Download - FEI Vena Month-End Close Webinar
Month-End Close: Best Practices for Today’s Finance Leader
© 2014 Vena Solutions Canada Inc.
Agenda
• Welcome & introductions
• Today’s month-end close process: definition
• Market data: the state of the month-end close
• The role of technology
• Common pain points
• Next generation processes: best practices & client stories
• Wrap-up & questions
© 2014 Vena Solutions Canada Inc.
Rishi GroverCo-Founder, President & SVP Solutions Engineering Responsible for the day-to-day operations and the success of client implementations at Vena
Solutions.
• Extensive experience in the Corporate Performance Management and Business
Intelligence space, working in a variety of capacities including Consulting, Marketing and
Sales.
• Worked very closely with numerous Fortune 500 companies in re-engineering and
optimizing financial processes and developing custom software solutions for finance and
accounting functions.
• At Clarity Systems - Director of Enterprise Solutions at Clarity Systems and a subject
matter expert in financial planning and regulatory reporting
Bachelor of Applied Sciences from the University of Toronto, specializing in Computer
Engineering and Communication Systems.
© 2014 Vena Solutions Canada Inc.
Patrizio (Pat) Calitri, CPA, CADirector, Financial Close & Consolidations Solutions
Responsible for the overall business leadership of Vena’s Financial Close and Consolidations
solutions.
Previous roles include:
• Clarity Systems: Corporate Controller
• Grand & Toy (OfficeMax’s Canadian subsidiary): Retail Controller and Corporate Controller
• Ernst & Young LLP: Audit Manager
• IBM (Clarity): Project Implementation Lead; Client Services Manager; Director of Financial
Close Management
• IBM Analytics: Business Unit Executive, WorldWide Product Marketing for IBM’s Disclosure
Management and Financial Close solutions
Bachelor of Mathematics (Honours Chartered Accountancy Option / Information Systems –
Co-operative Programs) from the University of Waterloo.
© 2014 Vena Solutions Canada Inc.
What is the Month-End Close Process?Overview
© 2014 Vena Solutions Canada Inc.
History of the Month-End Close Process
Historically, the month-end close process has undergone many iterations
The Original Close
Slow manual close where finance focuses on and is only interested in generating numbers for reports.
The Faster Close
Speeding up the Original Close by adding resources or streamlining activities based on risk assessments.
The Soft Close
Close focusing solely on internal management reporting and thus reducing the scope of the close work.
The Virtual Close
Completing a close by moving activities up in the process through estimation of items and system automation – significant cost.
© 2014 Vena Solutions Canada Inc.
What Has Impacted the Month-End Close?
2000 • The dot-com bubble pops, creating a massive fall in equity markets from over-speculation in tech stocks
• Enron bankruptcy and scandal2001 • The September 11 attacks and a nearly immediate string of large
bankruptcies attributed – rightly or wrongly – to the attacks2002 • Worldcom bankruptcy and scandal2008 • Bear Stearns fails
• Lehman Brothers bankruptcy• Subprime and credit problems explode
Some Significant Economic Factors
© 2014 Vena Solutions Canada Inc.
What Has Impacted the Month-End Close?
Regulatory Changes Enacted
• The Sarbanes-Oxley Act of 2002, The Public Company Accounting Oversight
Board (PCAOB), a non-profit corporation, is established by Congress.
• The conversion from national GAAP reporting to IFRS is mandated by the
Council of the European Union for all member states. Canada converts to IFRS.
SEC statement on convergence between International Accounting Standards
Board (IASB) and Financial Accounting Standards Board (FASB) standards.
• The SEC approves releases for new rules that require operating companies to
report financial information, mainly imposing requirements on mutual funds to
report risk/return summary information in XBRL.© 2014 Vena Solutions Canada Inc.
What Has Impacted the Month-End Close?
Regulatory Changes Enacted: (continued)
• Basel II, an international standard for banking regulators to control how much
capital banks need to put aside to guard against financial and operational risks
is created.
• Basel III global, voluntary regulatory standard on bank capital adequacy, stress
testing and market liquidity risk is created then the U.S. Federal Reserve
announced that it would implement substantially all of the Basel III rules.
• The Dodd-Frank Wall Street Reform and Consumer Protection Act passed; later
the Volcker Rule passes. © 2014 Vena Solutions Canada Inc.
How Has This Impacted the Month-End Close?
More administrative tasks are now part of the close
process!!
• Multiple GAAP reporting and currency requirements due to M&A and worldwide
economy
• Regulatory filing scrutiny and additional requirements – Basel, XBRL, Pillar,
CCAR, others
• Auditor Scrutiny – PSAOB – auditors are no longer self regulated and thus
scrutiny and procedures have changed as a result
© 2014 Vena Solutions Canada Inc.
3. Consolidation (Statutory & Management)
CONSOLIDATIONCONSOLIDATION MANAGEMENT REPORTINGMANAGEMENT REPORTING
COMPLIANCE CHECKLISTSCOMPLIANCE CHECKLISTS
DATA ASSURANCEDATA ASSURANCE
2. Data Collection Financial Close
• Collect Notes Disclosure Data Submissions
• Reconcile Notes Data Submissions to Trial Balance
• Perform account reconciliations
• Journal Entry Creation Process
• Other External Reporting Data Submissions (MD&A, Sustainability Reporting, etc…)
Financial Controls, Workflow Collaboration & Process Visibility
• Currency Translation
• Intercompany eliminations
• Group closing and other Management adjustments
• Corporate Allocations and other calculations
• Cash flow data submissions and preparation
4. Internal Management Reporting
• Tax and Treasury analytics
• Operational data collection
• Complete internal management reporting for decision making support services
• Internal Management Consolidated Reporting
• Dashboard reporting for Internal Management
5. Compliance Checklists
• Sarbanes Oxley 302 & 404 data certifications
• Internal audit checklists
• External audit checklists
• Risk mitigation through data validation of key elements
• Incorporation of materiality to variance or flux analysis requirements
• Close the local ledger and sub-ledger data
• Map local chart of accounts to corporate chart of accounts and submit trial balance results
• Validate data submission
• Roll forward data validations
1. Close Local Books & submit to corporate
Typical Month End Close Process
LEDGER CLOSELEDGER CLOSE
© 2014 Vena Solutions Canada Inc.
What is the Market Saying About the Month-End Close Process?Overview
© 2014 Vena Solutions Canada Inc.
BPM Partners
2013 Pulse Survey
Budgeting, Reporting, Consolidation, the Cloud and Mobile
© 2014 Vena Solutions Canada Inc.
Gartner Analysis
© 2014 Vena Solutions Canada Inc.
Gartner Analysis
© 2014 Vena Solutions Canada Inc.
Gartner Analysis
© 2014 Vena Solutions Canada Inc.
Gartner Analysis
© 2014 Vena Solutions Canada Inc.
What are the Technology Options for the Month-End Close ProcessOverview
© 2014 Vena Solutions Canada Inc.
Gartner: Evolution of Organizational CPM Maturity
© 2014 Vena Solutions Canada Inc.
Aberdeen Group
© 2014 Vena Solutions Canada Inc.
3 Existing Month-End Close Current States
1. 100% Manual – MS-Excel close system with rigours and controls that are manually documented and executed
2. Hybrid - Part automated and part manual MS-Excel
3. Utopia for the Month-End Close – a completely automated close process with an integrated/platform solution approach
© 2014 Vena Solutions Canada Inc.
Why a Spreadsheet-Only Approach Isn’t Acceptable
© 2014 Vena Solutions Canada Inc.
Common Month-End Pain Points
© 2014 Vena Solutions Canada Inc.
Current process
G/L
Sub-Ledgers
Other Systems
Source Data Numerous e-mails and versions of each document
Month-end CloseActivity
Review and Approval
Manuallyextract data& re-key intospreadsheets
Pain points
• Manual, time-intensive process
• Inconsistent workflow – modest controls of the process
• Limited audit / tracking capabilities
• Serial approach to organizational involvement
• More data collection – less analysis
• Errors/restatements are toxic
Why Do We Care About the Month End Automation?
© 2014 Vena Solutions Canada Inc.
Current process
G/L
Sub-Ledgers
Other Systems
Source Data Numerous e-mails and versions of each document
Month-end CloseActivity
Review and Approval
Manuallyextract data& re-key intospreadsheets
Pain points
• Manual, time-intensive process
• Inconsistent workflow – modest controls of the process
• Limited audit / tracking capabilities
• Serial approach to organizational involvement
• More data collection – less analysis
• Errors/restatements are toxic
Finance organizations that struggle to finish their close on time are far more likely to make serious mistakes.
Also, they generally don’t have enough time for entity-level controls or advanced analysis that could help the business manage risk and make decisions more effectively.
Why Do We Care About the Month End Automation?
© 2014 Vena Solutions Canada Inc.
Possible Return on Investment?
© 2014 Vena Solutions Canada Inc.
What Does It Mean To You?
Is Excel the issue? No.
Finance today loves Excel for many reasons but they are leveraging this personal productivity tool to do more than it was meant to do.
Examples:
• A data repository for data collection instead of just a form used to collect data
• Manual version and audit controls on the excel models for structure and data elements
© 2014 Vena Solutions Canada Inc.
What to look for:• A system that leverages your investment in Excel but
adds controls, interoperability and visibility into the process
Why:• Minimal change perceived and thus quick adoptability• Leverage and complement the manual process in place
today but automate the manual compliance and auditability of the current process
How to Improve Your Month-End Close Process
© 2014 Vena Solutions Canada Inc.
Deloitte Assessment of the Close Process
© 2014 Vena Solutions Canada Inc.
Next Generation Processes: Best Practices & Client StoriesRishi Grover
© 2014 Vena Solutions Canada Inc.
IntuitiveUser Experience
MS-Excel for input, modeling & reporting.
Controlled & dynamically connected to a central database
SimpleAdministration
Intuitive user interface to manage the process, data and business rules.
Managed by the finance user
Corporate PerformanceManagement
Extended
VENA
VENA Training and Support Services
VENA Consulting and Advisory Services
Web-based Collaboration
Design powerful workflows to promote collaboration with high visibility.
Deploy over the cloud, or on premise
About Vena Solutions
© 2014 Vena Solutions Canada Inc.
Benefits of Leveraging Technology• Involves many tasks that need to be completed in a short amount
of time• Requires controls around those tasks to maintain data integrity• Finance requires visibility of the process
Why technology for month-end close?
• End-to-end functionality that automates and streamlines accounting processes in a centralized, automated system
What does technology enable?
• Allowing companies to gain critical, real-time visibility into their financial close while optimizing workflow, saving time and enhancing accuracy
What are the benefits?
• Goal is to compile accurate financial statements that management can use to make business decisions
What’s the final outcome?
© 2014 Vena Solutions Canada Inc.
Month-End Close Best Practices• Leverage a Process Manager to have visibility into the close
processVisibility
• Leverage a template audit trail to enforce compliance and accountability Audit Trail / Version Control
• Central database to reduce errors or misstatements• Validation rules and compliance checklists for data integrityRisk Mitigation
• Automation to reduce time to completion and manual user effortsAccelerated Close
• Allow teams inside and outside of finance to provide input and insight into data collectedCollaboration
© 2014 Vena Solutions Canada Inc.
Examples of Helping Vena Customers
© 2014 Vena Solutions Canada Inc.
Operational Tasks
Comm
unica
ti
on
Data
Colle
ctio
n
&
Valid
atio
n Data
Aggre
gatio
n
Review
&
A
ppro
val
Repo
rtin
g &
A
naly
sis
Long-Term Planning
Budgeting
Forecasting
Management Reporting
Regulatory Reporting
Footnote Data Collection
Account Reconciliation
Tax Provisioning
Variance Fluctuation Analysis
CCAR/DFAST – Financial Services
Other Industry Related ReportingBusi
ness
Pro
cess
es
Financial Consolidation
Month-End Close Management
External Reporting
Other...
Repeated & Interrelated Processes
© 2014 Vena Solutions Canada Inc.
Customer Example 1: Regulatory Reporting & Footnote Data Collection
The Problem– Too many Excel files (125 unique Excel
templates times 100+ business line submissions)
– No visibility in data gathering process– No data validations– No version control (almost filed an
incorrect number)– Risky macro that consolidated all
submissions (hundreds)– Difficult to shape consolidated results
into SEC tables
The Companies– Large Financial Institution
Headquartered in the West US– Large Private Energy firm in the Central
US
The Solution– Template-ized Excel files – Process management to automate
multi-step workflows– Embedded input data validations– Single version of the truth of all
updates– Automated consolidation of data
through in-memory cube– Enhanced reporting and analysis of
data
© 2014 Vena Solutions Canada Inc.
Customer Example 2: Month-End Close Management
The Problem– Internal audit requiring control and
auditability of multiple, disparate spreadsheet processes
– 25 different finance and accounting processes that are manual
– Many Excel links across multiple workbooks (very risky!)
– Difficult to collaborate
The Companies– Major Bank in Canada– Mortgage Insurance Company in
Canada– Energy Company in Boston
The Solution- Process manager to visualize and
automate processes with full audit trail
- Direct link to source systems for actuals
- All spreadsheets now talk to a single database.
- Period reference variables for quick rollovers
- Process owner distributes out responsibilities to different users and can now track statuses
© 2014 Vena Solutions Canada Inc.
Customer Example 3: Account Reconciliation
The Problem– Hundreds of Excel files to manage all
account reconciliations– Manual copy-paste from source
systems– Manual data comparisons– No version control
The Companies– Major Airline in the South US– Energy Company in the East US
The Solution– Source system integration– Enhanced workflow to assign account
reconciliations and enforce segregation of duties
– Automated data comparisons and data validations
– Standardized journal entry creation– Automated journal entry extracts back
to source systems
© 2014 Vena Solutions Canada Inc.
Feature Benefit
Process Automation & Rollover
Automate user assignments and workflow
Data Collection Ability to collect data & text not in source systems
Feature Benefit
Integration to source data
Latest, accurate data
Business Rules Numbers always tie-out
Workflow Review & electronic sign-off
Data Integrity
Increased confidence in the results Start reviewing the data sooner
Feature Benefit
Security to view or edit data
Users only see the data they are supposed to see
Workflow controls access throughout the process
Users only see data when they are allowed to see it
Access to information is controlled
Feature Benefit
Compliance Checklists To ensure that the right steps are being followed
Audit Trail To track who did what, and when they did it
Compliance information always available
Clarity FSR Reduces the Risks
Accelerated Close
Security & Collaboration Control & Auditing
What our Customers Gain
© 2014 Vena Solutions Canada Inc.
Questions & Answers
© 2014 Vena Solutions Canada Inc.
© Vena Solutions Canada Inc. 2014
Patrizio (Pat) CalitriDirector, Financial Close & Consolidations
Rishi GroverPresident, SVP Solutions Engineering
venasolutions.com
Thank you!
© 2014 Vena Solutions Canada Inc.