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Month-End Close: Best Practices for Today’s Finance Leader © 2014 Vena Solutions Canada Inc.

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Page 1: FEI Vena Month-End Close Webinar

Month-End Close: Best Practices for Today’s Finance Leader

© 2014 Vena Solutions Canada Inc.

Page 2: FEI Vena Month-End Close Webinar

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.

Page 3: FEI Vena Month-End Close Webinar

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.

Page 4: FEI Vena Month-End Close Webinar

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.

Page 5: FEI Vena Month-End Close Webinar

What is the Month-End Close Process?Overview

© 2014 Vena Solutions Canada Inc.

Page 6: FEI Vena Month-End Close Webinar

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.

Page 7: FEI Vena Month-End Close Webinar

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.

Page 8: FEI Vena Month-End Close Webinar

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.

Page 9: FEI Vena Month-End Close Webinar

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.

Page 10: FEI Vena Month-End Close Webinar

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.

Page 11: FEI Vena Month-End Close Webinar

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.

Page 12: FEI Vena Month-End Close Webinar

What is the Market Saying About the Month-End Close Process?Overview

© 2014 Vena Solutions Canada Inc.

Page 13: FEI Vena Month-End Close Webinar

BPM Partners

2013 Pulse Survey

Budgeting, Reporting, Consolidation, the Cloud and Mobile

© 2014 Vena Solutions Canada Inc.

Page 14: FEI Vena Month-End Close Webinar

Gartner Analysis

© 2014 Vena Solutions Canada Inc.

Page 15: FEI Vena Month-End Close Webinar

Gartner Analysis

© 2014 Vena Solutions Canada Inc.

Page 16: FEI Vena Month-End Close Webinar

Gartner Analysis

© 2014 Vena Solutions Canada Inc.

Page 17: FEI Vena Month-End Close Webinar

Gartner Analysis

© 2014 Vena Solutions Canada Inc.

Page 18: FEI Vena Month-End Close Webinar

What are the Technology Options for the Month-End Close ProcessOverview

© 2014 Vena Solutions Canada Inc.

Page 19: FEI Vena Month-End Close Webinar

Gartner: Evolution of Organizational CPM Maturity

© 2014 Vena Solutions Canada Inc.

Page 20: FEI Vena Month-End Close Webinar

Aberdeen Group

© 2014 Vena Solutions Canada Inc.

Page 21: FEI Vena Month-End Close Webinar

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.

Page 22: FEI Vena Month-End Close Webinar

Why a Spreadsheet-Only Approach Isn’t Acceptable

© 2014 Vena Solutions Canada Inc.

Page 23: FEI Vena Month-End Close Webinar

Common Month-End Pain Points

© 2014 Vena Solutions Canada Inc.

Page 24: FEI Vena Month-End Close Webinar

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.

Page 25: FEI Vena Month-End Close Webinar

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.

Page 26: FEI Vena Month-End Close Webinar

Possible Return on Investment?

© 2014 Vena Solutions Canada Inc.

Page 27: FEI Vena Month-End Close Webinar

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.

Page 28: FEI Vena Month-End Close Webinar

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.

Page 29: FEI Vena Month-End Close Webinar

Deloitte Assessment of the Close Process

© 2014 Vena Solutions Canada Inc.

Page 30: FEI Vena Month-End Close Webinar

Next Generation Processes: Best Practices & Client StoriesRishi Grover

© 2014 Vena Solutions Canada Inc.

Page 31: FEI Vena Month-End Close Webinar

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.

Page 32: FEI Vena Month-End Close Webinar

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.

Page 33: FEI Vena Month-End Close Webinar

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.

Page 34: FEI Vena Month-End Close Webinar

Examples of Helping Vena Customers

© 2014 Vena Solutions Canada Inc.

Page 35: FEI Vena Month-End Close Webinar

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.

Page 36: FEI Vena Month-End Close Webinar

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.

Page 37: FEI Vena Month-End Close Webinar

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.

Page 38: FEI Vena Month-End Close Webinar

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.

Page 39: FEI Vena Month-End Close Webinar

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.

Page 40: FEI Vena Month-End Close Webinar

Questions & Answers

© 2014 Vena Solutions Canada Inc.

Page 41: FEI Vena Month-End Close Webinar

© Vena Solutions Canada Inc. 2014

Patrizio (Pat) CalitriDirector, Financial Close & Consolidations

[email protected]

Rishi GroverPresident, SVP Solutions Engineering

[email protected]

venasolutions.com

Thank you!

© 2014 Vena Solutions Canada Inc.