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Record-to-Report Process
Balancing Speed and Quality for
Effective Shareholder Stewardship
The financial crisis of This examination of the tenets of shareholder
stewardship is a timely one, as companies and
organization fulfill its mandate as a partner
to the business in managing the companys
20072008 had a lasting individual investors have made significant growth agenda and focus on strategic
investments through new acquisitions, opportunities.
effect on global economies renewed investments in subsidiaries and
It appears, in fact, that companies are
and companies alike, and individual investments in debt and equity
securities. This influx of new capital has increasingly realizing the need for effective
while the recovery has resulted in greater scrutiny and enhanced financial close and reporting processes. The
shareholder expectationsnot only with Accenture and Oracle global study The
taken a tenuous hold, the respect to business results, but also in regard Challenges of Corporate Financial Reporting
which probed companies close, filing and
aftershocks of that crisis to the transparency of company operations
and processes in light of a more complicated reporting processes, found that fully 82
continue to prevent a full regulatory environment. percent of large companies surveyed have
made substantial changes in the last three
recovery to pre-2008 levels. The timely and accurate reporting of years to the way they approach and manage
operational results for external and the three phases of the financial close and
In this environment of continuing financial management purposes is a crucial first step reporting process.2 Figure 1 (below) from that
volatility, there has been increased for finance organizations in the quest to fulfill study illustrates the rate of change across
debate about companies perceived lack the mandate of good shareholder stewardship. various geographies.
of corporate governance and financial To that end, the close process must be
reporting controlsparticularly those in the robust, controlled and technology-enabled Based on the level of investments in the close
financial sector. Central to this debate is to provide an accurate snapshot of company process, companies clearly recognize that, in
the way in which companies deal with the performance, enabling executives and boards a business environment defined by greater
disclosure and mitigation of risk and the to make prudent business decisions. Moreover, levels of uncertainty and permanent volatility,
importance of published statutory filings a robust close process anchored in leading the ability to make better decisions quickly
that enable investors and other stakeholders practices and technologies provides the added and with confidence is not only important
to assess a companys ability to create benefit of freeing up finance resources for but can be a key differentiator for creating a
sustainable value.1 value-added activities. This helps the finance competitive advantage.
Figure 1. Reporting areas that have undergone substantial changes in the last three years
% of sample
0 50 100 150 200
Financial close
Whole sample 42 61 42 16 2 Financial reporting
Financial filings
UK 33 65 38 18 3 None of these
Dont know
USA 58 72 50 13
Benelux 35 59 14 16 4
France 53 65 33 13 1
Germany 45 54 43 23 2
Italy 33 47 43 20
Middle East 51 71 49 12 10
Nordics 41 59 41 20 6
Russia 41 63 54 10
South Africa 19 43 36 19 2
Spain 32 66 50 14 6
Nigeria 44 44 40 14 6
Source: The Challenges of Corporate Financial Reporting, published by Accenture and Oracle, May 2012
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Obtaining Better Value from Performance
Management and Reporting Investments
Yet, despite that volatility, attracting and retaining top talent,
and managing the significant volumes of new
The difficulty of compiling data is exacerbated
in multi-national enterprises where, for
recognition and the data being generated. example, reconciling and maintaining the chart
(See Figure 2.) of accounts takes on average 26.8 man-days.
resulting investment In contrast, organizations with national offices
As a result of the changing environment,
in financial close finance organizations have seen their
take almost 50 percent less time to complete
this activity13.5 man-days.2
technology, Accentures workload expand while experiencing greater
pressure to perform faster, with greater Beyond just making the close process more
research on performance accuracy and reduced costs, in a highly complex, data-related issues have very
complex environment. tangible and damaging impacts on the
management, and its close process, including delays in regulatory
experience working with While most finance organizations are keenly
aware of the need for change, their key
submission, last minute changes, potential
restatements and increased process costs.
clients across industries, priority is to cope with the amount of day- The Challenges of Corporate Financial
to-day work. An increase in complexity as Reporting study claims that 88 percent
indicates that many firms a result of expansion, globalization, strict of surveyed companies have experienced
are still unable to obtain regulations and a scattered IT landscape
often leads to a continued focus on
delays in the last 12 months when executing
financial close, reporting and filing, of which
full value from their transaction-based activities, leaving less time 70 percent were due to data-related issues.2
for truly value-added matters.
performance management The second reason the investments in
One environmental factorthe proliferation financial close technology may not have
and reporting investments. of data across the enterpriseappears to be had the desired effect is the way companies
particularly detrimental to the financial close have approached the upgrade of their close
In fact, in the Accenture High Performance
and reporting process. The Accenture and capabilities. The Accenture/Oracle study
Finance Study, which surveyed 536 senior
Oracle global study previously mentioned pointed to organizations taking a piecemeal
executives from 20 countries, only 54 percent
also found that many finance professionals rather than holisticapproach to investing
of respondents indicated their company had
face serious challenges in managing and as the main reason that capability upgrades
advanced performance management and
reporting their companys financial and non- fall short. The study results imply that
reporting capabilities.3
financial data, with 84 percent of finance process improvement, data integrity, and user
managers saying it is difficult to control the adoption focus must accompany software
One reason for this apparent lack of
quality of financial data and other supporting investments for financial close improvement
confidence in their systems may be the fact
information across the entire process, from initiatives to meet the needs or expectations
that financial executives face significant
close to filing.2 of most organizations.2
challenges from new and changing
regulations, continued market and economic
How would you rate the affect of the following environmental developments on your finance organization?
Talent
40% 49% 11%
Data
40% 51% 10%
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Lowering the Barriers to
a High-Performance Close
The process of closing ever-expanding legacy systems and their
complexity which can, over time, pose
Creates ownership and responsibility
by designating a close process owner
the corporate books and barriers to change. Provides continuous monitoring of key
performance indicators and flash reporting
reporting on the results has In our work with high-performance
companies in a wide range of industries and Allows for the adoption of leading practices
grown increasingly difficult geographies, Accenture has developed an
In Accentures experience, an effective close
and complex. Companies end-to-end process (Figure 3) beginning with
process enabled by significant automation
the collection of source transactions and
that have undergone other accounting data and ending with the
and integration on the technology front can
help companies close their books by the
creation of internal management reporting
frequent organizational and external statutory reporting. Streamlined
second workday, generate reports by the
sixth workday and report results by the 20th
restructuring, for example, and effective internal management reports
in particularprovide insight into the key
workday (Figure 4).
must change reporting value levers and metrics, enabling companies An appropriately skilled and trained finance
to focus on managing future performance
structures and account for rather than on reviewing past events.
workforce is essential to delivering an
efficient close. Our work in this space
new operating results. Accentures Integrated Record-to-Report
confirms the need for clearly communicating
roles and responsibilities to employees
Regulatory concerns are another significant Process can help companies refocus their
and investing in substantial cross-training
hurdle. Changing statutory regulations in efforts and resources. The process promotes
to help deliver the expected results.
US GAAP (Generally Accepted Accounting an efficient close moving the organizations
Principles) are ongoing, and must be reconciled attention and actions around the month-end The integrated record-to-report process takes
in many cases with IFRS (International process from data processing to information place in five steps:
Financial Reporting Standards) as well as local analysis supported by global standard
GAAP (local country statutes). processes, policies and internal controls Step 1 - Aggregate sub-ledger transactions
based on leading practices.
During this initial step, companies record
As well, companies that have not made the transactions as they are created, approved
most effective use of enabling technologies, Companies can thus benefit from
a process that: and posted. They perform end-to-end intra-
been unable to effect continuous and intercompany accounting (processing)
improvements in their reporting processes and manage all interfaces between general
Is highly disciplined and coordinated from
and failed to align organizationally may have ledger and other systems such as multiple
start to finish
also placed themselves at a disadvantage. ERP systems, legacy systems, sub-ledgers,
As reliance on financial systems grows, Delivers clear communication and
and other feeder systems. Ideally, this process
companies become more vulnerable to enforcement of a close calendar
is automated as much as possible and also
General - overall process, technology, people, Tax Investor relations, external reporting
and governance Treasury and SEC filings
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Conclusion
9
Notes
1. Financial Reporting Council, Effective
Company Stewardship Next Steps,
September 2011. Access at: http://www.frc.
org.uk/getattachment/79cd68e0-5138-4199-
9ec6-a124e40f93b0/Effective-Company-
Stewardship-Next-Steps.aspx)