sales, Operations, HR Precursor to business intelligence
- 24. Q&A
Editor's Notes
- At AY McDonald we felt something needed to be done to streamline our annual budgeting and monthly close process. Timely, error prone, and left little time for analysis as it was everything we could do to physically complete the consolidation and ensure it was error free. The process of requesting budget numbers from managers, keying them into Epicor, having last minute changes made by accounting staff created an environment where the managers didn’t feel they owned the numbers. Often when questions would come up the manager would refer to the numbers as “Accounting’s numbers.” Without a single system containing the underlying source data it made it hard to reference what made up the original budget, thereby making it difficult to explain variances during the year. We needed a common approach to budgeting at each subsidiary and something we could introduce to acquisitions as they became part of the organization. Wanted a set of data that would provide consistency and was accessible to users without getting into the IT que.
- Budget files submitted by managers and entered by Finance Payroll Benefits Capital Expense Departmental Expense Financial statements submitted by subsidiaries and manually entered in by Finance Gather spreadsheets from multiple folders to create budget books Prone to errors Inaccurate data can be submitted or entered Same data is entered in two different interfaces by two different groups of users Lack of timely reviewing tools Limited Interactions Reports are “owned” by their creators Difficult to review account balances submitted by external parties No “What if” Scenario Data is not centralized Users must know where files/folders are located Linking data between spreadsheets is time consuming
- Each subsidiary had it own unique chart of accounts, making it difficult for a corporate understanding of subsidiary detail. Additionally each subsidiary reported their balance sheet, P&L, and statement of cashflow differently, requiring changes to be made during the corporate consolidation. We found during the EPM implementation that unknowingly some inconsistencies existed. Executive leaders were presented with subsidiary financial statements that were very unique, little consistency across subsidiaries. Even at Gross Profit and Operating Profit levels subsidiaries comparisons were not valid. FX on cambridge was calculated manually in Excel Each month a significant amount of effort was made checking and rechecking numbers to ensure accuracy.
- We wanted to eliminate having to get into the IT que for simple report requests or changes to existing reports. Moving EPM to a separate Virtual serve would take reporting processing of ERP server. It was a common practice to take data off a report, put in Excel, and manipulate prior to publishing report. Felt efficien
- Task list – security by user, only see what they have responsibility. Security – First level is Application; Second level is task list & form; and lastly Dimensional security mostly around dept and division
- Improves plan and reporting accuracy Reduces time lost in IS reporting queue for report origination and change requests Creates availability of data to drive decision making Greater access to usable information throughout businesses Single data source provides “One version of truth” Finance and Non-Finance Hours Repurposed: 25% reduction in reporting and planning hours frees up $35,000 in annual payroll costs (Finance Dept spends est. 5000 hrs/yr on reporting & planning ) 10% improvement in report writing and modification frees up $15,000 in annual payroll costs (Estimated 2 FTEs utilized in process, IS and non-IS) Creates a platform that can be leveraged given our growth plan
- Pull in subs to ensure you nail down consistency at account and dept level. Statement of Cash Flow method nailed down Technical aspects – Use implementation to ensure knowledge transfer Calc scripts and establishment of new data sets can be very tricky. What items are critical to be learned to ensure self-sufficiency. Additional planning/scoping would have ensured drill-through and auto data loads were developed to expectations.
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