Tuesday Mar 26, 2013

Best Practices in Profitability and Cost Management

I recently had the opportunity to run some roundtable discussions on best practices in profitability and cost management with financial executives attending the CFO CPM Conference in Philadelphia and CFO Rising East Conference in Orlando. The attendees represented companies in different industries ranging from manufacturing, to transportation, real estate, insurance, telecommunications and healthcare.

The premise for the roundtable discussion was this; For most organizations, aggressive cost-cutting and management were critical to remaining profitable while top line revenue was flat or shrinking during the recession. However, now many organizations taking a more “surgical” approach to profitability and cost management, by understanding which products, services, customers and channels are truly profitable and which ones are draining value from the business. In these roundtable sessions we discussed best practices in profitability and cost management, including how to accurately allocate revenue and costs to individual product lines, services, customer segments, locations, channels and other lines of business in order to improve decision-making. Here’s a summary of the feedback I received from attendees at these sessions:

At what level does your organization analyze and manage profitability? The answers to this question varied by industry and company: Insurance - region, state and products.  For example:


+ Real Estate Brokerage - offices, products
+ Healthcare Providers – hospitals, business units, departments, services, patients
+ Healthcare Insurance – products, markets, customers
+ Transportation/Freight – ship level, market (car rentals), customers
+ Manufacturing – location/site, products, major customers, projects
+ Retail – store level, regions
+ Telecommunications – business units, products


Are there any regulatory requirements driving detailed allocations of revenue and costs in your industry or organization? Based on the roundtables, the primary industries where there is a regulatory driver behind cost allocations and profitability analysis are Telecommunications, and Healthcare. (The latter as a result of the Healthcare Reform legislation and need to report on Medical Loss Ratios)

How are allocations performed to distribute revenue and costs down to the appropriate level in the business? What allocation techniques is your organization using? Here the participants indicated they are using a variety of techniques ranging from standard costing based on headcount, square footage, and revenue contribution to activity-based cost drivers and allocations for certain areas, such as customer service.

How frequently are detailed cost allocations performed? The frequency of allocations varied across individual companies. Some are performing this task on a quarterly basis, some semi-annually, one bi-weekly, and most of the participants are doing detailed allocations monthly. One company, in Transportation, mentioned they were doing this on a daily basis, running detailed P&Ls for each of their ships (pretty impressive).

What tools are used to perform the allocations and report on profitability at the line of business level? The tools used to perform detailed allocations, cost and profitability analysis included spreadsheets, ABC tools, multidimensional OLAP tools (i.e. Oracle Essbase), and in some cases, the general ledger system.

Who consumes the profitability reporting in your organization? The consumers of this information varied by industry and company, for example:


+ Insurance – product line managers, actuaries, regulators
+ Real Estate Brokerage – branch managers (with compensation linked)
+ Healthcare Providers – doctors, marketing campaign managers
+ Manufacturing – senior management, controllers, sales managers, business unit leaders, operations managers
+ Telecommunications – finance, business unit leaders


Is profitability reporting and management linked to the annual budgeting process? The answers to this question were more varied across the participants. Some leverage this information in their long-term strategic planning process, some link to their annual financial budget, and some are just starting to create a link to their planning processes.

Overall I was impressed with the feedback I received from participants in these sessions. Every company who participated was performing cost allocations and analyzing profitability at some level other than the corporate summary. Some were doing this at a very detailed level (i.e. daily ship P&L), and others at a more summarized level but looking to get more granular over time. I was also impressed with the frequency of profitability reporting, with most of the participants doing this on a monthly basis, some less frequently. And it was clear that the information being generated was actively shared and utilized beyond the finance organization to business unit leads, product managers, sales managers and other line of business decision-makers.

Areas for improvement that most participants identified included moving this process from spreadsheets to analytic tools and applications designed to automate and support detailed allocations and costing on a more frequent and repeatable basis. The good news here is that there are a number of packaged applications available in the market designed to support detailed allocations of revenue and costs. These applications include powerful reporting and analysis tools to provide insights and support improved decision-making regarding resource allocations, product/service mix, pricing, customer service and campaign strategies. Some of these are available as standalone solutions, while others are delivered within Enterprise Performance Management (EPM) application suites and provide seamless integration with EPM planning and reporting applications.

For more information about the profitability and cost management applications offered as part of Oracle’s EPM solutions please go to www.oracle.com/epm.


 

Monday Mar 25, 2013

Optimizing the Business as a Whole: The Case for Enterprise-Wide Planning

I recently interviewed David Jones, Director in PWC’s Consulting Services EPM Practice, and Simon Kenney a Senior EPM Consultant also from PWC, in a podcast about their successes in enterprise planning implementation and their research on finance effectiveness.


Initially, we discussed the research they have been conducting around planning and forecasting effectiveness; they call it the Finance Effectiveness Benchmark. For 2012, some issues were consistent with previous years. Planning, budgeting and forecasting is taking too long to pull together, it’s still too manual and requires too many resources or effort to get it done. But the interesting headline this year is that 80% of the respondents declared that the accuracy of their forecasts is critical to the running of their business, but only 45% said that their forecasts were actually reliable. This result is very concerning as this deficiency will prevent companies from making the right critical business decisions.


So what are the causes of this large deficiency?


According to Simon, a lack of integration across the entire planning process – front office to back office is a key issue. The business functions are just not engaged enough as the forecasting is mostly finance led. Sales and marketing are essential to any forecast, but they are often not engaged properly. Ultimately, those that generate the opportunities and the revenue need to be involved with the forecast.


No wonder the forecasts are not accurate!


How do companies to fix this deficiency and move to an integrated more inclusive world of forecasting? Simon suggested the following three steps are a good start.


Step 1: Identify why the forecasting process is failing (Is each function independently running their own processes? Is there a lack of clearly defined accountabilities?)


Step 2: Determine if/when the company is ready to integrate their processes. (Does it have the required level of sponsorship in place to move to an integrated planning process? Are the functions prepared for change?)


Step 3: Define a blue print or target “n” state (Design the integrated process. Determine which technology can help support the new integrated process)


These steps sound fairly simple, so I asked David what some of the more difficult or challenging things are that he sees when undertaking these steps with his customers. David indicated that there are challenges specific to each industry, but some common ones to watch for are:



  • Lack of executive sponsorship across functions (Very Key!) The drive to implement change must come from the top and be a collaborative process.

  • Miss-aligned performance measures that drive the wrong behaviour.

  • Too much granularity or unnecessary detail in the financial plan. Requests for more detail and more clarifications lengthens the process (without sufficient benefit) taking too much time and effort.


Simon shared his experience working with a large UK based motor car manufacturer – the challenges and success they had experienced.


Car manufacturers are a more traditional type of company with lots of legacy systems. Being so entrenched in these systems meant that they were not sure if they were really ready for a big bang approach to integrated planning and forecasting. They, therefore, decided to work on one area of the company at a time – in waves – so they could prove it was the right thing to do by demonstrating success and showing value to drive further change.


I asked David how real the benefits were that could be obtained through integrated planning and forecasting. David said that he sees real results in more accurate forecasts and a much better understanding of what goes on in the business, how it behaves, and the impact each business function has on delivering the optimal level of profit. These are real and tangible benefits. Individual functional areas need to understand their role in the overall plan and not behave independently.


What can organizations do today to evaluate their planning and forecasting processes? Simon suggested the following:



  • Look at your existing processes – are they collaborative and integrated?

  • How accurate are your forecasts? If you are not sure, take a retrospective look and find out.

  • How effective are the different business functions in forecasting accurately?

  • Take a look at benchmarks and case studies outside your organization and see how you measure up and what else you can achieve.

  • If you are in the spreadsheet world, re-evaluate the process and take an honest look at how it is working for you. How accurate are your forecasts?


It became quite apparent from speaking to David and Simon that it’s all about optimizing the business as a whole and not the individual parts; without enterprise planning integration, this is simply not possible.


To listen to the webcast, click here.

Monday Mar 04, 2013

Bridging the Gap Between Project Management and the CFO’s Office

Organizations undertake numerous projects and initiatives to generate revenue,  improve productivity and increase profits in the hope that they will have the desired effect. But in large and multi-national companies, how can they sensibly and efficiently decide which projects to undertake, how to assign resources, and how to fund them?

Aligning organizational plans (long term and short term) with financial plans and forecasts while enabling the various Lines of Business (LOBs) to lead the projects might sound like it would be next to impossible, but with proper project financial planning tools, it can work really well!

Whether you have indirect (or administrative projects) that generate cost but not revenue, capital projects or contract projects (that generate cost and revenue), or a combination of them, having a well defined, easy to navigate process for documenting, evaluating , funding and approving multiple projects from many LOBs is crucial for forecasting cost and revenues, and booking resources and staff.


Consider these steps:


Step 1: Plan for expenses and revenues (where appropriate), by individual project – and by groups of projects

Step 2: Generate and analyze project financials for individual projects and groups of projects

Step 3: Analyze the funding requirements and revenue generation potential for individual projects and groups of projects

Step 4: Analyze and approve workforce requirements and asset requirements for individual projects and groups of projects

Step 5: Enable the analysis, and approval process by Business Unit Leaders and Finance managers for individual projects and groups of projects within the overall financial plan

Step 6: Enable intercompany project planning and reconciliation to get a complete corporate view of projects within the overall financial plan

Step 7: Enable continued monitoring of project financials within the overall financial plan


Oracle Hyperion Project Financial Planning embraces these steps and provides the needed structure and automation to simplify an otherwise complex set of processes.

When proposing and planning new initiatives, understanding the financial implications on corporate financial plans and objectives and gaining consensus among all concerned parties are a major challenge for many organizations. Without good financial and operational information for both proposed and current projects, it is difficult to analyze and make decisions on new projects to undertake. Oracle Hyperion Project Financial Planning provides the ability for all involved parties to help with this decision making.

It bridges the gap between the detailed task oriented project plans that a project manager within each LOB maintains, and the overall impact of projects on corporate finances and resources. Management can get a holistic view of how their assets and resources are allocated, and then monitor performance and receive information about return on investment (ROI).

Oracle Hyperion Project Financial Planning bridges the gap between LOB project management and the financial plans and forecasts within the CFO’s office.

For more information, click here to read Oracle’s new whitepaper on Oracle Hyperion Project Financial Planning: Aligning Financial and Project Plans.

Monday Feb 25, 2013

Gartner Positions Oracle as a Leader in CPM Suites

On February 14th Gartner released their 2013 Magic Quadrant for Corporate Performance Management Suites report. In the report, Oracle was recognized as a Market Leader for the sixth consecutive year.


Gartner’s Magic Quadrant reports position vendors within a particular quadrant based on their completeness of vision and ability to execute. In this year’s report, among the market leaders, Oracle is positioned with the highest ability to execute and the strongest in completeness of vision.


Here’s an excerpt from the report with some comments about Oracle from Gartner:


“Oracle is a Leader in CPM suites, and the Hyperion brand is respected by finance executives worldwide. Oracle has a very broad and deep CPM product suite, which employs a multiproduct approach with different applications for each of the major CPM processes; however, these products employ a common foundation and administrative components. The vendor has a well-established partner channel and Hyperion skills are plentiful among the consultant community, given the well-established products.”


Oracle Hyperion Performance Management Applications are part of Oracle Business Analytics, which combine market-leading enterprise performance management applications with business intelligence tools and technology and analytic applications to help organizations strategize, plan and optimize business operations and achieve better business outcomes.


Click here to learn more:  reportpress release


For more information about Oracle’s Hyperion Performance Management Applications please go to www.oracle.com/epm.

Wednesday Feb 13, 2013

Tax Provisioning: Simplify, Standardize then Automate

Tax provisioning is a process that has become increasingly more complex to perform, but increasingly more important to do well. I recently interviewed Andy Oliver, a PWC Director in their Tax Practice and an expert in Tax Provisioning, in a Podcast which I feel sheds some light on this increasingly complex matter. To listen to the Podcast, click here.


Tax provisioning is the process of reporting current and deferred income taxes in a company’s financial statements – tax on current profits and estimated future tax on future profits. There are a myriad of rules and requirements for calculations and disclosure that apply to different companies and countries and they are changing all the time. It is extremely important to have accurate, transparent calculations as when and what to pay and defer can make a huge difference to a company’s bottom line.


How do most tax accountants and departments manage this process? Andy indicated that a majority of companies pull this information together through numerous and large spreadsheets with complex and convoluted calculations. And although these spreadsheets offer flexibility – to keep up with the ever changing rules – they do not provide consistency in calculations, standardization of the process, or data security. This means that the calculations and resulting reports are error prone and can cause countless hours of work to find and correct the errors.


Ideally, the tax provisioning process should be performed early in the financial close process to get a really good picture of the end result. However, inevitably being early in the process means the financial results will change and the provision or estimation will have to be recalculated. Having the tax provisioning process integrated with the financial close process and systems makes a lot of sense, from an efficiency standpoint, to reduce the amount of work required each time there is a change to the financial results. We also discussed how important it is to SIMPLIFY the tax provisioning process and then standardize and automate the process before integrating with the financial close process to be truly effective and world-class.


Oracle’s Hyperion Tax Provision solution was designed to provide this integration with the financial close process and drive efficiency into the tax provisioning and disclosure process.


Finally, Andy had this advice for the listeners, “If you can align the tax reporting process with the financial close process – eliminating much of the manual, spreadsheet-based calculations, you will get the job done quicker, experience fewer mistakes, and be able to spend more time doing the important part of your job as a tax accountant; analyzing the numbers, and providing insight on the results such as WHY the numbers are different from forecast or from last year.


For more information on the Oracle Hyperion Tax Provision solution, click here.


To listen to the podcast, click here.


 

Monday Dec 17, 2012

Integrated Reporting is Getting Closer

Oracle recently sponsored a webcast on CFO.com titled:  The CFO Playbook on Integrated Reporting: Integrating Sustainability into Financial Disclosures.  The speakers for this webcast were James Margolis, partner with Environmental Resources Management (ERM), a global provider of environmental, health, safety, risk and sustainability consulting services (EHSS) and Mike Wallace, Director of the Global Reporting Initiative's Focal Point USA.


This webcast focused on why top companies in the U.S. and overseas are incorporating sustainability content into their annual reports and other financial disclosures. The speakers discussed the benefits of integrating sustainability reporting with traditional financial reporting. They noted how investors, corporate directors, lenders and most recently, the Securities and Exchange Commission, use this information to better understand, benchmark and value companies. They also discussed the November 2012 release of an Integrated Reporting Framework by the International Integrated Reporting Council (IIRC).  See the press release and link to the framework here. 


The shift towards integrated financial and sustainability reporting is gaining momentum with a number of global stock exchanges endorsing this approach in 2012.  See the links here if you want to listen to the webcast or download the slides. Also, here is a demonstration of Oracle’s solution for integrated financial and sustainability reporting. If you’re interested in learning more about this and Oracle’s other Sustainability Reporting solutions, click here.


If you have any questions or need additional information, please feel free to contact me at john.orourke@oracle.com.

Friday Oct 19, 2012

Why CFOs Should Care About Big Data

The topic of “big data” clearly has reached a tipping point in 2012.  With plenty of coverage over the past few years in the IT press, we are now starting to see the topic of “big data” covered in mainstream business press, including a cover story in the October 2012 issue of the Harvard Business Review. 


To help customers understand the challenges of managing “big data” as well as the opportunities that can be created by leveraging “big data”, Oracle has recently run and published the results of a customer survey, as well as white papers and articles on this topic.  Most recently, we commissioned a white paper titled “Mastering Big Data: CFO Strategies to Transform Insight into Opportunity”.


The premise here is that “big data” is not just a topic that CIOs should pay attention to, but one that CFOs should understand and take advantage of as well.  Clearly, whoever masters the art and science of big data will be positioned for competitive advantage in their industries or markets.  That’s why smart CFOs are taking control of big data and business analytics projects, not just to uncover new ways to drive growth in a slowing global economy, but also to be a catalyst for change in the enterprise.  With an increasing number of CFOs now responsible for overseeing IT investments and providing strategic insight to the board, CFOs will be increasingly called upon to take a leadership role in assessing the value of “big data” initiatives, building on their traditional skills in reporting and helping managers analyze data to support decision making.


Here’s a link to the white paper referenced above, which is posted on the Oracle C-Central/CFO web site, as well as some other resources that can help CFOs master the topic of “big data”:


White Paper “Mastering Big Data:  CFO Strategies to Transform Insight into Opportunity


CFO Market Watch article:  “Does Big Data Affect the CFO?”


Oracle Survey Report:  “From Overload to Impact – An Industry Scorecard on Big Data Industry Challenges”


Upcoming Big Data Webcast with Andrew McAfee


Here’s a general link to Oracle C-Central/CFO in case you want to start there:


www.oracle.com/c-central/cfo


Feel free to contact me if you have any questions or need additional information:  john.orourke@oracle.com


Wednesday Oct 03, 2012

Planning in the Cloud - For Real

One of the hottest topics at Oracle OpenWorld 2012 this week is “the cloud”.  Over the past few years, Oracle has made major investments in cloud-based applications, including some acquisitions, and now has over 100 applications available through Oracle Cloud services. 


At OpenWorld this week, Oracle announced seven new offerings delivered via the Oracle Cloud services platform, one of which is the Oracle Planning and Budgeting Cloud Service.  Based on Oracle Hyperion Planning, this service is the first of Oracle’s EPM applications to be to be offered in the Cloud.    This solution is targeted to organizations that are struggling with spreadsheets or legacy planning and budgeting applications, want to deploy a world class solution for financial planning and budgeting, but are constrained by IT resources and capital budgets. With the Oracle Planning and Budgeting Cloud Service, organizations can fast track their way to world-class financial planning, budgeting and forecasting – at cloud speed, with no IT infrastructure investments and with minimal IT resources.


Oracle Hyperion Planning is a market-leading budgeting, planning and forecasting application that is used by over 3,300 organizations worldwide.  Prior to this announcement, Oracle Hyperion Planning was only offered on a license and maintenance basis.  It could be deployed on-premise, or hosted through Oracle On-Demand or third party hosting partners.  With this announcement, Oracle’s market-leading Hyperion Planning application will be available as a Cloud Service and through subscription-based pricing. This lowers the cost of entry and deployment for new customers and provides a scalable environment to support future growth.


With this announcement, Oracle is the first major vendor to offer one of its core EPM applications as a cloud-based service.  Other major vendors have recently announced cloud-based EPM solutions, but these are only BI dashboards delivered via a cloud platform.   With this announcement Oracle is providing a market-leading, world-class financial budgeting, planning and forecasting as a cloud service, with the following advantages:


·                     Subscription-based pricing


·                     Available standalone or as an extension to Oracle Fusion Financials Cloud Service


·                     Implementation services available from Oracle and the Oracle Partner Network


·                     High scalability and performance


·                     Integrated financial reporting and MS Office interface


·                     Seamless integration with Oracle and non-Oracle transactional applications


·                     Provides customers with more options for their planning and budgeting deployment vs. strictly on-premise or cloud-only solution providers.


The OpenWorld announcement of Oracle Planning and Budgeting Cloud Service is a preview announcement, with controlled availability expected in calendar year 2012.  For more information, check out the links below:


Press Release


Web site


If you have any questions or need additional information, please feel free to contact me at john.orourke@oracle.com.

Thursday Sep 13, 2012

What's Happening in Business Analytics at OpenWorld 2012?

Oracle OpenWorld 2012 is rapidly approaching on September 30th when we take over the city of San Francisco for five days.  The Business Analytics this year is our strongest ever with over 150 EPM, BI, Analytics and Data Warehousing sessions delivered by Oracle, our customers and partners.  We’ll also have Hands-On Labs, 20 demo pods dedicated to Business Analytics products, and over 30 partners exhibiting their solutions. 


So what’s hot in the Business Analytics program at OpenWorld?  Here are some of the “can’t miss” sessions at this year’s conference:



  • The EPM and BI general sessions, led by SVP of Product Development Balaji Yelamanchili will highlight what’s new provide a view into Oracle’s EPM, BI and Analytics strategies.  Both sessions are scheduled on Monday, October 1st.

  • Thursday Keynote:  See More, Act Faster:  Oracle Business Analytics, led by Oracle President Mark Hurd, will provide a view into Oracle’s strategy for Business Analytics, especially engineered systems designed to provide extreme performance for the most rigorous analytic tasks.

  • Superfast Business Intelligence with Oracle Exalytics.  Hear about various business intelligence scenarios in which Oracle Exalytics provides exemplary value—from operational reporting and prepackaged applications to analytics on unstructured data.

  • Turn Insights into Real-Time Actions with Oracle Business Intelligence Mobile.  Learn how Oracle Business Intelligence Mobile enables organizations to deliver relevant information and turn insight into real-time action, no matter where employees are located.

  • Empowering the Business User: Introduction to Oracle Endeca Information Discovery.  Find out how you can find fast answers to the new questions that confront your business every day, while avoiding the confusion and inconsistencies brought about by spreadsheets and desktop tools.

  • Big Data:  The Big Story.  Learn how to harness big data, your existing data, and predictive analytics to make better decisions in an environment of rapid shifts in behavior and instant feedback.  Learn about the technologies that constitute a big data architecture, how to leverage and implement advanced analytics for real-time decisions, and the tools needed to know the unknown.

  • Planning at the Speed of Business with Oracle Exalytics.  Learn how Oracle Hyperion Planning leverages the power of Oracle Exalytics to do planning faster, with more detail and more users than ever.


For more details on these and other Business Analytics sessions at OpenWorld, download the Focus On Business Analytics program guide at:  http://www.oracle.com/openworld/focus-on/index.html


We look forward to seeing you in San Francisco!

Friday Aug 03, 2012

What CFOs Need to Know About the Cloud

“The Cloud” has become one of the hottest buzz topics in the industry this year, and what started out as a topic mostly of interest to IT executives is quickly moving to the radar screen of CFOs and Finance Executives.  To help companies understand “the cloud”, as well as the advantages and considerations of cloud computing, Oracle has recently published a number of articles, white papers and videos on this topic. 


Some of the advantages of cloud-based applications include improved time to value, reduced up-front costs, leveraging 3rd party skill sets and having a scalable environment to support future growth.  Some of the considerations and risks include security, performance, integration of cloud-based applications with on-premise systems and long-term costs of ownership.


Here are some links to articles, case studies and videos covering what CFOs should know about the cloud on Oracle C-Central:


Partner Perspectives video: What CFOs Should Know About the Cloud


CFO Market Watch article: What CFOs Should Know About the Cloud


Essex County Council Adopts Cloud Computing for Payroll to Save US$ Millions & Offer Shared Services


Here’s a general link to Oracle C-Central/CFO in case you want to start there:


www.oracle.com/c-central/cfo


Here’s an article from Profit Magazine that might be of interest:


Five Ideas: Finance - What CFOs need to know about cloud and other technology solutions


Feel free to contact me if you have any questions or need additional information:  john.orourke@oracle.com


Thursday Jul 19, 2012

Progress Towards Integrated Financial and Sustainability Reporting

A few weeks ago in June 2012, thousands of diplomats, world leaders, executives of corporations, institutional investors as well as social and environmental activists gathered in Rio de Janeiro for the U.N. Conference on Sustainable Development, a.k.a. Rio +20 Earth Summit.  Among the agenda items discussed was corporate sustainability disclosures - and although a global agreement was not reached on this topic, there was some progress made here. 


While over 2000 organizations already have registered sustainability reports with the Global Reporting Initiative (GRI), and more than 3000 organizations have submitted their environmental information to the Carbon Disclosure Project (CDP), investors are pushing for more consistency and global standards in environmental and sustainability reporting and standards are being defined for integrating sustainability reporting with financial reporting. 


Towards this goal, the Nasdaq OMX Group Inc. joined stock exchanges in Sao Paulo, Johannesburg, Istanbul and Cairo in an effort to require listed companies to report material information about environmental, social and governance risks.  


Also at the conference, UK deputy prime minister Nick Clegg revealed a government mandate that will force companies listed on the London Stock Exchange’s main market to publish the full details of their greenhouse gas emissions.  What this means is that all LSE-listed businesses will have to report total greenhouse gas emissions for the year beginning April 2013. The regulations will be reviewed in 2015, before ministers decide whether to extend the approach to all large companies starting in 2016.


By encouraging companies to take social and environment dimensions into consideration, and by helping investors to make socially responsible decisions, the exchanges are hoping to enhance transparency of information in capital markets and help create more aware investors.


These exchanges agreed to urge their more than 4,600 listed companies to measure and report on environmental and governance issues such as greenhouse gas emissions, water usage and gender equality, or explain why they won’t. They are also asking more exchanges to join the effort.


So again, while a global standard was not agreed upon at the conference, some progress was made in getting additional stock exchanges to require or encourage listed companies to provide more disclosures to investors and other stakeholders about the environmental and social impacts of their organizations, in addition to their financial results.  These initiatives are positive steps towards the adoption of “integrated reporting”, or the alignment of sustainability reporting with financial reporting which I covered in a prior article on this blog.  See link here:


https://blogs.oracle.com/epm/entry/integrating_sustainability_reporting_with_financial


For more information about the Rio 20+ Earth Summit and announcements made there, see the links below:


http://www.environmentalleader.com/2012/06/20/firms-on-london-stock-exchange-will-be-forced-to-report-co2-data/


http://www.businessweek.com/news/2012-06-19/nasdaq-joins-four-exchanges-in-sustainability-effort


http://www.forbes.com/sites/mindylubber/2012/06/19/a-tipping-point-on-sustainability-disclosure-in-rio/


For more information about Oracle’s solutions for environmental and sustainability reporting, check out the following resources:


Press Release - http://www.oracle.com/us/corporate/press/513393


Sustainability Reporting page on O.com – http://www.oracle.com/us/products/applications/green/risk-performance-management-304575.html#sustainabilityreporting


Feel free to contact me if you have any questions or need additional information:  john.orourke@oracle.com

Friday Jul 13, 2012

Account Reconcilations - Making this Less of a Headache

The finance department in most organizations is coming under increasing pressure to transform and streamline the financial close and reporting function while continuing to maintain the integrity of the financial statements and close process. A key part of this close process includes the completion of detailed account reconciliations, which can be a major bottleneck and headache in the close process. The necessity for understanding and certifying an account balance and its transactions is prompted by regulatory and audit control requirements. In addition to the statutory pressure for account reconciliations, the current economic situation makes it imperative for Finance executives to understand the details and transactions behind every account. They need to be able to easily identify fraudulent, improper and excessively aged transactions. In most organizations, the account reconciliation process is a very time consuming and manual process. A robust and integrated account reconciliation software application   will allow Finance to more effectively manage their business.


Account Reconciliations Can Extend the Financial Close and Introduce Risk


Medium to large organizations often have the need to perform thousands of account reconciliations during the quarter-end or month-end close.  Examples of the typical reconciliations include tying general ledger balances to sub-ledger balances, general ledger balances to bank account balances, general ledger balances to data warehouse balances, and consolidation application account balances to general ledger account balances.  Most organizations also maintain reconciliations of general ledger balance sheet accounts such as prepaid expenses or accrued liabilities.


This tedious process is typically performed in Microsoft Excel, where Finance staff manually tie out the list of items in a spreadsheet to those in the general ledger and other systems.  Managers usually send emails or make phone calls to track progress and follow up on delinquencies.  Due to the challenges in tracking account reconciliations, companies typically prepare and review most reconciliations on the same schedule and are often not factoring in risk when determining frequency and due dates.  Common failure points include:


- Missing or lost reconciliations


- Unreconciled accounts


- Improper use of roll-forwards


- Reconciliation of the wrong balance (balance changed after certification)


- Insufficient justification or documentation


When these failures occur, audit findings can result in a significant deficiency or a material weakness in internal control, and costs can reach the hundreds of thousands, or even millions of dollars.


Integrated Account Reconciliation Management Applications Meet the Challenge


Leading edge Finance organizations are now looking to eliminate spreadsheets and manual processes used to support account reconciliations, and adopt packaged software applications designed to automate and streamline the process.  But it’s not enough to have a packaged software application to support account reconciliations, this application should also be integrated with financial close workflow, and the various systems in which account balances and transaction detail reside, such as financial consolidation applications and specific general ledgers.  Key features in account reconciliation software packages include:


- Currency translation


- Audit controls for all activities


- Reporting and Monitoring


- Pushback of reconciliation adjustments to source systems


- Rule based thresholds for automatic certification and risk assessments


- Workflow support for reconciliation process


- Tasks and task assignments


The key benefits of integrated and packaged account reconciliation software packages include efficiency gains as well as reduction in risk to Finance organizations.  Efficiency gains can be measured by the value in labor savings achieved by making the administration, preparation, and review of account reconciliations more efficient.  Reduction in risk can be measured by the avoidance of costs associated with a failure in internal controls around account reconciliations.  If material weaknesses are found and announced in external audits, the consequences can be costly.  Companies incur expenses for additional legal and audit fees and there can be an impact on the stock price for publicly-held entities.


In summary, with increasing pressure to reduce close times and improve the integrity of financial reporting, Finance departments need to eliminate spreadsheets and manual processes and adopt technologies that can help automate and streamline the financial close process and eliminate the chances for errors, omissions and fraud.  Integrated and packaged account reconciliation software applications can help alleviate a major bottleneck in the financial close process, increase accuracy and reduce risk, and can complement existing investments in financial consolidation, financial reporting, financial close workflow and transaction processing systems.


Here’s a link where you can find information about how the new Account Reconciliation Manager feature in Oracle Hyperion Financial Close Management can help make account reconciliations less of a headache:


http://www.oracle.com/us/solutions/ent-performance-bi/financial-close-065894.html


Also, here’s a link to a recent webcast replay on this topic:


https://oraclemeetings.webex.com/ec0605lc/eventcenter/recording/recordAction.do;jsessionid=gLMyQNcpqmQSGGf8h2YNZYT2gcwpdQNyTjvlxMj2hP0rXFJSSDTz!-866538466?theAction=poprecord&actname=%2Feventcenter%2Fframe%2Fg.do&actappname=ec0605lc&renewticket=0&renewticket=0&apiname=lsr.php&entappname=url0107lc&needFilter=false&&isurlact=true&rID=69582487&entactname=%2FnbrRecordingURL.do&rKey=168b45687e963894&recordID=69582487&siteurl=oraclemeetings&rnd=0489765029&SP=EC&AT=pb&format=short


Please contact me if you have any questions or need more information:  john.orourke@oracle.com

Tuesday Jul 10, 2012

Challenges in Corporate Reporting - New Independent Research

Earlier this year, Oracle and Accenture sponsored a global study on trends in financial close and reporting. We surveyed 1,123 finance professionals in large organizations in 12 countries around the world during February and March.


Financial Consolidation and Reporting is the most mature aspect of Enterprise Performance Management with mainstream solutions having been around for over 30 years. But of course over this time there have been many changes and very significant increases in regulation. So just what is the current state is Financial Consolidation and Reporting in our major corporations across the world? We commissioned this independent research to find out. Highlights of the result are:


          Seeking change: Businesses recognize they need to invest in financial reporting to address the challenges they currently face. 47 percent of companies have made substantial investments over the last year to the financial close, filing, and reporting processes.


          Ineffective investments: Despite these investments, spreadsheets (72 percent) and e-mails (68 percent) are still being used daily to track and manage reporting, suggesting that new investments are falling short of expectations.


          Increased costs and uncertainty: The situation is so opaque that managers across the finance function are unable to fully understand the financial impact or cost implications of reporting, with 60 percent of respondents admitting they did not know the total cost of managing and publicizing their financial results.


          Persistent challenges: 68 percent of respondents admitted that they have inadequate visibility into reporting processes, while 84 percent of finance managers surveyed said they find it difficult to control the quality of financial data across the entire reporting process.


          Decreased effectiveness: 71 percent of finance managers feel their effectiveness is limited in some way by data-analysis–related issues, while 39 percent of C-level or VP-level respondents say their effectiveness is impaired by limited visibility.


          Missed deadlines: Due to late changes to the chart of accounts, 15 percent of global businesses have missed statutory filings, putting their companies at risk of financial penalties and potentially impacting share value.


The report makes it clear that investments made to date by these large organizations around the world have been uneven across the close, reporting, and filing processes, which has led to the challenges these organizations currently face in the overall process. Regardless of whether companies are using a variety of solutions or a single solution, the report shows they continue to witness increased costs, ineffectual data management, and missed reporting, which—in extreme circumstances—can impact a company’s corporate image and share value.


The good news is that businesses realize that these problems persist and 86 percent of companies are likely to make a significant investment during the next five years to address these issues. While they should invest, it is critical that they direct investments correctly to address the key issues this research identified:


          Improving data integrity


          Optimizing processes


          Integrating the extended financial close process


By addressing these issues and with clear guidance on how to implement the correct business processes, infrastructure, and software solutions, finance teams will find that their reporting processes are much more effective, cost-efficient, and aligned with their performance expectations.


To get a copy of the full report:


http://www.oracle.com/webapps/dialogue/ns/dlgwelcome.jsp?p_ext=Y&p_dlg_id=11747758&src=7300117&Act=92


To replay a webcast discussing the findings:


http://www.cfo.com/webcast.cfm?webcast=14639438&pcode=ORA061912_ORA

Tuesday May 29, 2012

What's Going on With IFRS?

There hasn’t been much news lately about the adoption of IFRS in the United States, and I have received some questions from customers and partners on this topic.  So here’s a quick update.


Most of the world has moved to International Financial Reporting Standards (IFRS) with the last holdouts being Japan, India and the United States.  Japan has started the transition process and should be complete by 2015 and India will be in transition through 2018.  The Financial Accounting Standards Board (FASB) has been discussing and working with the International Accounting Standards Board (IASB) on the convergence of US GAAP and IFRS for many years.   The reality is that the United States Securities and Exchange Commission (SEC) is not going to force a switch entirely over to IFRS, but is proposing a slow convergence of US GAAP with IFRS principles over time.  In fact the latest word being used to describe this process is “condorsement”, as per a proposal issued by the SEC in May 2011. 


There are a number of convergence projects now being worked on between the two standards committees, but the four that are in focus currently relate to Financial Instruments, Revenue Recognition, Financial Statements and Leases.  Exposure drafts on these topics were released for public comment back in 2010 and SEC board reviews occurred in 2011.  The expected timeline for adoption of the revised US GAAP rules in these areas is highlighted below.


Revenue:  Exposure draft closed, comment period over, the boards are mulling the exact wording.   This is expected to be finalized in late 2012.  Effective date unknown – but not likely until 2015, with retroactive reporting back to 2013.


Leasing:  Principles established, exposure draft still being finalized.  Anything that meets the definition of a lease will be on the balance sheet as a right to use asset and a lease liability.  P&L expense will distinguish the interest element from the usage element.  Some issues still to be resolved.  This is expected to be finalized in 2013.


Financial Statement Reporting: Postponed indefinitely.


Financial Instruments:  Progress, dialogue this year between FASB & IASB.  Basel III, Dodd-Frank, JPMorgan Chase, Greek exposure all factors in getting this one done.  No final dates at this point.


The SEC has not made their announcement, but everyone is pretty certain that what they will do is ask the FASB to expose the IFRS statements, other than the 4 convergence ones listed above, as ASUs (Accounting Standards Updates) to US GAAP: that is, FASB will adopt IFRS, not companies.    Companies will then adopt the IFRS statements as US GAAP Updates as FASB rolls them out, but absolutely no details are available on that program currently.


Oracle has staff carefully tracking these developments and provides features and capabilities in our financial management applications designed to help customers migrate smoothly from their local GAAPs to IFRS.  For news and updates on US GAAP/IFRS convergence projects, please consult the following resources:


US SEC:  http://www.sec.gov/


FASB:  http://www.fasb.org/home


IASB:  http://www.ifrs.org/Home.htm


For information about how Oracle’s financial management solutions can help with the transition to IFRS:


http://www.oracle.com/us/solutions/corporate-governance/ifrs/061806.html


Please contact me if you have any questions or need more information:  john.orourke@oracle.com

Thursday Apr 12, 2012

What's New in Oracle's EPM System?

Oracle’s EPM System R11.1.2.2  is now generally available to customers and partners on the download center.  Although the release number doesn’t sound significant, this is a major release of Oracle’s Hyperion EPM Suite with new modules as well as significant enhancements across the suite. 


This release was announced back on April 4th as part of Oracle’s Business Analytics Strategy launch, so analytics is a key aspect of the release.  But the three biggest pieces of news in this release are Oracle Hyperion Planning support for the Exalytics In-Memory Machine, the new Project Financial Planning Application and the new Account Reconciliations Manager module.


The Oracle Exalytics In-Memory Machine was announced back in October 2011, at Oracle OpenWorld.  It’s the latest installment from Oracle in a line of engineered systems that combine Oracle Sun hardware, with Oracle database and application technologies – in solutions that are designed to provide high scalability and performance for specific tasks.  Exalytics is the first engineered system specifically designed for high performance analytics.  Running in-memory versions of Oracle Essbase, as well as the Oracle TimesTen database and Oracle BI tools, Exalytics provides speed of thought response times for complex analytic processes with advanced visualizations.  Early adopter customers have achieved 5X to 100X faster interactivity and 6X to 10X faster planning cycles.  Hyperion Planning running with Oracle Exalytics will support enterprise-wide planning, budgeting and forecasting with more detailed data, with hundreds to thousands of users across an organization getting speed of thought performance.


The new Hyperion Project Financial Planning application delivered with EPM 11.1.2.2 is also great news for Oracle customers.  This application follows on the heels of other special-purpose planning applications that Oracle has delivered for Workforce and Capital Asset planning.  It allows Project Managers to identify project-related expenses and revenues, plan and propose new projects, and track results over time. Finance Managers can evaluate and compare different projects, manage the funding process, monitor and report the actual financial results and impacts of projects and project portfolios. This new application is applicable to capital projects, contract projects and indirect projects like IT and HR projects across all industries.  This application is a great complement to existing Project Management applications, and helps bridge the gap between these applications, and the financial planning and budgeting process.


Account reconciliations has to be one of the biggest bottlenecks and risks in the financial close and reporting process, and many organizations rely on spreadsheets and manual processes to perform this critical process.  To help address this problem, Oracle developed an Account Reconciliation Manager module that is being delivered as part of Oracle Hyperion Financial Close Management.   This module helps automate and streamline account reconciliations and eliminates the chances for errors, omissions and fraud.  But unlike standalone account reconciliation packages, it’s integrated with the rest of the Oracle Hyperion Financial Close suite, and can integrate balances from any source system.  This can help alleviate a major bottleneck in the financial close process, increase accuracy and reduce risk, and can complement existing investments in Hyperion Financial Management, as well as Oracle and non-Oracle transaction processing systems.


Other enhancements in this release include an enhanced Web 2.0 interface for Hyperion Planning and Hyperion Financial Management (HFM), configurable dimensionality in HFM, new Predictive Planning feature in Hyperion Planning, new Detailed Profitability feature in Hyperion Profitability and Cost Management, new Smart View interface for Hyperion Strategic Finance, and integration of the Hyperion applications with JD Edwards Financials.


For more information about Oracle EPM System R11.1.2.2 check out the links below:


Press Release:  http://www.oracle.com/us/corporate/press/1575775


Product Information on O.com:  http://www.oracle.com/us/solutions/business-analytics/overview/index.html


Product Information on OTN:  http://www.oracle.com/technetwork/middleware/epm/downloads/index.html


Webcast Replay:  http://www.oracle.com/us/go/index.html?Src=7317510&Act=65&pcode=WWMK11054701MPP046


Please contact me if you have any questions or need additional information – john.orourke@oracle.com

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This blog will highlight key EPM market trends, recent events and other news of interest to our field, customers and partners.

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