Modern Finance Tour London May 2016
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Transcript of Modern Finance Tour London May 2016
1
MODERN FINANCEModernising the way Finance & Accounting work
Tuesday 17th May
London
2
AGENDA
The Hackett GroupT&C BreakBlackLine overviewLV case study
3
THE HACKETT GROUPGilles Bonelli,
EPMBI & A2R Practice Leader EMEA European Advisory Services
MODERN FINANCEZOOM ON A2R
The Hackett GroupDecember, 2014
Presented to:
Gilles Bonelli - EPMBI & A2R Practice Leader EMEA
5© 2015 The Hackett Group, Inc. All rights reserved. Reproduction of this document or any portion thereof without prior written consent is prohibited.
Statement of Confidentiality and Usage Restrictions
This document contains trade secrets and other information that is company sensitive, proprietary, and confidential, the disclosure of which would provide a competitive advantage to others. As a result, the reproduction, copying, or redistribution of this document or the contents contained herein, in whole or in part, for any purpose is strictly prohibited without the priorwritten consent of The Hackett Group.
Copyright © 2015 The Hackett Group, Inc. All rights reserved. World-Class Defined and Enabled.
WORLD-CLASS FINANCE
§ World-Class Finance defined
§ Zoom on A2R
§ The reconciliation headache!
§ Best practices in action
7© 2015 The Hackett Group, Inc. All rights reserved. Reproduction of this document or any portion thereof without prior written consent is prohibited.
Hackett define World-Class in concrete, measurable terms
8© 2015 The Hackett Group, Inc. All rights reserved. Reproduction of this document or any portion thereof without prior written consent is prohibited.
Hackett Finance Function Value Grid™World-Class Organizations results compared to Peer Median
Source: 2016 Hackett Finance Benchmark
EFFECTIVENESS§ 39% fewer customer billing errors
§ 70% less Accounts Payable transactions require correction
§ 25% less analyst time spent collecting and compiling data to create a report vs. analysis of data to provide insight
§ 98% more operations managers (as a percent of total) that have online access to management reporting information
§ 33% more likely to use both financial and non-financial performance measures in analyzing the relative success of the business
§ 12% more financial analysts (as a % of total) with the skill set and business acumen to act as business partners
§ 19% greater analytical focus on proactive decision making and planning vs. historical reporting
§ 84% more FTEs focused on Business Analysis
§ Value-Added analysis/Planning: 10% time spent on analysis
§ Tax strategy Effectiveness: 4 time savings from tax strategies
EFFICIENCY§ 42% less expensive and increasing year
over year - representing cost gap of$4.3 million per billion of revenue
§ 57% less expensive to support transactional processes
§ 26% less time (in days) required to process an Accounts Payable invoice for payment
§ 33% less time (in days) after month-end close required to report monthly operating results
§ 42% more reporting volume (as a percent of total) generated from a central data repository
§ 24% fewer days required to complete the annual budget
§ 4.27x more operations managers (as a percent of total utilizing on-line budgeting applications
Hackett Value Grid™
9© 2015 The Hackett Group, Inc. All rights reserved. Reproduction of this document or any portion thereof without prior written consent is prohibited.
Companies with World Class Finance organizations outperform
their industry average financial performance in several critical
categories:
Revenue Growth +1.3%EBITA Margin +3.3%
Net Income +3.7%Total Shareholder Return
+2.5%
Return on Assets +1.3%
World Class Finance organizations are more effective
& efficient than peer organizations:
Based on Hackett 2014 World Class Finance companies vs. Industry peer performance from
2011 – 2014
World Class Finance organization achieve higher performance levels through operational
excellence:
World-Class Finance is broader than cost reduction, its about value creation
50% More likely to
outperform Industry than Peers
1.02%
0.59%
Peer Group World Class
42%
WORLD-CLASS FINANCE
§ World-Class Finance defined
§ Zoom on A2R
§ The reconciliations headache!
§ Best practices in action
11© 2015 The Hackett Group, Inc. All rights reserved. Reproduction of this document or any portion thereof without prior written consent is prohibited.
The value grid in A2R is the basis for determining Top Performers and for making company specific assessments
Hackett Value Grid™High
HighEfficiency
Effe
ctiv
enes
s
Low
A2R Study participants
1Q
1Q
Top PerformerEFFECTIVENESS *§ External audit fees per billion in
revenue § Days to close§ Days after month-end that it
takes for report distribution and other key accounting reports
§ Percent of time that external earnings reports are restated after being released to external agencies
EFFICIENCY *§ General Accounting and external
reporting cost as a percent of revenue§ General Accounting & external reporting
FTEs per billion § Percent of automated journal entries§ Use of centrally maintained uniform
chart of accounts§ Secondary applications per billion § Extent to which sub-systems are
interfaced or integrated with the general ledger
* Value grid driver weightings vary (i.e. not evenly weighted)
12© 2015 The Hackett Group, Inc. All rights reserved. Reproduction of this document or any portion thereof without prior written consent is prohibited.
Days to close and Consolidate
The Top Performer group in A2R closes and consolidates, and reports results 4 days faster than the Peer Group
Days it takes after month-end close (and consolidation) to report month-end operating results and
other key financial/accounting reports
5
3
Peer Group Top Performer
3
1
Peer Group Top Performer
13© 2015 The Hackett Group, Inc. All rights reserved. Reproduction of this document or any portion thereof without prior written consent is prohibited.
Process Cost as a % of Revenue FTEs Per Billion($) of Revenue
The Top Performer group in A2R operates with 51% lower cost, and 52% fewer FTEs than the Peer Group
0.068%
0.024%
0.019%
0.018%
0.010%
0.004%
0.008%
0.005%
0.019%
0.008%
0.123%
0.060%
Peer Group Top Performer
8.4
3.6
1.6
1.2
1.4
0.5
1.1
0.7
2.2
1.0
14.8
7.1
Peer Group Top Performer
General Accounting External Reporting Fixed Assets Inter-Company Cost Accounting
WORLD-CLASS FINANCE
§ World-Class Finance defined
§ Zoom on A2R
§ The reconciliations headache!
§ Best practices in action
15© 2015 The Hackett Group, Inc. All rights reserved. Reproduction of this document or any portion thereof without prior written consent is prohibited.
Ultimately fragmented non-standard processes & systems drive unnecessary complexity, cycle time & cost
Predictive Analytics
Profitability and AnalyticalModeling
C-level &BU Mgmt.
VPs & Dept.Mgrs.
BusinessPartners
Financial and People
Management
OperationManagement
MarketBig Data
CustomerRelation
Management
External Market Data
Customer Data
Ledgers , sub-ledger
and modules
Operational Data
EnterpriseData Repository
(ETL, Staging and Facts)
Strategic Planning
Integrated planning & forecasting
Statistical Analysis
Master Data Management
(Measures and Dimensionality)
Consolidation
SupplyChain
Management Supplier / Manufacture
Data
Information support
User types
EnterpriseApplications
Warehouse Data martsDatabaseFarms
Dashboards
Standard Reports
DynamicDrill Down
Self Service Reports
CustomerProfitability
Root CauseAnalysis
Ad-hocExcel
What If
Analysis
Sensitivity Analysis
Reporting and Process AutomationAnalytics and Modeling Tools
In Memory Storage In Memory Calculation
16© 2015 The Hackett Group, Inc. All rights reserved. Reproduction of this document or any portion thereof without prior written consent is prohibited.
... For instance, reconciliations are everywhere
Predictive Analytics
Profitability and AnalyticalModeling
C-level &BU Mgmt.
VPs & Dept.Mgrs.
BusinessPartners
Financial and People
Management
OperationManagement
MarketBig Data
CustomerRelation
Management
External Market Data
Customer Data
Ledgers , sub-ledger
and modules
Operational Data
EnterpriseData Repository
(ETL, Staging and Facts)
Strategic Planning
Integrated planning & forecasting
Statistical Analysis
Master Data Management
(Measures and Dimensionality)
Consolidation
SupplyChain
Management Supplier / Manufacture
Data
Information support
User types
EnterpriseApplications
Warehouse Data martsDatabaseFarms
Dashboards
Standard Reports
DynamicDrill Down
Self Service Reports
CustomerProfitability
Root CauseAnalysis
Ad-hocExcel
What If
Analysis
Sensitivity Analysis
Reporting and Process AutomationAnalytics and Modeling Tools
In Memory Storage In Memory Calculation
C2COrder Tracking
EcommerceCash applications
SL to GLPOS to GL to Bank
DiscountsCommissions
P2PPurchase ledger recsVendor issue mgmt.
GRNIOrder Tracking
Supplier StatementsInventory / StockSundry Payments
A2RGL Reconciliations
Intra Account nettingInter-Company
Prepayment /AccrualVAT recs with GLBank & Treasury
Suspense accounts
OtherGift / Pre-paid Cards
Credit Card / ATMPayroll
Fixed AssetsSystem to SystemEmployee benefits
Leasing / Loans
17© 2015 The Hackett Group, Inc. All rights reserved. Reproduction of this document or any portion thereof without prior written consent is prohibited.
21%
39%
29%
14%
56%
75%
25%
32%
11%
36%
22%
21%
21%
29%
11%
15%
25%
32%
7%
32%
39%
7%
Fixed Assets reconciliations
Intercompany reconciliations
Bank reconciliations
Other B/S reconciliations
Cost Allocations
Other
No Limited Amount Medium Amount High Amount
Top Performer
17%
50%
8%
8%
50%
8%
8%
17%
8%
25%
17%
25%
17%
25%
17%
100%
58%
17%
58%
58%
8%
Q: “Have you been able to move the following activities outside of the critical path of the Close?”
Top Performers have moved most reconciliation activities out of the critical path of the close process
Peer
18© 2015 The Hackett Group, Inc. All rights reserved. Reproduction of this document or any portion thereof without prior written consent is prohibited.
Reconciliation best practices beyond technology
15%
31%
31%
62%
62%
92%
92%
92%
Aging of open items on account reconciliations is performed
All reconciliations are submitted for review; only a subset is selected for review
A materiality limit is established for resolving discrepancies identified in account reconciliations
A time limit is established for resolving discrepancies identified
A time limit is established for resolving discrepancies identified in account reviews
Standard formats are used for account reconciliations
Account reviews are completed within a specified period of time
Account reviews are assigned to specific owners
Process of Review and Approval of Reconciliations
WORLD-CLASS FINANCE
§ World-Class Finance defined
§ Zoom on A2R
§ The reconciliations headache
§ Best practices in action
20© 2015 The Hackett Group, Inc. All rights reserved. Reproduction of this document or any portion thereof without prior written consent is prohibited.
Participants mini-poll
‘Please stand up’
21© 2015 The Hackett Group, Inc. All rights reserved. Reproduction of this document or any portion thereof without prior written consent is prohibited.
Reconciliation Automation
Thin Ledger, Standard , Descriptive chart of accounts
Unified datastream for group and segment reporting
Front end data validation
Automatic data feed & validation
IC Reconciliation
Consolidationengine
Closing management tool
W-C cycle time I 3 days I 1 days
Info
rmat
ion
stan
dard
sSy
stem
sO
rgan
izat
ion
Wor
kflo
w
Entity close Validation & upload Consolidation ReportingRecording
Shared Services undertaking an increasing role in both governing and executing the processScope: (General Ledger, Intercompany, Fixed Asset, Cost Accounting, External Reporting)
Standard online reporting
Are all these best practices related to “Information” in place? If not please sit down
Enterprise Process Ownership (well delineated process & team responsibilities to design & execute the process)
Collaborative Working enabled by detailed calendar of activities (often system enabled see below)
Workload guided by materiality Flat consolidation
XBRL filiing
22© 2015 The Hackett Group, Inc. All rights reserved. Reproduction of this document or any portion thereof without prior written consent is prohibited.
Reconciliation Automation
Thin Ledger, Standard , Descriptive chart of accounts
Unified datastream for group and segment reporting
Front end data validation
Automatic data feed & validation
IC Reconciliation
Consolidationengine
Closing management tool
W-C cycle time I 3 days I 1 days
Info
rmat
ion
stan
dard
sSy
stem
sO
rgan
izat
ion
Wor
kflo
w
Entity close Validation & upload Consolidation ReportingRecording
Shared Services undertaking an increasing role in both governing and executing the processScope: (General Ledger, Intercompany, Fixed Asset, Cost Accounting, External Reporting)
Standard online reporting
Are all these best practices related to “Workflow management” in place? If not please sit down
Enterprise Process Ownership (well delineated process & team responsibilities to design & execute the process)
Collaborative Working enabled by detailed calendar of activities (often system enabled see below)
Workload guided by materiality Flat consolidation
XBRL filiing
23© 2015 The Hackett Group, Inc. All rights reserved. Reproduction of this document or any portion thereof without prior written consent is prohibited.
Reconciliation Automation
Thin Ledger, Standard , Descriptive chart of accounts
Unified datastream for group and segment reporting
Front end data validation
Automatic data feed & validation
IC Reconciliation
Consolidationengine
Closing management tool
W-C cycle time I 3 days I 1 days
Info
rmat
ion
stan
dard
sSy
stem
sO
rgan
izat
ion
Wor
kflo
w
Entity close Validation & upload Consolidation ReportingRecording
Shared Services undertaking an increasing role in both governing and executing the processScope: (General Ledger, Intercompany, Fixed Asset, Cost Accounting, External Reporting)
Standard online reporting
Are all these best practices related to your “Organization” in place? If not please sit down
Enterprise Process Ownership (well delineated process & team responsibilities to design & execute the process)
Collaborative Working enabled by detailed calendar of activities (often system enabled see below)
Workload guided by materiality Flat consolidation
XBRL filiing
24© 2015 The Hackett Group, Inc. All rights reserved. Reproduction of this document or any portion thereof without prior written consent is prohibited.
Reconciliation Automation
Thin Ledger, Standard , Descriptive chart of accounts
Unified datastream for group and segment reporting
Front end data validation
Automatic data feed & validation
IC Reconciliation
Consolidationengine
Closing management tool
W-C cycle time I 3 days I 1 days
Info
rmat
ion
stan
dard
sSy
stem
sO
rgan
izat
ion
Wor
kflo
w
Entity close Validation & upload Consolidation ReportingRecording
Shared Services undertaking an increasing role in both governing and executing the processScope: (General Ledger, Intercompany, Fixed Asset, Cost Accounting, External Reporting)
Standard online reporting
Are all these best practices related to your “Systems” in place?If not please sit down
Enterprise Process Ownership (well delineated process & team responsibilities to design & execute the process)
Collaborative Working enabled by detailed calendar of activities (often system enabled see below)
Workload guided by materiality Flat consolidation
XBRL filiing
25© 2015 The Hackett Group, Inc. All rights reserved. Reproduction of this document or any portion thereof without prior written consent is prohibited.
Participants mini-poll
‘How many of you are still standing?’
26© 2015 The Hackett Group, Inc. All rights reserved. Reproduction of this document or any portion thereof without prior written consent is prohibited.
Questions Or Comments?
27© 2015 The Hackett Group, Inc. All rights reserved. Reproduction of this document or any portion thereof without prior written consent is prohibited.
Contact information
Atlanta1117 Perimeter Center WestSuite N500Atlanta, GA 30338Phone: +1 770 225 3600
Miami1001 Brickell Bay DriveSuite 3000Miami, FL 33131Phone: +1 305 375 8005
Philadelphia225 Washington StreetConshohocken, PA 19428Phone: +1 610 234 5500
AmsterdamStrawinskylaan 3051G, 1077 ZXAmsterdam, The NetherlandsPhone: +31 20 301 2210
AustraliaAMP Centre50 Bridge StreetSydney NSW 2000Phone: +61 2 8216 0970
India8-2-120/112/88 & 891st Floor, Aparna CrestRoad 32, Banjara HillsHyderabad 500034Phone: +91 40 23551432
LondonMartin House5 Martin LaneLondon EC4R 0DPPhone: +44 207 398 9100
FrankfurtTorhaus WesthafenSpeicherstrasse 5960327 Frankfurt am Main, GermanyPhone: +49 69 900217 0
Paris8, rue de Port Mahon75002 Paris, FrancePhone: +33 1 53 43 0400
www.thehackettgroup.com
Gilles BonelliEPMBI & A2R Practice Leader EMEA
European Advisory ServicesMobile: + 44 (0) 7879 480 249
28
Break
Andy Young, Head of Finance
LV= Reconciliations
31
LV= is the largest UK Friendly SocietyWe sell insurance, investments and pensions We look after £12 billion of investmentsOver 5m members and customers Over 6,000 employeesGI premiums over £1.4 billionLife premiums over £1.6 billion
Background§LV= has been and is growing significantly
§Growth has required a more formalised approach to our control environment
§Balance sheet reconciliations are seen as one of our key controls to verify our balance sheet
§As a PRA/FCA supervised group some of our reconciliations are mandated by the regulations
§A key enabler to help us meet these requirements is Blackline
32
Original Reconciliation Challenges
§Highly reliant on excel – too flexible/no control, all recs done in separate spreadsheets (>3000 recs in total)
§Print out and sign off to evidence but it may not be what gets submitted§ALL non moving balance sheet recs must still be reviewed and reconciled each month (share capital, zero accounts etc)
§There is no guarantee queries are resolved when raised on paper recs§The reporting of all recs and their aging is a lengthy and cumbersome process
§Data moved in and out of excel/access runs risk of lost/missing data§Lack of visibility in process from end to end§Audit issues as sign off dates may be before back up§Can’t always find supporting documents
33
Original Reconciliation Challenges34
Reconcile in excel
Summarise aging of all recs in excel
Transfer to MS accessfor consolidation
Source data General ledger
Download TBto check accurate/complete
Paper review
Transfer to excel for reporting
Our Solution§Self built system
§Full end to end control of process with visibility of who did what when
§Rejected recs have to be actioned now
§One version of the truth, agrees to GL
§Standard template is used for all recs
§Supporting info is attached via embedding or pasting “pictures”
§Auditors love it (gave them view access) – positive comment in report to Audit Committee
35
Our Solution36
Reconcile/auto reconcile in System
Review and Sign Off in System
Report from System
Source data(keyed or via SQL)
General ledger
New System Reconciliation Challenges
§Does not cope with daily reconciliations (all our regulated ones are daily)§ALL non moving balance sheet recs must still be reviewed and reconciled each month (share capital, zero accounts etc)
§Reporting was clunky and time consuming§No drill down to issues§Attachment of supporting documents created large data storage issues§Slow response times (press the button and watch Coronation Street!)
§System fell over in November 2015!
37
Action§Weighed up solutions in the marketplace in mid 2015§Plan to implement late in 2016§Selected Blackline as our preferred system§Fast tracked work due to November collapse issue§Signed contract with Blackline at the end of December§Managed to run old system for December§Set up, tested and trained everyone in January§Go live 1 February§January month end recs all done in Blackline
38
Benefits of Blackline Reconciliations
We’ve made sure we still have§Full end to end control of process with visibility of who did what when§Rejected recs have to be actioned now§One version of the truth, agrees to GL§Standard template used for all recs (although we have several now that are better suited for different styles)
§Supporting info is attached (but not via embedding or pasting “pictures”)§Auditors can access
39
Benefits of Blackline ReconciliationsBut we’ve now also got§The ability to load supporting documents once provided they remain consistent from period to period
§Daily reconciliations (all our regulated ones are daily)§ALL non moving balance sheet recs can be pushed to reconciled saving time (share capital, zero accounts etc)
§Reporting is easier to use with drill down capability§No large data storage issues§Fast response time on the system§Feeds from policy systems to automate more of the process§Autorec of contra items
40
Blackline Gives Us§Over 50 people are involved in recs. They used excel and now use excel in FSR – minimal training/issues
§Auditors can self serve recs§Reconciliations that do not move regularly (eg share capital) will be auto reconciled by the system
§Better autoreconciliation (policy and investment systems plus automatchcodes)
§Good reporting of reconciliations§Any rec can now be found easily (all in one place)§More time to spend on issues not the process§A robust and reliable system with good performance
41
Questions?
42
43
Thank You