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Automating Financial Consolidation and Reporting Webinar

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Automating Financial Consolidation WebinarWith today's stringent controls on reporting timeliness and accuracy and increased internal demands for meaningful financial information optimizing the financial close and disclosure process is more important than ever for companies. This Automating Financial Consolidation Webinar focuses on current and emerging trends in the technology available to ease the enormous challenges posed in effectively and accurately consolidating company financial results across business units, multiple subsidiaries and international locations, as well as budgeting and forecasting for these entities.

This video is from the Proformative webinar "Automating Financial Consolidation and Reporting" held on January 10, 2013.  The webinar featured a presentation from Tom Kelly, T-Edwards, Inc.

 

Automating Financial Consolidation Webinar

 

Let's get into this. We're going to be talking about consolidation, and all the wondrous challenges facing us these days with consolidation. Whether it's within one country or across several countries. We'll also talk about how the cloud can help you really kind of jump start and help you out in this process. We make it much more efficient, much more informative, accurate and intuitive.

Let's talk a supporting today's global business environment. I want to be clear about this. Let's say global as we talk about this. Consolidations as I say, can happen within one country. There's plenty of companies that I have worked with that have several subsidiaries here in the US, and they're just solely US based.

The challenge, believe it or not, I think is relatively the same. However, some of the requirements and details might be different. In essence, let's talk about where your employees are and your customers. They're spread around the globe or spread around the country. There's a complex currency translation environment that exists today, and the re-valuation of that, and the requirements that we have for accounting. That is true across the board things are almost changing daily in that area.

There are large numbers of companies that, minority interest eliminations that you're going to have to perform. Some of us may do it manually through Excel, etc. However, I believe it is a rather tedious process to do that. Then think about the local tax compliance. Just sales tax here in the US is mind boggling. [Inaudible 01:38] evaluated tax, etc.

There's a whole host of things that from a compliance standpoint you can really get dinged and fined for if you're not on top of it. That goes in line with the next one which is increase in the [inaudible 01:52]. If we don't have the auto trail, and the tax auditor comes in, nine times out of ten, you're going to get a nice little fine.

Ultimately, when you get down to IT in general, scant, if you will, a nice English word there, scant local IT resources. When you think about that if you are global, or again, even here within the US, having the appropriate IT resources available on site is getting to be more and more of a challenge for companies, both large and small.

When you combine that with the substantial local and global changes that are going on today, there's a greater need for visibility into the business. Being able to understand exactly what's happening, not just locally, but, globally. Such that you can explain if you're a public company, and you're doing your quarterly calls or whatever it might be.
You're going to want to make sure you're on top things, and that the investment community feels that from what you're telling them.

Local sales tax changes, again, sales tax here in the US, plus the other ones, and even globally. Taxes, and tax flows change. On some level it's almost like a commodity how quickly they can change. Trying to stay on top that is more than a full time job.

Geographically there's a lot of regulatory change when certain types of accounting and reporting is required. Really trying to be able to stay on top of that is quite a gargantuan effort. Then let's say we're a company that's going through mergers and acquisitions. There's all different types of laws across the world as to how you're going to account for that, and how you're going to report on that.

New billing models. In this day and age, we talk about the cloud. The [inaudible 03:37] billing, being able to bill for that. Recognizing that revenue, so that you're in compliance with the accounting procedures and policies of the areas you're operating within. Then even launching new subsidiaries and new geographies as an organization, being able to accomplish that somewhat seamlessly when you're going to come down to consolidating those results and reporting on those results.

I talked a little bit about the shrinking IT resources. Again, I'm not totally sure it's shrinking, it's just that there's a limited amount of resources and the amount of IT involvement that's going to be required if you're holistically on premise. I mentioned about the new billing modules, but the new revenue recognition models are pretty complex and pretty stringent how you need do things so, being about to stay on top of those requirements, again, is quite the challenge.

Here's a wonderful schematic. Let's talk about a company that is global. This is at the worldwide headquarters on top, and what you can see here is that picture is almost the same for every area. We have a situation where we're at the corporate level, worldwide headquarters, and we've got various types of systems that we're using. They're pieced together, there's not a single database. You see Excel in there which is the de-facto reporting and requirement tool for many of us out there today.

Then you go down to let's say the region, the Americas, Europe, Asia-Pacific. Again, you're going to have situations out there where you've got organizations using certain types of products and applications, again not tied together. Various different [inaudible 05:14] accounts, you name it. It becomes very complex.

Then you get into the country that we're talking about. The tax requirement, the reporting requirement, the accounting regulations. Being able to stay on top of those, and once again, when you get into the operating units, you have this existing mish-mosh for lack of a better term, of your IT infrastructure. How your reporting comes together, how people interact with the applications to be able to provide information how the organization is performing.

Now with the wonders of technology, if we go back to that page, there's going to be these lines, these spaghetti lines being drawn or hairballs if you will. I would argue that each one of these lines is, you could probably put about 5, to 15, to 20 people on each one of those lines, in terms of people that are involved in either making the application work right, getting information into the system, verifying the information that goes to the next person is right.

You name it, it's profound in terms of how much redundancy we have within an organization, such as a worldwide headquarter item. Or, [fact B] even if you're here operating in the United States and you've got three other different departments across the United States. This scenario exists and stays out there across the continuum it is consolidation. So what does this mean? What does that schematic mean? What's the reality, what's the facts? I think we could all argue, or all agree that there's a lengthy
cycle to all of the financial results from the subsidiaries.

Editor's Note; You may also enjoy taking a look at some of Proformative's other recorded webinars, such as: Leasing & Revenue Recognition Webinar, Corporate Finance Technology Strategy Webinar, Time & Expense Accounting Webinar, Revenue Recognition Regulations Webinar & Corporate Budgeting & Forecasting Webinar.

The ability to close your books in a timely basis, becomes quite the anxiety provoking, stress enhancing process, and there are all these pieces that you're trying to pull together. I've used the example of the whack-a-mole, where you smack one of the moles down, you figure you've got them licked and another one pops up. That's the visual I would give you in terms of what's going to happen with all this information coming in.

The other thing, when you don't have this system, such that you're on a single database, having visibility at the local level is almost an impossibility, or to get that visibility is either there's a lot of manual interaction, effort, phone calls, resources, people. To be able to understand what's happening with that subsidiaries financials, the details
of it. What does this all end up doing? I think what it really ends up doing is there's a lack of confidence in that financial data from corporate to the subsidiary. In that, the information is not believable; sometimes subsidiaries don't have the ability to understand what's going on because they have various composite of systems and applications.

What does this mean? It's error prone; it's definitely inefficient, and I would tell you it's extremely time consuming. Even though we have these applications that we're using. You'd be surprised if you take a step back and look at these processes and how much manual interaction and intervention is required to do this.

What you also find is this term silo. Meaning that if you're going to look at the corporate performance for a company. Even a customer let's say, unless you have this connectivity from beginning to end of that supply chain. It's very difficult to get that 360 view of what's happening with in that organization. The concept of ordered cash. What does it take for us as an organization to build the product, ship the product, sell the product, collect the money, etc. That's a pretty profound process, and
it's very difficult probably to pinpoint and get some details on the process across the continuum of a global entity.

We've talked about this, about the owners local accounting requirements, the tax compliance requirements. A lot of that is inherent in some of the issues you may face. What also ends up happening is there is a tendency to have some error prone errors in your managing at currency exchange in the rates, because you have to have historical accuracy, because of the currency rates are changing daily.

When you're reporting this information, how do you do that? How do you make sure you're constantly compliant with what the requirements are; not just on a global level, but at the local level as well. With that, we'll go to our first phone question.

Questioner: Thank you very much Tom. Now that we've outlined a lot of the potential issues that people have. The first phone in question is going to be around how many days it takes your company to consolidate and close monthly? First of all I'd like to note, those of you in the audience who are here for [CPE] credits, you'll need to answer all phone in questions throughout the webinar. Every one in the audience, we very much appreciate your consideration in answering these questions. We consolidate this data and use it for benchmarking and we share that with you on Proformative. Tom, as we have the poll for another minute...

End partail; Automating Financial Consolidation Webinar

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