Don Hammer, Business Development Manager
Vertical Edge Consulting Group
I met with a dozen companies at the end of last year and early into 2017 to discuss their plans for 2017. Three Finance Department initiatives caught my eye. These are companies with mature financial reporting, budgeting and planning processes at the corporate office and in their subsidiaries.
Three themes emerged that I believe are emblematic of the challenges facing Finance Departments going into 2017:
1. Chart of Account Simplification – Now this is interesting! I have seen numerous situations where the driving force behind Chart of Account modernization is the implementation of a new ERP solution. Of course, this is a natural time to update the Chart of Accounts. I am seeing a push to have a simplified chart of accounts at the corporate level which requires a more rigorous mapping between the operating entities and the corporate office. The first goal is to generate a clear picture of the financial position of the corporation to ensure all operating entities are looking the financials important to the corporation. Their next step is to push the simplified Chart of Accounts into the subsidiaries to enable a consistent reporting, budgeting and planning discipline across the entire enterprise. The goal is not to replace the half-dozen ERP systems in their subsidiaries, rather to establish a baseline for financial discipline across the enterprise. Then over time they can move to eliminate legacy ERP solutions.
2. Bringing in Disparate Operational Data – As budgeting and planning systems begin to make an impact on visibility into the financial position of a company over the course of the year, companies are starting to bring operational data into their financial planning/reporting environment. One manufacturer is bringing in weekly operations work-hours and key production metrics to identify the mix of equipment utilization that minimizes costs and optimizes production. They anticipate they will be able to fine-tune production and identify mechanisms to increase equipment utilization. ERP data was monthly, production data was daily, production planning was weekly and hours were in a siloed system. Bringing this data into their budget/planning environment allows them to extend the value of this solution by bringing in Analytics.
3. Account Reconciliation – Over the past couple of years, companies have focused on shortening their month-end close process. Short of Chart of Account Simplification, their alternative is to focus on the process of Account Reconciliation. Two companies shared how their subsidiaries will create a new account in their local ERP and during the financial close process, an orphaned account is identified. Financial analysts must be detectives to first find the errant transaction and then to identify where it belongs. This slows down the close process with manual calls and e-mails exchanged between the corporate office and the subsidiary to note the purpose of the new account and the appropriate parent account. These companies are focused on Account Reconciliation initiatives as a key mechanism to shorten their close cycle.
These companies are focused on:
• Standardizing how their operating companies look at their financial performance.
• Extending the value of their solutions to include analytics that cross the finance and operations silos.
• Speeding their financial close process to provide timely financial reports to their key stakeholders.
What are your key 2017 financial operations initiatives?