The document discusses leading practices in financial planning and analysis (FP&A) and the close process. It provides examples of what leading companies are doing, including implementing rolling forecasts that are updated monthly and linked to business drivers. The document contrasts rolling forecasts with annual budgets and outlines the key components of best practice planning processes, such as collaborative target setting and linking rewards to performance. It also analyzes gaps between a company's current FP&A processes and better industry practices.
Genpact helps leaders of some of the largest enterprises
transform and run their processes and operations, including
the very complex and industry-specific. We help enterprises to be more competitive by becoming more intelligent: adaptive, innovative, globally effective and connected by enabling tighter management of costs, risks, regulations, and supporting growth.
Proven Techniques for Optimizing Your Financial Planning & Analysis ProcessProformative, Inc.
In this session, you will learn best practices for optimizing the planning process including how to adopt a driver-based model, efficiently manage rolling forecasts, embrace “what if” scenario modeling and provide more meaningful reporting and analysis to impact decision making. You will gain insights from comprehensive industry research recently conducted with hundreds of financial professionals around the world in order to understand key industry trends and best practices that are working for leading edge organizations today. In addition to the research, subject matter experts will share numerous practical steps for improving performance management processes in your organization. You will come away with real-world methodologies to help you improve and shorten your budgeting process and will also enable better decision making and organizational alignment that will help you to optimize performance.
Speaker: Tony Ard, Director of Solutions Engineering, Axiom EPM
Presentation delivered at ProformaTECH 2014 - http://www.proformatech.com
Track: Operational Advantage | Session: 5
Strategic Planning And Budgeting Part 1: Business Model and StrategyKenny Ong
ABF Budgeting, Forecasting and Financial Planning Conference, Feb 2009
*Understanding what strategic planning is and why it is important
*Clarify the difference between vision, mission statement, goals and objectives
*The external environment: The need to understand the economic cycle
*SWOT and PESTEL analysis
*Tying the strategic plan to the budget
Financial planning and analysis (FP&A) is the process of forecasting a company's future financial performance and managing its financial resources to meet those forecasts. FP&A professionals are responsible for creating accurate financial models, developing budget proposals, and analyzing past financial performance in order to identify trends and recommend improvements.
Delivering Value with Financial Performance: Leading FP&A Practices of High-G...Proformative, Inc.
The FP&A organization along with the rest of finance is undergoing a transformation, with increasing responsibilities and their accompanying challenges, all of which have to be undertaken with limited resources. FP&A leaders, like their peers in other finance groups, are being asked to elevate their focus and extend their reach across the organization, while still delivering on traditional blocking and tackling activities. Hear from FP&A leaders who have created significant company value while navigating high growth business environments. Learn how best practices – on KPIs, planning cycles, rolling forecasts, and other techniques – have enabled high performance, both for their functions and for their overall business.
Speakers: Eileen Tobias, Sr. Director of FP&A, NetSuite
Eric Zimmerman, Manager of Financial Planning and Analysis, Infusionsoft
Presentation delivered at ProformaTECH 2014 - http://www.proformatech.com
Track: Operational Advantage | Session: 4
Best Practices in Financial Planning and Analysis | 2013 Business Analytics S...Cartegraph
Loras College is proud to present our annual Business Analytics Symposium on March 27, 2014 at the Grand River Center in Dubuque, IA. Industry experts will share their insights about the evolving field of business analytics opportunities. Learn about everything from best practices when analyzing data to the importance and benefits of building a culture of analytics within your organization.
To learn more, secure your seat or to take advantage of group discounts visit www.loras.edu/bigdata.
Genpact helps leaders of some of the largest enterprises
transform and run their processes and operations, including
the very complex and industry-specific. We help enterprises to be more competitive by becoming more intelligent: adaptive, innovative, globally effective and connected by enabling tighter management of costs, risks, regulations, and supporting growth.
Proven Techniques for Optimizing Your Financial Planning & Analysis ProcessProformative, Inc.
In this session, you will learn best practices for optimizing the planning process including how to adopt a driver-based model, efficiently manage rolling forecasts, embrace “what if” scenario modeling and provide more meaningful reporting and analysis to impact decision making. You will gain insights from comprehensive industry research recently conducted with hundreds of financial professionals around the world in order to understand key industry trends and best practices that are working for leading edge organizations today. In addition to the research, subject matter experts will share numerous practical steps for improving performance management processes in your organization. You will come away with real-world methodologies to help you improve and shorten your budgeting process and will also enable better decision making and organizational alignment that will help you to optimize performance.
Speaker: Tony Ard, Director of Solutions Engineering, Axiom EPM
Presentation delivered at ProformaTECH 2014 - http://www.proformatech.com
Track: Operational Advantage | Session: 5
Strategic Planning And Budgeting Part 1: Business Model and StrategyKenny Ong
ABF Budgeting, Forecasting and Financial Planning Conference, Feb 2009
*Understanding what strategic planning is and why it is important
*Clarify the difference between vision, mission statement, goals and objectives
*The external environment: The need to understand the economic cycle
*SWOT and PESTEL analysis
*Tying the strategic plan to the budget
Financial planning and analysis (FP&A) is the process of forecasting a company's future financial performance and managing its financial resources to meet those forecasts. FP&A professionals are responsible for creating accurate financial models, developing budget proposals, and analyzing past financial performance in order to identify trends and recommend improvements.
Delivering Value with Financial Performance: Leading FP&A Practices of High-G...Proformative, Inc.
The FP&A organization along with the rest of finance is undergoing a transformation, with increasing responsibilities and their accompanying challenges, all of which have to be undertaken with limited resources. FP&A leaders, like their peers in other finance groups, are being asked to elevate their focus and extend their reach across the organization, while still delivering on traditional blocking and tackling activities. Hear from FP&A leaders who have created significant company value while navigating high growth business environments. Learn how best practices – on KPIs, planning cycles, rolling forecasts, and other techniques – have enabled high performance, both for their functions and for their overall business.
Speakers: Eileen Tobias, Sr. Director of FP&A, NetSuite
Eric Zimmerman, Manager of Financial Planning and Analysis, Infusionsoft
Presentation delivered at ProformaTECH 2014 - http://www.proformatech.com
Track: Operational Advantage | Session: 4
Best Practices in Financial Planning and Analysis | 2013 Business Analytics S...Cartegraph
Loras College is proud to present our annual Business Analytics Symposium on March 27, 2014 at the Grand River Center in Dubuque, IA. Industry experts will share their insights about the evolving field of business analytics opportunities. Learn about everything from best practices when analyzing data to the importance and benefits of building a culture of analytics within your organization.
To learn more, secure your seat or to take advantage of group discounts visit www.loras.edu/bigdata.
Finance Vision 2020 presenation used for the launching of our book at the Finance Transformation Summit (organized by Alex van Groningen) on December 2, 2008
Best in Class Finance Transformation - Best Practices for the Finance FunctionProformative, Inc.
The evolution of the CFO role from controlling and reporting to strategy and support for the exec team now includes responsibility to deliver value for key stakeholders, such as investors. Top finance organizations are capable in multiple components of enterprise performance management (EPM), including strategic planning, execution, cost visibility, driver behavior, forecasting, planning, predictive analytics, ERM, and process productivity improverment (lean and Six Sigma). This workshop covers effective EPM frameworks, optimal organizational structure, talent management, leveraging technology to improve processes, and best practices for process change.
Speaker:
Birgit Starmanns, Senior Director, Solution Marketing, SAP
Presentation delivered at CFO Dimensions 2013
Workshop
How to Bring About Finance Transformation on Your Own TermsWorkday, Inc.
In this deck, experts from PwC and Workday explain how finance leaders can use automation, artificial intelligence, and analytical skills to help their teams adapt to rapid change.
Finance 2020: Designing a Finance function to meet new demandsDeloitte Canada
CFOs in all industries are under pressure to provide insights to help boards and leadership teams make better decisions. How do they—and their Finance teams—need to change to meet rising expectations? What will the impact be on the Finance organization and its information, systems, processes and controls? Finance 2020 explores possible futures for operational, business and specialized finance.
These receivables management engines include:
SAP Credit Management – to help companies implement a single company-wide credit policy and use credit analysis results to calculate credit limits – including embedding credit checks into key operational processes
SAP Biller Direct – an electronic bill presentment and payment solution that 1) lets customers download or pay invoices via bank transfer, card, etc., as well as start the dispute process, and 2) allows vendors to see the approval and payment status of their invoices, including inquiry functionality
SAP E-Invoicing for Compliance – an e-billing solution that sends customers validated, signed invoice PDFs via email or invoices via EDI – including the compliance checks required in 37 different countries
SAP Collections and Dispute Management – modules that provide workflow and process support for managing disputes as well as a module that generates prioritized collections worklists that help collections specialists proactively contact customers.
Best Practices in Creating a Strategic Finance FunctionFindWhitePapers
Many CFOs and the finance organizations they lead have started to take on new strategic roles within the enterprise. Their goal is to enforce stricter control processes to ensure legal and regulatory compliance, offer strategic insights into the internal and external business environment, and connect the business strategy with daily operations through performance tracking.
Source to Settle Process and Solutions MapBob Solomon
Almost twenty years after the advent of e-procurement and e-sourcing software, there is now a specialized software solution provider or managed services provider for the sourcing and procurement of almost every spend category, no matter how complicated the category is.
Finance Vision 2020 presenation used for the launching of our book at the Finance Transformation Summit (organized by Alex van Groningen) on December 2, 2008
Best in Class Finance Transformation - Best Practices for the Finance FunctionProformative, Inc.
The evolution of the CFO role from controlling and reporting to strategy and support for the exec team now includes responsibility to deliver value for key stakeholders, such as investors. Top finance organizations are capable in multiple components of enterprise performance management (EPM), including strategic planning, execution, cost visibility, driver behavior, forecasting, planning, predictive analytics, ERM, and process productivity improverment (lean and Six Sigma). This workshop covers effective EPM frameworks, optimal organizational structure, talent management, leveraging technology to improve processes, and best practices for process change.
Speaker:
Birgit Starmanns, Senior Director, Solution Marketing, SAP
Presentation delivered at CFO Dimensions 2013
Workshop
How to Bring About Finance Transformation on Your Own TermsWorkday, Inc.
In this deck, experts from PwC and Workday explain how finance leaders can use automation, artificial intelligence, and analytical skills to help their teams adapt to rapid change.
Finance 2020: Designing a Finance function to meet new demandsDeloitte Canada
CFOs in all industries are under pressure to provide insights to help boards and leadership teams make better decisions. How do they—and their Finance teams—need to change to meet rising expectations? What will the impact be on the Finance organization and its information, systems, processes and controls? Finance 2020 explores possible futures for operational, business and specialized finance.
These receivables management engines include:
SAP Credit Management – to help companies implement a single company-wide credit policy and use credit analysis results to calculate credit limits – including embedding credit checks into key operational processes
SAP Biller Direct – an electronic bill presentment and payment solution that 1) lets customers download or pay invoices via bank transfer, card, etc., as well as start the dispute process, and 2) allows vendors to see the approval and payment status of their invoices, including inquiry functionality
SAP E-Invoicing for Compliance – an e-billing solution that sends customers validated, signed invoice PDFs via email or invoices via EDI – including the compliance checks required in 37 different countries
SAP Collections and Dispute Management – modules that provide workflow and process support for managing disputes as well as a module that generates prioritized collections worklists that help collections specialists proactively contact customers.
Best Practices in Creating a Strategic Finance FunctionFindWhitePapers
Many CFOs and the finance organizations they lead have started to take on new strategic roles within the enterprise. Their goal is to enforce stricter control processes to ensure legal and regulatory compliance, offer strategic insights into the internal and external business environment, and connect the business strategy with daily operations through performance tracking.
Source to Settle Process and Solutions MapBob Solomon
Almost twenty years after the advent of e-procurement and e-sourcing software, there is now a specialized software solution provider or managed services provider for the sourcing and procurement of almost every spend category, no matter how complicated the category is.
Driving efficiencies in the new month end close - vena solutionsVena Solutions
The month-end close has become more complex since the early 2000’s. Increasing regulatory scrutiny is forcing companies to change the way they measure their success while continuing to generate full-scale, compliant, and timely financial statements every month. This paper examines four ways companies can remedy a dysfunctional month-end close without altering their core business systems or processes.
Interoperability between networks, be they cell networks, ATM networks, instant messaging, services, EDI networks, social networks, or even physical networks such as train tracks is a complex topic. Studying the history of how interoperability comes about can be useful for those developing software networks or platforms.
Source to Settle and Order to Cash Process MapBob Solomon
For every Source to Settle process at a buyer's company, there is an equal and opposite Order to Cash process at a supplier's company. Interweaving and automating this interaction on both sides is the only way to remove costs from the process, rather than just shifting the burden from one "side" to another.
Anaplan and Deloitte webinar: The fundamentals of zero-based budgetingAnaplan
Executives are re-embracing zero-based budgeting (ZBB) to empower department leads to take control and ownership of their budgets in order to reduce unnecessary costs and rationalize activities throughout the value chain. However, without the right tools in place, completing a full ZBB cycle can be challenging for many organizations.
Join Anaplan as we host a webinar featuring Ed Majors and Ron Dimon from Anaplan partner, Deloitte. They will discuss how to successfully deploy ZBB and embrace cost management as a strategic play.
AVATA is adding to their express solutions suite with “IBP express”, a hosted service offering that provides the framework for conducting the S&OP/IBP process with supported dashboard reports and KPI’s. IBP express will allow for a rapid deployment enabling your first S&OP/IBP cycle within 90-days.
IBP express is both a technology tool and service offering that supports advancing your current S&OP process or implementing S&OP/IBP for the first time. IBP express includes the required Education, Workshops, Coaching & Technology that will deliver a rapid ROI.
Enterprise Planning: Integrating the Strategic Plan with the Annual Budget an...Alithya
Edgewater Ranzal presented lessons learned and best practices in producing and integration the strategic plan with the annual budget and forecast process, at the Association for Finance Professionals (AFP) 2013 Annual Conference.
Next-generation integrated business planning: The Deloitte Perspective | AnaplanAnaplan
How can smart planning help your business become more agile and connected? What business activities can benefit from an integrated, real-time planning approach?
In this informative webinar, Bart Hughes from Deloitte will share perspectives on what business planning activites to integrate and when to do so on the journey to integrated business planning (IBP). You’ll gain perspective from Deloitte planning process experts across Finance, Sales, HR, and Supply Chain on how next-generation IBP can benefit your business and the steps you can take to get there.
https://www.anaplan.com/webinars/next-generation-integrated-business/
Sales & Operations Planning (S&OP): An IntroductionSteelwedge
Do you know the secret to a successful Sales and Operations Planning process?
Your ability to troubleshoot issues, plan for unexpected events, and maintain a reliable, single set of planning numbers is drastically affected by people, process and technology.
Educate your colleagues or refresh your own skills with the new introduction to S&OP presentation.
For more information about S&OP and how Steelwedge can help your business, please visit: http://www.steelwedge.com/resources/sales-and-operations-planning-intro/
Sales & Operations Planning (S&OP) and integrated business planning (IBP) align demand, supply and finance, allowing a holistic view across all departments so that businesses can test the financial impact of different “what if” options and respond to unplanned events--both positive and negative. Visit http://www.steelwedge.com/resources/s-and-op-intro
Oil and Gas companies are facing energy transition with a significant increase in energy demand, but also a shift towards a lower carbon fuel mix. In addition, digitalization is disrupting manifested business models. A new way of business steering and planning is required to cope with these challenges in order to shape a successful strategy for the future.
Webinar: The Balanced Scorecard What Does It Mean And How To Implement ItAli Zeeshan
For other Informa Webinars: http://www.informa-mea.com/webinars
To view recording: https://youtu.be/4RQF-oUMgcw or watch the video at end of the slide
This webinar is designed as a practical guide to using the Balanced Scorecard.
The Balanced Scorecard is a system used extensively in business and industry, government, and non-profit organisations worldwide to align business activities to the vision and strategy of the organisation, improve internal and external communications, and monitor organisation
performance against strategic goals.
The Balanced Scorecard was originated by Drs Robert Kaplan (Harvard Business School) and David Norton as a framework to help managers consider both financial and non-financial aspects of their business and design performance metrics around them.
While the phrase Balanced Scorecard was coined in the early 1990s, the roots of this type of approach are deep, and include the pioneering work of General Electric on performance measurement reporting in the 1950s and the work of French process engineers (who created the Tableau
de Bord – literally, a "dashboard" of performance measures) in the early part of the 20th century.
About the Presenter:
Ian has over 30 years of business experience ranging from senior management positions, in such companies as Ericsson to founding and selling his own companies. Ian designs and delivers training programmes globally with particular attention to the GCC nations. He works in many
fields including both accredited and non-accredited courses.
Ian divides his time equally between the Middle East and the UK. In the UK, Ian is a lead professor at London Met University and the University of West London specialising in working with students to gain their membership to the Chartered Institute of Procurement and Supply.
Loras College 2014 Business Analytics Symposium | Steve Whinnery and Scott St...Cartegraph
This presentation will walk you through an explanation of planning, industry leading practices for planning, executive leading practices for planning and finally analytics and planning.
For more information on the Loras College 2014 Business Analytics Symposium, the Loras College MBA in Business Analytics or the Loras College Business Analytics Certificate visit www.loras.edu/mba or www.loras.edu/bigdata.
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Best Practices for FPA and Month-End Close - FENG Workshop
1. 1
Point of View / Information Exchange:
Leading Practices in FP&A and Close
Financial Executives Networking Group
Workshop Presentation
2. 2
Agenda
Forecasting, Budgeting & Planning Guidance and Leading Practices
– Bottoms-up vs. Tops-down vs. Rolling
– Best Approach for Low Volume / High Configuration Companies?
Close and Consolidation Leading Practice
– Reconciliation Frequency
– Allocation Level of Detail: Full allocation vs. Some allocation vs. Corporate bucket
– Level of Allocation Accuracy
3. 3
Forecasting, Budgeting & Planning -
Guidance and Leading Practices
Leading Practices – What are other companies doing?
Approaches – How can the processes, policies, and systems be improved and transformed?
4. 4
Leading practice forecasts focus action on closing the gap
between anticipated performance and strategic goals
Integrated forecasts linked to external
environment, based on demand, supply and
finance
Gap between target and actual business
performance is regularly analyzed and closed
by identifying initiatives for improvement
Extensive use of business drivers to convert
existing operational plans into financial
forecasts using relationships
Forecasts are regularly maintained, shared
and transparent. Collaborative input is
required across the organization through
embedding into operational planning day job
Emphasis on analysis (why and what if),
insight and judgement.
Speed and agility are critical. Forecasts
should be completed within 5 days.
0
500
1000
1500
2000
Qtr 1 Qtr 2 Qtr 3 Qtr 4 Qtr 1 Qtr 2 Qtr 3 Qtr 4 Qtr 1
Quarters£in000s
Forecast Budget
Target
Gap
closure
*
* Gap closure
Target
Historical Forward looking
5. 5
Highly effective companies have redesigned their planning
processes
…..and improved strategic relevance, forecast accuracy and reduced cycle
times and costs
Integrated planning
Rolling Forecast
Estimate
Business
Plan
Model
Measuring & ReportingTargets & Rewards
TARGET
CASCADE
RESULTS &
FEEDBACK
STRATEGY
Strategy
Definition &
Evaluation
MANAGEMENT
OPERATIONS
TARGET
CASCADE
RESULTS &
FEEDBACK
Rolling forecast
Realised Sales
0
50000
100000
150000
200000
250000
300000
350000
400000
1
3
5
7
9
11
13
15
17
19
21
23
Months
Volume
Sales
Collaborative planning
Consistent Integrated
Automated
Transparent
Business
Units
Systems
Strategic
plans
Projected
sales Production
plans
Shared
Information
Customer
commitments
KPI’s
Inventories
Distribution
Focus on Gap Closure
0
500
1000
1500
2000
Qtr 1 Qtr 2 Qtr 3 Qtr 4 Qtr 1 Qtr 2 Qtr 3 Qtr 4 Qtr 1
Quarters
£in000s
Forecast Budget
Target
Gap
closure
*
* Gap closure
Target
Historical Forward looking
Lifetime customer
value
Costs
Lost Sales
Sales
Customer
satisfaction
Value for money
Differentiation of
offer
Brand value
Customer/Brand
Employer of choice
Living the brand
Motivation
Skills & knowledge
Leadership
Organisational
responsiveness
Stock availability
Idea creation &
application
Quality of
information
People
Value created
Internal processes
6. 6
What Leading Companies are Doing
Company Leading Practice Observed
Based on top-down targets as an output of
LRP (deploying driver-based models )
Forecast focuses only against key elements
Top-down targets set in the form of “stretch”
in conjunction with retailer goals based on 5-
year plan
Weekly, monthly and quarterly rolling
forecasts (18 months); exception-based input
Strategy is integrated to operational levels
using Balanced Scorecard framework
Corporate growth targets decomposed to
BUs as targets; focus on cost reduction and
understanding competition
Performance measured against historical
results and competition
Deploys rolling forecast, updated monthly
• Integration of the strategic planning
process with the tactical business
plan and budgeting processes
• Target setting used to limit number
of iterations
• Rolling forecast utilized to reduce
content prep and submissions detail;
exception-based forecasts
• Less data gathering, more analysis
• Predictive “what if“ analysis /
scenarios
• Incentives linked to identifiable
target (e.g., year-over-year results)
• Use of common planning tool
• Enhanced synergy among demand
forecasting and financial forecast
accuracy
Leading Practices
7. 7
Process Components
The principles underlying these key components build the foundation of best practice
Collaborative Planning Targets & Rewards
Rolling Forecast PrioritizedPlanning Integration
Measuring & Reporting
Focus on Gap Closure
• Strong linkage to the Strategic Plan
• The critical few objectives are clearly
communicated and woven into the
planning process
• Collaborative and inclusive
‘aspirational’ planning process
• Integrated long- & short-range
planning
• Annual stake in the ground.
• Flexible – designed to promote action
• Target levels based on external
indicators and aligned to strategic
imperatives
• Targets challenging but achievable
(“owned” by the operational leaders)
• Targets set top down and then
cascaded
• Rewards and incentives attached to
performance of groups and teams
• Rewards based on performance
relative to peers, benchmarks, prior
periods
• Rolling forecasts rather than a once-a-
year process, beyond year-end, and
based on relevant cost drivers
• Consistent vision for the forecasting
process across levels, organization
department, and global regions
• Fewer data records at the corporate
level
• Budget ‘if required’ - ideally a
snapshot of rolling forecast and the
first year of the business plan
• Compare forecast to plan to identify
actions and steps to close gap
• Allow for changes to current market
conditions on the fly
• Real-time (or near real-time) scenario
/ what-if analysis
• Allow more time for judgement instead
of focusing on data manipulation
• Automated recurring what-if &
sensitivities
• Integrated Actuals, Forecasts,
Budgets, Variance and Story
• Focus on exceptions
• Few iterations
• Scorecard based on both financial and
non- financial measures cascaded to
operations
• Scorecard forms a key component of
regular management reporting
• Consistent method applied across
divisions and the globe
• Role-based information delivery -
open and transparent.
• Automated performance delivery vs.
financial delivery.
• Business planning and forecasting
process integrated with operational
planning.
8. A Rolling Forecast will reduce the effort associated with planning and improve the quality of the plan
Rolling Forecast versus Annual Budget
Typical Rolling Forecast
• Forward-looking, more
market-based, external focus,
tops-down planning
• Less overall effort
• Few top-down targets
• Fewer iterations and less
detailed churn at sites
• Fewer data lines sent to HQ
• Tightly linked with strategy
• Improved decision support
• Planning horizon refocused
to, e.g., 15 months - looking
beyond year-end
• “Annual event” reduced in the
fall, so increases continuous
planning mindset
• Improved, uniform I/T tools
and infrastructure
• Smoothes resource needs
throughout the year
Typical Annual Budget
• Internally-focused, historical
perspective, bottoms-up plan
development
• Multiple lines of targets
provided, but no formal firm
targets (e.g., revenue, EBIT)
• Multiple iterations of detailed
budget preparation
• Detailed data required at all
levels
• Excessive handoffs
• Spring and fall plans are
separate activities
• Forecast focus is only on
current year
• Fall plan process results in
large spike in workload
• Incompatible systems /
software used throughout
Without these changes, a Rolling
Forecast will INCREASE the planning
workload
Required Changes
• Changes are made to
the current plan
process and philosophy
• Timely and complete
targets
• Reduced data elements
• Improved data
collection tools
• Close linkage with other
planning processes
• Continuous Planning
• Increased line
management focus on
quarterly forecasts
versus single event
…can be
replaced
with this...
…but only
if these
changes
are made...
…Otherwise…
9. 9
Rolling Forecast Illustration
Forward-looking, beyond
year-end
Improved predictability of
results
Fewer data records
Extensive use of drivers
Based on operational
planning
Ideally event-based and
maintained regularly
0
500
1000
1500
2000
Qtr1 Qtr2 Qtr3 Qtr4 Qtr1 Qtr2 Qtr3 Qtr4 Qtr1
Forecast Budget
Target
Gap
closure
Quarters
$in000s
*
* Gap closure
Target
Budget
Historical Forward looking
10. 10
Understanding where you are now
Key steps:
Understand business model and key success drivers (i.e., description of key aspects
of how the business operates, e.g. marketing, sales, logistics, alliances etc)
Evaluate current process metrics and costs (including frequency, cycle time, FTE
effort and cost)
Apply Benchmarks and Best Practices
Understand current applications architecture and existing IT infrastructure
Summary of key issues & opportunities
Business Consulting Services
11. 11
Identifying gaps between better and best practices
Process ABC Peers ABC Company Facts and Statistics
Budgeting&Planning
Integration with G/L /
Use of planning and
budgeting tools
Planning and Budgeting is performed in Excel spreadsheets
Results are loaded manually in to Hyperion; data is not loaded to the GL
Reports are prepared using Excel spreadsheets
Drill-down Capability Drill-down capabilities for analysis do not exist
Access and Delivery
A formal Profit Plan and Quarterly Update books are prepared in Excel
Monthly Outlooks spreadsheets are reviewed as part of the Operations Review
Preparation and
Approval Process
Regional Profit Plans are prepared annually, Quarterly Profit Plan updates are prepared, and Monthly
Outlooks are performed; longer-term plans have not historically been performed; a 3yr. Plan is currently
under development
Periodic additional requests for forecast updates are made; Rolling forecast not utilized
Profit and key measure targets are provided; however, regions tend to “hold back” projected earnings due to
stretch targets; multiple iterations and submissions
Detailed bottoms-up Plans with numerous line items are submitted; 4 month cycle-time
Report formats within each Business Group are not consistent
The Finance organization incurs a significant effort to prepare all Plans and Forecasts; frequent re-
submissions and reconciliations exist
Reports and measures do not use consistent definitions across business groups; results are typically
compared vs. prior period
Link to Strategy
Reports and measures do not appear to be derived from or directly linked to strategies and tactics;
however, performance / compensation are somewhat linked to Plan numbers
Reports / measures do not appear to link to the drivers of shareholder value
Needs
Improvement
World-
Class
Illustration
12. 12
FP&A – Selected Benchmarks
Days to complete forecast
Cycle time
Days to produce budget
Benchmark
32 days
Median
60 days
Benchmark
3 days
Median
8 days
Cost
# of FTEs per $1bn revenue
Benchmark
2.7 FTEs
Median
7.3 FTEs
13. 13
Close and Consolidation Leading Practices
Leading Practices – What are other companies doing?
Approaches – How can the processes, policies, and systems be improved and transformed?
14. 14
General Accounting
Leading Practices Company Leading Practice Observed
• Implemented an integrated general ledger system
globally
• Transactions are entered in the general ledger
automatically
• Benefits achieved include time savings and
increased accuracy of transactions
• Uses an integrated accounting and reconciliation
system to simplify the management of daily business
operations across multiple locations
• Reduced its administrative workload by 22 percent
• A web-based, user-friendly system eliminates
manual steps and journal entries, and automates
bank reconciliation
• A financial portal provides a common tool to process
transactions, view activity and analyze data
• Allowed the company to reduce or reallocate
resources and reduce bank fees
• Minimize the number of manual journal
entries, and apply materiality principles to
those that are made
• Integrate systems, automate interfaces and
maintain a single source general ledger
chart of accounts
• Enable journal entries to be entered and
posted real-time
• Develop and communicate a period closing
and reporting calendar
• Ensure data quality at the source, and
assign responsibility for the accuracy and
timeliness of underlying data
• Initiate master data management (MDM) at
a global enterprise level to drive
standardization
• Implement “global process owner” concept
to help manage process commonality
• Shift from a monthly “hard” Close to
quarterly Closes with monthly soft Closes
15. 15
Close and Consolidation
Leading Practices Company Leading Practice Observed
• Adopted five day Close, consolidation and reporting
cycle
• Implemented single-level consolidation system
• Web-enabled reporting
• Integrated the general ledger with their consolidation
tool
• Implemented a single source for finance data and
warehousing of historical reports
• Consolidated reporting standardized across the
enterprise
• Common rule set defined and common consolidation
process centrally maintained
• Cost allocations minimized and, when necessary,
driven by automated routines
• Single-level consolidation system implemented and
multiple sub-consolidation systems sunset
• General ledger and planning systems integrated with
consolidation tool
• Three workday close and consolidation
(including preliminary reporting)
• Single-level consolidation system; common
consolidation process centrally maintained
• Link the general ledger to a financial
modeling system (data warehouse) that
automates reports / schedules and
facilitates communication of explanations
• Common rule sets (foreign exchange,
eliminations, etc.) applied to enterprise-
wide process
• Centralized location for reports and
warehousing of historical reports
• Cost allocations are minimized or
eliminated / simplified / automated
• The ability exists for consolidations to drill
down to the original records in any entity
• Simplify departmental relationships as far
as possible for consolidation purposes
16. 16
Intercompany Accounting / Allocations
Leading Practices Company Leading Practice Observed
• Automated allocations and journal entries in the
Close and consolidation process
• Improved intercompany transaction processing,
matching and elimination
• Implemented CitiNetting intercompany system to
enable common dispute management and common
terms settlement
• Outsourced intercompany reconciliation process
• Adopted web-based hub as a clearinghouse for
intercompany reconciliation activity across disparate
instances of SAP
• Re-designed intercompany accounting model
• Eliminated negotiated transfer pricing to speed
planning cycle
• Implemented policy to freeze intercompany transfer
prices for one year
• Maintain single intercompany charge
process
• Handle allocations in similar manner
across businesses
• Standardize the dispute management
process
• Agree on similar terms across the
company
• Implement service level agreements as
rationale for charge outs
• Freeze intercompany charge rates
• Eliminate negotiated transfer prices for
intercompany goods movement
• Automate intercompany reconciliation
process
• ERP / Hub
• Use budgeted amounts for charging non-
volatile costs
17. 17
Comparison to Leading Edge Practices – Close Process
Leading Edge Practices Conventional Practices
Timing
Two day G/L close cycle time; one day consolidation
Use effective Close timetables that are adhered to throughout
the organization
Pre-close planning and post-Close evaluation meetings
Make standard journal entries early in the month, outside of
the critical path of close
Limited use of inter-division allocations
Reduce the number of adjusting entries and trial balance re-
runs made after the initial trial balance
Systematize routine journal entries, distributions, etc.
Standard company policies for cut-offs, intercompany, etc.
Reconcile key accounts and perform key analyses on an
ongoing basis thorughout the month
Closing cycle time reduction efforts must be driven and
supported from top management
5-10 day G/L close; 3 day consolidation; 1-2 days reporting
Limited process management ( i.e., closing timetables, post-
Close evaluation meetings)
Practice of performing entries outside the close cycle is limited
in use
Extensive use of allocations
Multiple iterations of trial balance prepared and reviewed
Limited systemization of entries
Close policies and guidelines are limited
Reconciliations performed during month end close
Lack of standard policies for cut-offs, intercompany, etc.
Month-end reconciliation during Close
Close cycle time not transparent to management
Quality
Track errors that are made and assign responsibility
Collect Close process measurements
Provide cross-training for employees of the key accounting
functions
Use one general ledger and a common chart of accounts
across all business units
Provide for electronic approval of journal entries
Limited performance tracking and Close measurement utilized
Limited cross-training of staff
Multiple chart of accounts
Moderate use of automated approvals
Materiality
Establish a clear statement of materiality levels for cut-offs
and reports
Set aggressive materiality limits for intercompany
transactions in order to speed the closing process
Materiality limits not defined
Intercompany transactions reconciled to the penny (generally
after the Close)
18. 18
Comparison to Leading Edge Practices – Consolidations
Leading Edge Practices Conventional Practices
Process
• Single level consolidation (i.e., all reporting entities
submit directly to HQ)
• Elimination entries recorded and final
consolidation reflected on the ledger
• Process should automatically include allocations
and elimination of intercompany transactions
• Currency conversions performed at the field
locations where the transactions originate
• Automatic consolidation and eliminations
• Multi-level consolidation (consolidations at BUs,
regions, or countries plus HQ)
• Entries made on spreadsheets , off the ledger
• Allocations and eliminations manually prepared
using spreadsheets
• Currency conversions performed by Corporate
Consolidation team
• Manual consolidation process
Technology
• Use on-line data collection for all units
• Use pre-formatted requirements to streamline
month-end reporting to headquarters
• Report monthly P&L and balance sheet results to
headquarters electronically
• G/L report writer supports consolidated process;
standard reports automatically generated
• Certain units not on-line
• Format established but not entirely adhered to
• Reports extracted from Excel files
• Report writer not utilized or manually prepared
19. 19
Close Continuous Improvement Roadmap
DaystoClose
Transformation
Today Tomorrow
Standard non-finance processes
Common integrated non-financial systems
Financial and non-financial systems are integrated
Common detail level GL (BU legacy GLs sunset)
Common project costing (legacy project costing sunset)
Common financial sub-systems (legacy sub-systems sunset)
All financial systems are integrated and share a common
configuration
Scaleable systems to support M&A activity
Flexible systems able to support a calendar Close
Process improvement and standardization including pre-Close activities (lean)
Enterprise-wide consolidation tool (sunset legacy consolidation tools)
Single level consolidation
Enterprise-wide GL
Flexible systems able to support weekly Flash reports
15
5
3
Virtual
days
days
days
20. 20
Close Process Improvement Approach
Technological
changes
0
4
8
12
16
20
DaystoClose
Effort
Process
management
Process
changes
• Significant cycle time reductions can be made through system-neutral efforts,
managing the process and making process improvements.
• However, to achieve a virtual close, the system environment must be extremely well
integrated which often demands system transformation
21. 21
The Benefits of an Accelerated Close Process
Facilitates world-class cost reduction in the Finance function
Real-time information dissemination drives proactive decision making regarding
strategies, plans, and forecasts
Shortened cycle time drives efficiency and quality at the source
Focuses Finance on the critical set of information needed to run the business
Enables management to spot and capitalize upon positive trends – or respond to
negative ones more rapidly
Promotes investor confidence by telegraphing that Finance is on top of their
numbers and well-managed
Mitigates risk through continuous feedback on key performance indicators (KPIs)
and financial performance
22. 22
Close Reduction Methodology
“How-to” Hints and Suggestions: Timing
Measure in hours, not days
Make use of effective closing timetables that are followed throughout the organization
Adhere to a well-defined close cycle throughout the division
Perform minimal or no sub-consolidations or management reports prior to Close
Provide daily reconciliation of receivables and payables to the general ledger
Automate the accruals process, the inter-company process, and bank reconciliations
Move activities from the critical path (clear “bottlenecks”)
Establish a “pre-Close meeting” early in the Closing to discuss any unusual results
Allow no re-runs of the general ledger during the Close
Use quarterly or annual true-ups to adjust as necessary
Reconcile key accounts and perform key analyses on an ongoing basis during the
month
Determine the critical path of all closing tasks and reassign month-end tasks to re-
balance workloads (again, clearing “bottlenecks”)
23. 23
“How-to” Hints and Suggestions: Costs and Allocations
Eliminate or minimize allocations and inter-company transfers wherever possible
Consider: what is gained by making the allocation? Can it be achieved another, simpler way?
Increase thresholds for allocations and inter-company transfers, as this reduces manual
transactions and error rates
Simplify cost-center structures
Close expense systems marginally early and use estimates where necessary
Use predetermined allocations that are automatically charged each month regardless of the
real costs incurred – track variances through the year, but only true-up at year-end (once)
Commissions:
o Early discussion of critical cases
o Streamline process (reduce number of runs)
o Introduce estimation process (analyze and book non-material differences in the next quarter)
o Reduce complexity and consider materiality aspects
24. 24
“How-to” Hints and Suggestions: Materiality
Review Transactions for materiality, not accuracy
Establish a clear statement of materiality levels for cut-offs and reports
Consider eliminating accrual process for unpaid invoices at month-end: either accrue
ahead of month-end for material items, or avoid the effort if amounts are not material
All adjustments made at month-end are based on materiality guidelines
Do not allow missing data to stop the consolidation process
Stratify accounts by risk, materiality, volumes, etc. and then reconcile less-risky, low-
materiality, and low-volume accounts on a cyclical basis
25. 25
“How-to” Hints and Suggestions: Timing and Cut Off
Measure in hours, not days
Make use of well-defined and detailed closing timetables
Consider use a “non-calendar-based” Closing schedule (task-driven, not time-based)
Provide daily reconciliation of receivables and payables to the general ledger
Move activities from the critical path – reduce bottlenecks
Establish a “pre-Close / post-Close” meeting cadence to discuss any unusual results
Allow no re-runs of the general ledger during the Close
Use quarterly or annual true-ups to adjust as necessary
Eliminate “nice to have“ elements of reporting packages
Standardize and integrate audit process (start earlier)
Develop a Close process manual
26. 26
“How-to” Hints and Suggestions: Physical Adjustments
Physically consolidate transaction processing sites
Locate closing staff where they can physically see the users of the closing data
Centralize the accounting function and assign global process owners (manager) for
significant processes such as the month-end Close
Reduce the number of accounts and/or transaction codes
Allocate responsibility for all key accounts to named individuals
Minimize month-end interfaces - feed from subsystems more frequently
Ensure that profit center and legal entity reporting are driven from the same data source
and ensure that they always balance
Have all / most journal entries prepared by subsystems
Insist that there be automatic generation of accruals from the payables system
27. 27
“How-to” Hints and Suggestions: Data Quality
Attack root cause of identified data quality issues
Insist that all data is edited prior to its delivery into the closing process
Track errors that are made and assign responsibility
o Use the term "unacceptable" to describe invalid transactions
o Insist that the supplier of unacceptable data is responsible for correcting it
Eliminate inspection and review points in the close process
Minimize reclassifications, accruals, error corrections and adjusting entries performed
during the Close—base those that are performed on predefined materiality guidelines
Collect close process measurements
Standardize corporate reporting data sets
28. 28
“How-to” Hints and Suggestions: Systems
Minimize month-end interfaces; feed from the subsystems more frequently
Insist that all feeder systems are processed during the weekend in order to provide the
complete data needed on the first workday of the close process
Exploit all aspects of current technology to assist you (or re-new):
o Have all / most journal entries prepared by subsystems
o Insist that most entries to the general ledger are automated from other systems
o Insist that there be automatic generation of accruals from the payables system
o Use intranets and the internet to communicate financial information and to increase the
accessibility of financial data
o Interface consolidation systems with feeder ledgers and sub-ledgers
o Implement a single data warehouse for all business data
o Distribute reports electronically, allowing on-line query
o Use rules engines to calculate multi-GAAP results
29. 29
Close & Consolidation – Selected Benchmarks
Measure Median * Benchmark **
Cycle time in days to perform monthly close at the site level. 5.0 3.0
Cycle time in days to perform annual close at the site level. 11.0 6.4
Percentage of journal entry line items that are corrective/adjusting. 2.5% 0.5%
Notes: * Median is the 50th percentile performance from the sampled organizations
** Benchmark is 80th-percentile performance from the sampled organizations
Editor's Notes
Agree the high level design principles
For Example
Fully integrated management process: business plan, forecasting and reporting.
Commonality of process across the group where appropriate with varying levels of detail for forecasts.
Targets set at appropriate (Business Area?) level, tight link with strategy & refreshed if strategy changes.
Medium-term plan based on rolling forecasts for trajectory of business as normal.
Gap between target (using external indicators) and business as normal is closed by identifying initiatives.
Rolling financial forecast based on rolling sales forecast and other costs drivers.
Rolling forecasts maintained regularly, with weekly/monthly data, for 18 (?) month time horizon, updated by event or quarter.
Budget will be a snapshot of the rolling forecast to provide short-term reference and control framework.
Forward looking process predicts outturn for year, comparison to business plan.
Design will take into account usability of selected BI solution, seeking to balance between functionality and effort
Targets based on external indicators and events and aligned to five strategic imperatives, e.g. Profit, Partners, Customers ...
Targets set top down by Division, communicated to Centre, for achievement over 3-5 year period.
Divisions use rolling sales and financial forecast for base level performance and identify initiatives to close gap between targets and currents expectations, e.g. bringing forward new store openings, news systems projects, etc.
Divisions cascade targets, initiatives and assumptions for coming financial year to operating units, e.g. branches, buying, systems for decomposition to estimates
Reviews against business plan scheduled on a Quarterly basis. Review conducted based on forward looking trends. New initiatives commissioned.
Long-term investment modelling for capital requirements, lifecycle revenue and profit, cash and borrowing projections. Planning only undertaken at the Centre. Conducted annually. Time horizon up to 10 years.
Business planning to target revenue and profit, responding to competitive pressure, identifying initiatives to close gap between management requirements and expected performance. Targets set by the Division, communicated to Centre, with planning undertaken at the Divisional level. Conducted annually. Time horizon 3-5 years.
Short term planning based on rolling sales forecast converted into a financial forecast using relationships and drivers, e.g. cost per case. Calculated monthly but updated Quarterly or by event. Time horizon 18 months.
Is anyone’s process significantly better than the Median cycle time?
Anyone’s significantly worse?
This drives offerings
1. We know customers start at different places.
2. We want to help
3. Build a plan going forward