Do you feel the costs of your management reporting are higher than the industry average? In most Fortune 500 companies, the Finance function accountable for producing accurate and timely reporting spends approximately 70% to 85% of its time gathering, consolidating and reconciling data. As a result, the high cost of employing finance labor is consumed on data crunching instead of advising CFOs on causes behind the metrics variances that drive business profitability.
World-class organizations, characterized by an effective and efficient utilization of resources, spend less than 20% on production-related activities. A simple yet highly effective approach to managing your management-reporting dilemma is to deploy the standardization, automation and migration process to reduce the heavy costs and reclaim the Finance charter to be the advisor that always provides “one version of the truth”.
The standardization process requires that you identify and eliminate the list of duplicate, “nice to have” reports and identify the common metrics and data elements produced among the many different management reports. Consolidating these reports into three categories: Profitability, Expenses, and Regulatory Reporting, will help further standardize your final selections. Oftentimes, the volume of reports keeps increasing but the exact usage of that report often remains unknown. A portion of reports that started out as “ad hoc” become regular over time and sometimes the leaders that requested the report leave their role but the “ad hoc turned regular” reports never get rationalized for continued production.
When working on automation, identify the different sources of data from where the data is procured and create a common data warehouse that auto sources data from different general ledger systems. I recommend selecting a Business Information Analytics tool that stores the data at account level and has the functionality to roll up at business entity, product, and cost center levels. The majority of Fortune 500 companies utilize many different types of management reporting tools among their different lines of business. Quite often, this is the result of the business lines not taking the time or resources to combine the different general ledgers or each simply creates their own custom Excel or Access-based solutions to meet internal and external reporting needs.
The migration process requires separation of the production and analytics portion of the report. It is recommended that you employ low cost labor either onshore or offshore that is capable of generating reports from a system that can be reviewed for accuracy. Establishing service level agreements (SLAs) and quality standards with the manager handling the production of the reports is key, as oftentimes, managers of the finance reporting function hesitate to utilize offshore resources due to issues with getting accurate reports on time.
You can expect the following results once the three step migration model has been deployed:
• Superior Business Insight for Decision Making
‐ An understanding of what’s driving the variance
‐ Improved forecast using plan, actual, and external data
‐ Enhanced comparison of different lines of business
• Swift Delivery of Management Information
‐ Information supplied on a specific date every month
‐ Improved ability to respond to ad hoc analysis, model “what if” scenarios
‐ Enhanced connectivity among your local and global companies
• Significant Cost Savings
‐ Lift and shift the “offshore” model to areas other than Finance
‐ Minimization of non-value added effort (reconciliation, manual production)
‐ Improved utilization of onshore capacity
Deployment of the three step model will lead to a more effective and efficient utilization of your resources and enable your organization to compete with world-class organizations.