Over the last decade or so, the role of finance teams has undergone something of a transformation. Where they were once seen as the collectors and keepers of company financial information, they have now become key business partners, tasked with providing internal and external information and expertise to support the management decision-making process.
At the same time as this change has been taking place, they have come under increasing pressure to improve effectiveness and efficiency through quicker delivery of more reliable and insightful reporting and analysis, and to provide regular and accurate business forecasts.
This all comes along with the obligation to meet ever increasing regulatory requirements, and in uncertain economic times, when budgets are tight and cost reductions are sought in all corners of the organisation. Cost reduction initiatives in finance often result in already lean teams being pared right back to the bone.
Technology has long been recognised as an enabler to the transformation of finance. And although there has been investment in systems, this has mostly been targeted towards ERP and operational systems to drive transactional and process efficiency.
Many organisations are finding it difficult to take the next step towards achieving the most appropriate combination of technologies to manage and improve the key processes of consolidation, reporting, budgeting and forecasting.
- Execute strategy
- Integrated planning
- Accurate forecasts
- Insightful information
- Scenario modelling
- Business analysis
- Up to date information
- Standardise processes
- Improve quality
- Accurate reporting
- Eliminate duplication
- Reliable information
- Process automation
- Reduce costs
- Manage risk
- Accurate reporting
- Governance and compliance
- Shareholder relationships
Reporting & Consolidation
While ERP and general accounting systems have been the subject of investment and updates in recent years, the Ventana Research report, Trends in Developing the Fast Clean Close, found that among companies with at least 100 employees, only 38% used their ERP system for financial consolidation. The research also found that 45% of midsize companies and 62% of large and very large companies have ERP systems from multiple vendors.
The most widely used alternative is the spreadsheet. Excel is attractive, because it is readily available, there is a wide knowledge base, and it offers the end user flexibility and control. However, using Excel as your key consolidation and/or reporting system is not without its problems. As companies grow, so do their reporting and data requirements and complexities, resulting in ever larger spreadsheet models demanding more maintenance and validation.
The acquisition of data from multiple ERP sources can be cumbersome, and research consistently shows that extensive use of spreadsheets results in more errors, which take time and resources to resolve.
|The finance team is maintaining and accessing multiple linked spread sheets along with various finance software and database sources. This makes it harder for them to operate at optimum efficiency.||The financial consolidation and/or the key financial, management and board report packs are compiled from numerous Excel spreadsheets. This entails much linking and copying of data and results in duplicate versions at risk of being misinterpreted or missed completely.|
|Organisational changes, such as new account groups or reporting lines, new companies or different consolidation structures, cause enormous amounts of additional work updating spreadsheets and reports.||Adding new items to the company structure or reporting formats involves editing all the various spreadsheets included in the close and reporting process and inserting new rows, columns and sheets. Other sheets and workbooks with existing and historic data may also need to be adjusted to remain in alignment with the new structure. The new items may need to have formulas added and existing formulas and data links may need to be edited.|
|Consolidation adjustments and eliminations are uncontrolled and unclear||Consolidation level adjustments are made directly on the face of spreadsheets. There is no double entry control and full transparency and understanding of the adjustments is only possible if users remember to add some cell annotation. Reporting pre and post adjustment requires additional sheets to be maintained.|
|Because of the above three points, they are under pressure through each close and reporting cycle, as well as being asked to furnish ad-hoc information requests to support new business initiatives||A disproportionate amount of time is spent each month by financial controllers or analysts updating and preparing spreadsheets and templates. Shortcuts are taken, risking incorrect calculations, missing links, duplication of data and inconsistencies and uncertainty. All adding to the effort required in subsequent months.|
CENTRIXE is multi-dimensional (OLAP) software providing complete financial functionality for consolidations, budgeting and management reporting. It can easily combine information from multiple sources and provides all the benefits of rapid reporting.
All data required for reporting, including calculations, are held in the core CENTRIXE database. All reporting and analysis uses this single source, ensuring all users are working off the same information without the need for any duplicate data sets or files.
CENTRIXE can be used to consolidate, based on a legal structure, geography, or an industry structure. It can create multiple paths that can be used for business reorganisation modelling, providing a view of different scenarios, pre or post-acquisition, without impacting your current consolidation.
CENTRIXE can also include Joint Ventures, appropriate equity adjustments, eliminations and consolidation adjustments. If CENTRIXE’s Inter Company Balancing module is being used, the consolidation process can take care of all eliminations at both intra-group and inter-group levels.
An included double entry journals module provides full transparency and control of any adjustments made.
CENTRIXE’s intelligent rules engine can differentiate between input elimination and consolidation entities, so that calculations are always applied correctly.
CENTRIXE is user-friendly and operates within a familiar Excel interface, meaning that training time is minimal and the team is able to carry out their functions without disruption.
Because CENTRIXE is truly flexible, users can easily make changes to report formats and incorporate new reporting requirements without involving IT.
Branches, Regions and Subsidiaries
In larger organisations there are often many teams performing similar related analysis and reporting. These can be branches, regions and subsidiaries of large, perhaps multi-national, corporations, as well as dedicated business control and planning teams at both corporate and local level. These groups face the challenge of extra demands to satisfy local management information requirements, and more focused analysis remits need to be integrated with yet more data sources. A corporate data warehouse and reporting system may be available, but not necessarily with the structures or tool set that gives users the flexibility to create the reports and analysis they need.
|They are part of a bigger organisation, which provides corporate top down systems, but these don’t address the way the business is managed locally.||The central systems have been designed to meet the corporate requirements. They are managed and controlled by a central authority, and although the system may reflect local charts of accounts and regulatory requirements, it doesn’t have the level of detail needed to manage the business at a local level. The central system can’t be expanded to include all the local requirements. It is a compromise solution that tries to cover the needs of all branches, regions and subsidiaries.
A localised solution has been promised, but help is needed now.
|They need a localised solution that can be implemented quickly, and can easily exchange bi-directional information with the corporate system to reduce duplication, while addressing the local requirements.||The corporate reporting requirements dictate what is required of each subsidiary. The subsidiary needs to produce information in that format to ensure compliance and alignment with corporate standards, but also requires additional detail for local reporting and analysis. A solution that enables both sets of requirements to be met in one process and from one source is desirable, improving efficiency and eliminating the risk associated with duplicate data taken from multiple sources.|
|There are tight controls over budget availability and IT infrastructure for local solutions.||Large business systems and infrastructure implementations are managed by a central IT function and form part of a corporate IT strategy. The IT strategy is focused on implementing common global systems, and although local functions have been involved in defining the scope and requirements, a ‘one size fits all’ implementation approach means that the local needs are not completely met.|
|Because of the above three points the team continues to “make do” with spreadsheets to meet their local requirements.||Spreadsheets are the de facto reporting system and provide some of the flexibility and responsiveness that is needed to close the gap between local reporting needs and the corporate requirements. Their limitations, data integrity issues and risks are recognised, but this is seen as the only available solution for the time being.|
CENTRIXE is an ideal solution for subsidiaries and local teams and departments. Very specific local models can be designed and implemented rapidly whilst at the same time maintaining tight integration with corporate systems.
CENTRIXE solutions provide multiple models to investigate different aspects of the business and can easily change source systems, charts of accounts and performance measurements.
The models and reports are easy to set up and maintain and do not require any IT or central involvement.
Low cost and small footprint implementations mean CENTRIXE can often be installed on existing servers and infrastructure.
Because CENTRIXE solutions are scalable, they can be developed to meet the exact requirements of any finance team, and thanks to CENTRIXE’s rapid deployment model, implementation can be complete within days.
Budgeting and Forecasting
Budgeting and forecasting can present many challenges to the finance team. Despite many attempts to revolutionise the whole concept of planning with initiatives such as Beyond Budgeting, driver based budgeting, aggregated budgets, rolling forecasts and process focused performance management, most organisations still follow the pattern of a detailed bottom-up annual budget and a monthly or quarterly re-forecast process at a slightly more summarised level. This is generally a laborious process that is resource intensive without adding any value.
The need for more accuracy in budgets and forecasts places significant pressures on the process, and this is compounded by the need to be even more agile and responsive to changing conditions.
Although forecasting should be a business-wide responsibility, it is nearly always managed by the finance team, who must ensure accuracy, quality and a timely turnaround.
It is well known in the industry that spreadsheets are widely used, but are ranked poorly on how they handle forecasting and budgeting.
|The process takes longer than it should, because of the number of iterations and the effort required to set up and manage the spreadsheets for each iteration.||Turbulent economic times mean there is more pressure on finance teams to turn around forecasts and budgets quickly whilst improving quality. The rapidly changing environment means more versions and reviews of budgets and forecasts to ensure they are relevant. Finance teams manage multiple submissions and struggle to keep on top of the differences between them and the impact on consolidated group totals.
It is not unusual for budgets not to be finalised before the start of the new year.
|Any changes required in the forecast or budget models, when the process is already underway, take a lot of time resulting in heroic efforts by the team to maintain control.||The process is built around collecting data from multiple locations, whether they are branches, divisions or cost centres. Spreadsheets are distributed then returned for amalgamation into a central model for review and analysis. If a change is required during the process, perhaps to expand a product revenue breakdown, or to introduce a new cost centre, not only will the data collection spreadsheets need to be amended, but the entire model must be updated to cater for the additional rows, columns and sheets. Potentially, any spreadsheets holding current or historical data to compare performance will need to be restructured. As this continues through several iterations, the data must be continually checked for mistakes and incorrect formulas.|
|The current system lacks accessibility, transparency and accountability by budget holder.||Any planning process involves many stakeholders. But the spreadsheet based system relies on a few key personnel to ensure that the most up to date submissions from those stakeholders are received and correctly incorporated into the overall budget/forecast. Once submitted, there is no opportunity for stakeholders to have any further involvement in the finalisation of the budget until they receive some analysis and a request for another submission. In the meantime, as conditions change and new data becomes available, the budget/forecast remains fixed.
The finance team would like to conduct some ‘what-if’ analysis, but this is only possible at a high level in the central spreadsheet. To get the stakeholders’ input into this would mean another round of submissions.
|Because of the above only a small part of the team’s time is available for value added analysis activities and the budgets and forecasts are obsolete within a very short period of time.||Most of the team’s time during a budget or forecast seems to be spent managing Excel spreadsheets rather than focussing on the accuracy and relevance of the forecast or budget. As deadlines approach, it becomes harder to make changes, resulting in a trade-off between quality and timeliness. The desire for more frequent forecasting or rolling forecasts has not been realised, because the existing process and spreadsheet model could not cope.|
CENTRIXE is built around a core multi-dimensional database and all data is held in that database against a common dimension structure. This provides the ability to maintain multiple versions of budgets and forecasts and manage many iterations of submissions.
Any structural or logic changes made to the model are immediately reflected in all locations and versions. End users can enter data directly into the CENTRIXE model, avoiding the need for Excel templates completely.
The data versions can all be linked and make use of assumptions and calculation rules so that changes in base data or drivers can automatically cascade through all impacted parts of the model.
Inbuilt profiling functionality enables data items to be forecast based on trending and growth rules.
Integrated Top Down budgeting provides automatic allocation of central targets to underlying business locations.
Forecasts and budgets can be easily compared against any other data versions in the model, providing the basis for analysis of the latest forecast by comparing it to the previous version, or to the budget, or against the latest actuals.
CENTRIXE’s scenario modelling functionality allows unlimited “what if” scenarios and facilitates the forecasting and predictive analysis process.
Forecast and Budget data can be used immediately in any reporting, alongside previous forecasts, actuals and historic data.