Fast Track your Financial Close: Hyperion 101. Written by Timothy J. Simkiss, CPA Hyperion EPM Practice Lead

Transcription

1 Fast Track your Financial Close: Hyperion 101 Written by Timothy J. Simkiss, CPA Hyperion EPM Practice Lead

2 Note: The following information is intended to outline a general solution offering. It is intended for information purposes only, and may not be incorporated into a contract. It is not a commitment to deliver any material or functionality and should not be relied upon when making purchasing decisions.

3 Achieving Financial Excellence using Oracle EPM/BI tools Contents Introduction... 4 World Class Defined... 5 A Typical Budgeting Process... 5 Issues That Can Surface During Budgeting... 6 A Typical Month End Close Process... 6 Issues That Can Surface During Month End Close... 7 Best Practices of World Class Finance Departments... 8 A World Class Financial Department with Oracle Hyperion EPS... 9 Conclusion About BizTech

4 Introduction In business, as in life, a key part of fixing a problem is to first be aware that you have one. In the financial close cycle, (which can often be defined as the sum of three separate parts budgeting, accounting, and reporting) problems in finance departments can often be as simple as the need for more robust accounting policies and procedures or as complex as having limited or no segregation of incompatible duties. Unsound accounting policies are not limited to larger companies like Enron, Healthsouth or World Com, by the way. In fact, the majority of internal control deficiencies are related to accelerated filers, or organizations with a market capitalization between $75 and $700 million dollars. The results suggest that firms with more segments tend to have more weaknesses in internal control and more difficulty closely the books. Firms with different operations may require different controls. Moreover, firms with more geographical segments that are spread over several countries and operate in different legal and economic environments may find it difficult to compile their financial statements and maintain effective internal controls. 1 Longer close times, a six month or more budget process, extensive reliance on the Microsoft Office suite for closing the books, complex intercompany accounting processes and limited or no account reconciliations are hallmarks of a less than optimal financial close process. This whitepaper seeks to highlight some typical issues that can arise during the financial close cycle, give examples of best practices among world class finance" departments, and provide some tips and techniques on how users of Oracle Business Intelligence and Oracle Hyperion Enterprise Performance Management can utilze these tools to create a more optimal financial close cycle. Oracle s Hyperion Planning, Hyperion Financial Management, Hyperion Financial Close and Business intelligence can provide some quick solutions for even the smallest of companies to assist with their growth and improve their business processes. Hyperion s re-built packages are easy to implement, easier to customize and easiest to use. They will allow even the most spreadsheet orientated companies to achieve Mission Possible: Achieving Forecasting and Financial Reporting Excellence using Oracle EPM/BI tools. 1 DETERMINANTS OF INTERNAL CONTROL WEAKNESSES IN ACCELERATED FILERS - Yousef Jahmani Savannah State University 2

5 World Class Defined A world class car may be defined as a Lamborghini, or a Mercedes Benz. A world class athlete may be defined as an Olympic gold medal winner or MVP of a sports league. But the definition of a world class finance department can be more ambiguous. They have been described as a department which completes the entire closing and reporting cycle in fewer than eight business days, and are able to publish accurate financial results well ahead of their competitors. World Class companies usually provide year end results within 20 days of a year-end close. These companies frequently establish and attain published targets. World class finance departments often maintain a rolling 13-month forecast with various scenarios, and can typically prepare an annual budget (if they even prepare one) in less than 60 days. Other key metrics such as low cost of capital, accurate forecasts, and financial transparency also help define meaning to the term world class finance departments. World class finance departments typically empower their employees, provide incentives for productivity and timeliness, and share a sense of vision passed down through senior management. They are efficient, automated, and do not carry a lot of underperforming employees. They typically have a trained backup for every position as well as documented policies and procedures. While these are not necessarily the only descriptions or characteristics of world class finance departments, they will serve as a guiding principle for the remainder of this whitepaper. A Typical Budgeting Process Excel Templates are prepared by the FPM team (usually in October) Current year actual results are annualized and ed out on a separate template. All formulas are checked to ensure that links and calculations are working Templates and instructions are ed out to various department heads Each department head is responsible for their own budget by expense line, capital expense and salaries/workforce In larger companies this often involves sub-departments separated by location or line of business Requested time frame is usually three weeks to complete reminders are usually sent out one week prior to submission Templates are submitted back to FPA by department heads 3

6 For a typical company, this also involves chasing down a few stragglers, collecting all the templates, and consolidating into one master budget Excel templates by department are then consolidated into on master budget which will be reviewed by senior management. After this review, changes are requested for each department, and the whole process begins anew The final approved budget from management is then submitted to the Board for their consideration and approval Issues That Can Surface During Budgeting Excel is an outdated tool when preparing detailed Annual Budgets Larger or even mid-sized firms with multiple lines of business, products, departments, cost centers and locations can often find themselves needing hundreds or even thousands of Excel templates to prepare a consolidated budget Most summary and detail departmental templates need to be printed out and audited by someone in finance and accounting to verify data integrity One broken link among thousands will lead to an incorrect budget and time consuming fact finding Lack of dimensionality in Excel leads to difficulty drilling into and analyzing the key drivers of the budget ing budgets to and from users is time consuming, can be accidentally overlooked or discarded, risks data integrity and is prone to user errors or consolidation issues Multiple versions lead to different versions of the truth Often a company will have multiple versions of a budget, one for baseline, one for upside one for downside and sometimes numerous other combinations. Review of these various versions wastes valuable time and blurs the truth of what should be the most realistic budget Dated material By the time the budget process begins, and budgets are sent out, received back, sent out again, revised, approved, further revised to achieve final approval, months can often pass, leading to outdated or irrelevant budgets, depending on current conditions A Typical Month End Close Process Month end data, including revenue recognition, payables and journal entries, is prepared at the site level 4

7 Files are imported, and ed or exported to corporate with primary visibility remaining on the site s general ledger, limiting the parent s visibility into the detailed transactions Financial Consolidation is then performed at the parent level Consolidation in financial accounting is a technique that summarizes a group of companies' financial statements into one. This offers the benefit of viewing the whole group's financial information together to see how all companies are doing combined Increasingly, global organizations need to integrate data from multiple transactional systems, transition to new international financial reporting standards, and improve their transparency and regulatory compliance procedures Foreign Currency adjustments must be identified at the proper rate Businesses may enter into transactions (sales, payments, etc.) in multiple currencies. Each business unit translates these items to its functional currency at an appropriate exchange rate Intercompany transactions between subsidiaries (sales, services, transfers) must be eliminated in the parent financial statements otherwise a company would be double-counting activity Data must be reviewed, reconciled and approved before process is complete Reports that finally summarize the results of the parent and subsidiary operations are issued This can often take weeks for even the largest companies! Issues That Can Surface During Month End Close Regardless of the methods, it became obvious that there are numerous shortcomings to all of these methods, such as: Relying on error prone spreadsheets, which can be difficult to audit and tie back to the GL Losing the integrity and sources of account balances from the various general ledgers Becoming overly dependent on one or two consolidation super users to write the complex macros or pivots often used to consolidate financial statements manually Difficulty meeting deadlines as the parent company becomes more and more reliant on local entities closing their books quickly Trying to push through adjustments or allocations to the local entities for certain pass through costs Ensuring that financial statements have been prepared per the proper accounting standards and compliance with foreign and domestic accounting standards Intercompany activity can be difficult to identify and even harder to reconcile 5

8 Top side adjustments may never be pushed back to the subsidiary ledgers, meaning Excel now become the only source of the truth Enduring sky high audit fees as public company audit firms need to increase testing due to difficulty relying on the consolidated financial statements Best Practices of World Class Fiance Departments While there may not be one absolutely set in stone list of best practices in the financial close cycle, some of the more time honored, fundamentally sound practices of world class finance departments include (but are not limited to): 1. Making full use of automation. To be discussed further in the Oracle BI and EPM sections below but world class companies fully leverage automation and technology in their financial close cycle. This includes automatic data extraction and importing, automatic task list and updates, cost allocations, manager approvals, and using system alerts and reminders to the fullest extent possible to minimize manual interaction and user error or oversight. 2. Utilizing key metrics or business intelligence to gauge performance. With the availability of real time business intelligence, the best departments establish key metrics and baselines like AR and AP turnover, quick ratios, supplier performance and the like. These metrics are monitored daily via dashboard and alerts. The result of this heightened attention to shareholder value is a trend toward using other value-based measures, such as EVA, ROI, and economic profit, which help to minimize surprises. Surprise in the world of finance and accounting is a dirty word. Finance organizations are leading value-based measure efforts not only for business decision-making, but also for underpinning approaches to executive compensation, strategic planning, forecasting, budgeting, and measuring on-going performance. 3. Using checklists. A proper list of checklists, developed by location, department and user with established deadlines and expectations, should be approved by management, made available to all stakeholders and updated frequently to help ensure that no critical dates are missed during the cycle. Weekly meetings of the finance department, led by the Controller, are often another best practice employed by top organizations. Employees are requested to comment on prior week s activity and discuss plans/goals for the upcoming one. 4. Delegating / Allocating responsibility where possible. Leveraging the skills of various members of the company, including those not necessarily in the finance department (Executive, Purchasing, Legal, etc.) to ensure that the financial close cycle is not seen as merely an accounting thing is critical to creating a workable process. Remember, the tone at the top sets the message for the whole company. 5. Preparing results and ensuring visibility. One of the biggest tricks to ensuring compliance and even enthusiasm as part of the financial cycle is to make sure that results are disseminated as appropriate. Keeping 6

9 employees in the dark about past results and future pans is one of the easiest ways to de-motivate employees whose cooperation may be critical. Ensure everyone realizes they have some skin in the game. 6. Eliminating redundancies. Many companies still require multiple signatures review, manual entry of seemingly critical information, photocopying and saving several years worth of data and enlisting offsite storage facilities to hold onto even the most innocuous of documentation, all in the name of compliance and best practices. The reality is that most online documentation can be scanned, input in the system or even saved to external drives at a fraction of the cost companies incur for storage. Shared services, like utilizing one global AP or Treasury department can further reduce costs, paperwork and headcount, as appropriate. Completely outsourcing other functions like payroll or collections work is also a frequent choice of top performing companies. 7. Closing weekly and forecasting monthly. Most world class finance departments perform a soft close (not an absolute close with its stricter deadlines) once a week, with results for all sites automatically consolidated, translated and reported on early the following week via a flash report. Rolling budgets are prepared monthly, with a full 13 months of forecasts reviewed, approved and updated within the budget system. Actual results are compared to budgeted results on at least a monthly basis and significant variances are commented on in the budget system. 8. Encouraging suggestions and Improvements to existing processes. A suggestion may either be made anonymously, in an inbox or via direct interaction with management, but all are considered and implemented where appropriate and/or feasible. There truly needs to be a culture of no such thing as a bad idea mentality instituted. Reward innovation and out of the box thinkers. 9. Ensuring that all the kids play well in the sand box. There will always be employees who stand out (whether good or bad) at all companies, but issues between personnel are addressed quickly and resolved, conflicts are kept to a minimum and responsibilities are allocated among personnel on an equal basis, per their responsibilities. This should ensure fair play for all, build a team orientated atmosphere and result in a much more cohesive group. 10. Documenting policies and procedures. World class finance departments ensure that there are adequately trained backups at every position, there are formal policies and procedures for key tasks within the departments and all job positions are updated regularly. This helps mitigate the risk of unfilled tasks, gray or undefined areas in employee responsibilities, and overreliance on any one individual. A World Class Financial Department with Oracle Hyperion Enterprise Performance Suite Now comes the fun part of this whitepaper: How can companies utilize existing technologies available with Oracle s Enterprise Performance Management / Business Intelligence tools to help achieve Forecasting and Financial Reporting 7

10 Excellence? We shall examine some of the available tools in these two platforms and ways they can be used to accomplish just that. Please note that your company does not need to be using Oracle EBS general ledger to utilize EPM technology. First, let s take a look at the basic EPM/BI architecture. As you can see, your organization s ERP or other legacy data system (hopefully Oracle EBS!) resides on the lowest level of the structure. Data is easily integrated into the EPM/BI platform using an extraction tool like ODI, Financial Data Quality Management or Informatica. This process can be scheduled to be performed overnight, or even in real time. This integration works equally well with your investment in Lawson, SAP, Sage, Peoplesoft or JD Edwards to name a few other ERP systems. The next level up is the fusion middleware levels, or server levels, which is where much of the system configuration is performed specific to your business. This is secret sauce of any implementation or data migration project. Oracle Hyperion Foundation Services software provides a single, shared infrastructure to install the EPM system, manage users, security, metadata and the application lifecycle. By combining the technologies to install and configure all modules, centrally create and provision user security, build and manage EPM applications and to consume EPM content via the web and through Microsoft Office, Foundation Services can ease the deployment of your Hyperion implementation - large or small. And, since Foundation Services provides easy integration with BI tools, applications, and portals through an open, service-oriented architecture, it can enhance productivity and reduce total cost of ownership of the existing information technology assets in your organization. Finally on top of all of this sits the presentation layer, which is where users may now access their applications. With Oracle Shared Services, users may access any of the applications with just a single sign on. Now, let s take a closer look at the advantages offered by each of the EPM products. By leveraging existing resources, eliminating multiple products or vendors and reducing non-compliance risk, it has 8

11 been noted that the ROI (return on investment) on implementation of any of these products is often less than a year. Planning and Forecasting Oracle's Hyperion Planning is a web driven Planning and Budgeting tool that utilizes Oracle Essbase as the data storage and calculation engine. It is the number one (by far) Planning and Budgeting Tool in the world. Hyperion Planning sits on top of the Essbase OLAP server. By leveraging Essbase' s multidimensional data model as well as standard relational database management platforms, Some of the key features/attributes of Hyperion Planning include: Hyperion Planning contains process flow management and process guidance for end users. Planning has an add-in with Microsoft Office (called Smartview) which allows users to forecast or budget in Microsoft Excel, an environment comfortable to most finance users Hyperion Planning is part of Oracle's Hyperion EPM software suite and is often utilized with Hyperion Financial Reports and Web Analysis to enhance the analytic value inherent in its underlying use of Essbase Ability to prepare continuous forecasts (rolling, event based, time based) Top-down and bottom-up budgeting capability, including ability to create different scenarios and versions. Makes Use of consistent assumptions, allocations & calculations, which can be changed as your business needs change Integrated Operational Planning to address in-depth revenue and margin planning Purpose-built Capital Assets and Workforce planning modules for fast deployment Powerful workflow and process management for budgeting and forecasting Hyperion Planning Solutions Hyperion Planning makes for a much more efficient process, controlled by Finance Budgets are ready for input immediately upon release by Finance Department Reduces time to complete, risk of stragglers, resource misuse Reduced data entry, risk of errors and risk of key files on desktops or C drives No hidden or offline files. All supporting detail can be uploaded to the Budget Easier budget consolidation no need for manual uploads, of files or transferring of files Fast calculation performance most calculations performed in 4 seconds or less Workflow feature ensures timeliness or user preparation and management review alerts to remind user of deadlines 9

12 Standard calculations and business rules maintained in database Data from your Excel or legacy planning systems is easily imported into Hyperion Planning and implementation can take a matter of weeks. The Smart View Microsoft Office feature allows users to take advantage of the comfort of their old Excel planning templates, or reconfigure them in minutes in the Planning applications. Intercompany and Consolidation Oracle Hyperion Financial Management (HFM) is a comprehensive, Web-based application that delivers global financial consolidation, reporting and analysis in a single, highly scalable software solution. HFM utilizes today's most advanced technology, yet is built to be owned and maintained by the enterprise's finance team HFM has financial controls, workflow and best-practices built into the platform to support: US GAAP and IFRS Reporting Audit Trails and Activity Logs Foreign Exchange Translations Sarbanes Oxley (SOX) Compliance Intercompany Eliminations and Consolidation XBRL Capabilities In addition to the powerful features provided "out of the box", HFM is also highly configurable to support the complex elimination and allocation requirements specific to your organization HFM is a finance-owned, IT-supported system that allows your organization to quickly make changes as conditions warrant but tracks those changes to provide transparency and visibility for auditability Ensuring that all data is integrated and validated prior to review by management Hyperion Financial Management Solutions Automating and improving the timing and efficiency of the month end close Reducing consolidation and reporting cycles by days or even weeks simply by eliminating redundant data entry and the need to check and double-check actual results Use the Financial Data Quality Management (FDM) tool to map and integrate from various GL s Using FDM (formerly known as Upstream), follow the Fish upstream to consolidate and validate data Manage the workflow and approval of the consolidation process Import Foreign Currency rates from established sites to save time and improve accuracy Drill through and Drill back into your source data and create journal entries into HFM. Faster calculation performance most calculations performed in 4 seconds or less 10

13 Automatic alerts to remind user of deadlines Create control questions manage sections 302 and 404 of Sarbanes Oxley HFM is simple to learn, quick to implement and extremely user friendly, especially with the Smart View Microsoft Office feature. Implementation can take a matter of weeks, and the ROI on the investment is usually positive a few months later. Reduce redundancies, inefficiencies, complexities, and audit fees in your month end close. Financial Close Oracle Hyperion Financial Close Management is built for centralized, web-based management of period-end close activities across the extended financial close cycle. The first application of its kind, Oracle Hyperion Financial Close Management will help manage all financial close cycle tasks including ledger and sub-ledger close, data loading and mapping, financial consolidation, account reconciliation, tax/treasury and internal and external reporting processes any task associated with the extended financial close. It coordinates the entire financial close process by ensuring all key players get automated task assignments and workflow notifications Also new in Release , the new Oracle Hyperion Disclosure Management module helps organizations create regulatory filings and XBRL instance documents for submission to the SEC and other regulatory bodies Using Microsoft Word as the authoring environment, users can hot link their financial filings to Oracle s financial reporting applications to ensure accuracy and easy updating. These filings can be produced in multiple formats, including Microsoft Word, HTML, and PDF, as well as XBRL. Oracle Hyperion Financial Close Management includes two modules: Close Manager and Account Reconciliation Manager. Close Manager Close Manager is a task management solution. Tasks can be anything that needs to be done during the close process whether in the transaction system, general ledger, consolidation system or reporting system Employees are assigned to each task and the tasks are given a due date relative to each period end date so it s easy to identify bottlenecks in the process using pre-built, web-based dashboards for monitoring the progress of the financial close Common calendar views, task list views, and Gantt views are leveraged for each user s tasks and active calendars and task lists allow users to launch applications and complete tasks from the calendar itself A roll-forward feature allows quick set up new financial close calendars based on the prior financial close Account Reconciliation Manager Account Reconciliation Manager is a module dedicated to the management of account reconciliations. 2

14 Helps companies reduce risk by providing real-time visibility into the performance of reconciliations and ensuring that all reconciliations prepared are properly qualified Helps companies streamline and optimize performance by automating certain reconciliation tasks and supporting risk-based reconciliation cycles. It enables balance integration using Oracle Hyperion Financial Data Quality Management ERP Integration Adaptor for Oracle Applications and has mapping features to summarize low-level balances to the level appropriate for reconciliation Authorized zero balance accounts and balance comparison accounts can be auto reconciled and there are easy to use features for maintaining reconciliation assignments, including mass update and import capabilities Includes Pre-built dashboards provide monitoring status, aging, performance metrics, and compliance metrics As discussed above, often companies have to manage the extended financial close process using offline spreadsheets, s and phone calls. This can be both laborious and time consuming, slows down the close process and makes it more error prone. Oracle Hyperion Financial Close Management provides the tools to centralize the management of all period-end close activities. This replaces traditional, manually maintained spreadsheets and checklists with dynamic dashboards that give users the ability to immediately view and act on information. Business Intelligence Business Intelligence (BI) has become a mainstream approach to gain insight into information locked away in corporate operational and financial systems. The drastic reduction in storage costs, consolidation of software tools and availability of skilled practitioners has made BI affordable and cost-justifiable for both large and medium-sized organizations alike. Gone are the days where projects included a seven figure price tag and upwards of a year to complete. Users may elect to customize their dashboard reports or use Oracle built standard dashboards and reports from OBIA, a set of prebuilt reports for every business module like Financial, HR, Sales, Supply Chain, Order Management, etc. Functional highlights of Oracle Business Intelligence include: Key Metrics and Interactive Dashboards that deliver personalized information in a structured format to users based on roll and security definitions Ad Hoc Analysis and Interactive Reporting that allows business users to easily create analysis from scratch or modify existing analysis Enterprise Reporting that allows for the creation of highly formatted templates, reports and documents Proactive Detection and Alerts that trigger workflows and notifications based on events or conditions Actionable Intelligence that provides users with the ability to enact business processes and Web services all from within a report or dashboard Microsoft Office Integration that embeds up-to-the-minute analytics within Microsoft PowerPoint, Word and Excel documents as well as enabling 3

15 users to easily download reports into Excel, PowerPoint or CSV files for further analysis and presentation Scorecard and Strategy Management that brings to life and organizations strategic objectives and success criteria through graphical scorecards and key performance indicators Business Intelligence has become a cost-effective technology solution to providing an organization unprecedented insight into operations, financials, customers and products. Fortunately, the nightmares of ERP implementations do not apply. BI can be implemented quickly and cost effectively. While the opportunities for BI may be vast within an organization, the best approach is to start with a small initiative focused on a specific business problem or opportunity. Where possible, pre-built applications should be employed to reduce development costs and reduce the time to business value. Conclusion While companies have transformed themselves into state of the art operations with regards to communications, technology and level of service, many finance departments have remained stuck in the past, resistant to change or struggling to keep up. An overreliance on spreadsheets, on key employees and/or manual processes has caused a strain in both the input and output of finance departments. However, this does not need to be the case any longer. By implementing some best practices utilized by world class finance departments, coupled with integration of some of the best enterprise resource management tools available from Oracle, finance departments should be able to transform themselves into a top performing member of an organization within months. Oracle s Hyperion Planning, Hyperion Financial Management, Hyperion Financial Close and Business intelligence can provide some quick solutions for even the smallest of companies to assist with their growth and improve their business processes. Hyperion s re-built packages, easy to implement, easier to customize and easiest to use allow even the most spreadsheet orientated companies to achieve Mission Possible: Achieving Forecasting and Financial Reporting Excellence using Oracle EPM/BI tools. About BizTech BizTech is recognized throughout the Mid-Atlantic and New York Metro regions as a leading IT Services firm. For more than a decade we've focused on Oracle applications, technology and consulting services for small, midsize and Fortune 500 companies. As an Oracle Platinum Partner with over 300 successful implementations, we are committed to Oracle solutions and the service we provide to our clients. 4

16 BizTech offers a unique combination of proven industry methods, and a tailored selection of experienced Oracle experts to lead your organization through changes required to manage, build, and implement business driven solutions. We offer a flexible approach enabling you to select the scope of services that will meet your business goals. Achieving Financial Excellence using Oracle EPM/BI tools April 2013 Author: Timothy J. Simkiss Business Technology Services (BizTech) 1150 First Ave Suite 320 King of Prussia, PA Phone: BIZTECH Copyright 2013, Business Technology Services Inc, All rights reserved. Trademarks: Products mentioned herin are trademarks or registered marks of their respective owners. This document is provided for infromation purposes only and the contents hereof are subject to change without notice. 5