Close, Consolidations and Reporting (CCR) is the process by which organizations accumulate and generate critical information that both internal and external parties use to make strategic decisions and measure success. To complicate matters, the results of strong growth often translate into an array of challenges, including acquisitions, divestitures and operational reorganizations. Because of this, many organizations put an emphasis on continuous-improvement activities, undertaking initiatives to drive enhancements in transparency, accuracy, timeliness and reliability. In MorganFranklin’s experience, there is a set of questions that many high-performing enterprises ask to help them continually evaluate their CCR process:
Are your reporting packages providing actionable insights?
These are direct and meaningful actions that can be taken based on a set of raw data. Unfortunately, many organizations muzzle themselves with reporting packages that are focused on providing every number, aren’t focused on audience needs, do not tell a story about the factors impacting key drivers, and are primarily paper-based. Reporting packages today should be clear and concise in providing the metrics that are driving the organization’s current strategy, flow naturally through the layers of the business, and be accessible and interactive in a digital form.
Is your close fast enough to allow enough time for action and impact on the current month’s performance?
Let’s all admit it. The close process is an administrative burden that limits an organization’s resources from applying their expertise toward analysis, special projects and business support. Many organizations take a week devoted to the aggregation of numbers and a week to analyze the numbers before spending another week distributing the assessment of the results. That is quite a bit of time, so it is no surprise that CCR is a hot button for transformation. Many organizations are undergoing a transition from a hard close to a soft close while emphasizing the following key concepts:
- Decide what can be eliminated, what can be deferred to a quarterly or annual close and what can be done outside of the typical close process.
- Let time-related accruals flow through subsystems, accruing only when material closes quarterly or annually.
- Leave forecasting as a separate process. Do not complicate the close cycle with the forecasting cycle.
- Use fixed rates, budgeted rates or the prior month to move cost allocations away from the monthly close. We typically find that these variances are immaterial.
- Eliminate any additional cycles of report production and dissemination. Keep the focus on the gross changes that are occurring month to month, not the small postings done the prior day.
- Raise the level at which allocations are posted to where they will be meaningful to management. This should reduce complexity.
- Focus only on material entries that have high impact on the organization and eliminate any that are material to one party, such as a single business area or operating group.
- Integrate and flatten the system architecture using a modern iPass tool such as Dell Boomi. This should improve the timeliness of information.
Is there consistency to the data by/between your systems to be able to say you have a single version of the truth?
It’s not uncommon in large organizations to have challenges with Master Data Governance (MDG), but it is common to see an impact on the close cycle. High-performing organizations rely on a formalized MDG approach that allows them to clearly define data’s path from the source to the target and what constitutes their key performance indicators. This allows organizations to remove what often is manual manipulation of data going into the close cycle, as well as any subsequent changes required for reporting, but done after close. Data should flow through systems naturally and the definitions should be standardized across the organization.
Does your team have the right capability and ecosystem to not just support finance, but drive impact within the operation?
Resourcing is a response to match the correct skill set demanded to meet the obligations of your ecosystem, and it is a constant challenge for even the strongest organizations. Much of the resourcing applied to CCR typically is devoted to the aggregation and dissemination of information as opposed to the analysis and insight into the numbers. When organizations get into this pattern, it becomes easy to talk about the desire to move away from this model and into one that provides higher analytical value. The challenge is that it’s hard to move a team’s skill set to a point at which it spends 80% of its time driving insight because you either
- struggle to keep those folks that are best suited to drive insight over the course of the journey;
- find it easier to throw resources at the data agg /manual activities instead of addressing the root causes within the ecosystem;
Ultimately, driving the need for 80% of the time spent on aggregation and dissemination.
Is our Enterprise Resource Planning and Reporting (ERP) solution(s) set up to effectively support our business growth and current operations?
The CCR process relies heavily on the performance and structure of an organization’s ERP. Metadata structures in an ERP should represent the way in which the business is managed. For example, does your operational structure easily match the related metadata structure within your ERP? If not, then there is a good chance that the resulting misalignment is driving reductions in timeliness, reliability and, at times, accuracy as additional steps are required to structure reporting into a meaningful representation of recent performance.
Does drilling down and following up on actions and questions from reporting happen efficiently?
Leadership has questions and finance teams have answers. The distance between the two represents the timespan that can be covered by factors of systems and processes used to respond. First, do your organization’s systems allow access to the layers of data used in the aggregation process, or do answers often require additional data pulls and manual Excel-based manipulation? Are calculations clearly understood? Is access provided to the base inputs? Leading organizations possess tools that enable them to effectively and efficiently drill through to key drivers of results at the lowest level. An ideal use-case is providing a system with dynamic reporting capabilities (e.g., dashboards)with drill-through functionality that enable leadership to ask and answer questions within the same systematic framework.
Second, if leadership has questions over the causality of an organization’s root data, then processes must support the response. Many of our clients create processes around their CCR activities that aggregate and capture variance explanations coming from functional owners (used to reach to the owner of that function to determine the correct answer). For example, a drill-down into the data shows that A/R past terms are driving variance from expectations but cannot answer WHY a customer isn’t paying on time.
Finance and accounting organizations that find themselves struggling with these questions have an opportunity to drive additional efficiency and effectiveness, serve as a better partner to the business, and ultimately increase shareholder value. Don’t go at it alone. Learn how MorganFranklin can help you optimize your Close, Consolidation and Reporting process.
