By birgit.starmanns, Senior Director, Product Marketing, SAP.
Originally posted on SAP Analytics, 20 Feb 2015. Reprinted with Permission.
As part of our ongoing accounting and financial close series, today I’ll be covering how you can accelerate your financial close.
Marathons. Formula One. Internet downloads. Streaming video. There are many examples where we intuitively know that faster is always better.
For finance, one of the traditional measurements of the performance of the finance organization is the speed at which a company closes its books. In benchmarking studies, SAP Value Engineering found that the top quartile performing companies achieve the annual financial close in 26% fewer days than their peers. A result of these efficiencies is a 61% lower general ledger and closing costs.
Why the focus on the number of days it takes to close the books? There are three simple answers:
Enter SAP Simple Finance – One Source of the Truth
A key factor that causes delays in the financial close is the number of financial systems that companies have in place, from multiple transactional systems, to analytics and performance management systems. And each system has its own database. Not only does this cause delays in getting the needed information into the right system for the close, many times there is logic associated with transferring information from one system to the other, which may introduce inconsistencies.
With SAP Simple Finance, these redundancies are significantly reduced. With the power of the in-memory technology of SAP HANA, the same data can be used for transactional, analysis, and planning processes. And since key performance indicators can be calculated on the fly using these transactions, there’s no need for the additional logic and summarization in moving data from place to place, which reduces duplication of information and the need for additional reconciliation.
Real-Time Processes for Instant Insight
One of the bottlenecks to achieving a faster financial close is the number of processes that are run in batch at the end of the period, because they are resource-intensive, both from a finance and an IT perspective.
Now imagine that these processes could be run on the fly using SAP HANA, based on transactional information, without the need to run batch processes overnight. Therefore, a “soft close” is possible to see the financial position of a company in real time.
Processes that also depend on real-time information include GR/IR reconciliations and intercompany reconciliations, which have historically been bottlenecks into the visibility of cash management and resulting liquidity forecasts.
Strategic Benefits
You may think that waiting 15 minutes for a report is not a deal-breaker. Yet if you add 15 minutes to each step in the close processes, the impact is not in minutes or hour, but in days. An additional example is profitability analysis. With the many dimensions of profitability – customer, product, geography, channel – any top-down allocations and most reports are processed in batch overnight. And if an error is introduced, finance must wait another day to correct it.
While the speed of the close can certainly help the efficiency of finance organizations, what matters more is the activities that finance can engage in to leverage the saved time. It’s not just the external disclosures that are important, it’s also the managerial information that is captured that is needed to run the business. If the close takes more than a week, there may be lost business opportunities due to a lack of insight into business drivers, which is critical information in making decisions.
Finance is increasingly engaging in strategic activities – advising the business as a whole on the financial implications of business options, from evaluating a merger or acquisition, to introducing new product lines and the potential cannibalization effects to existing products. With the prediction, simulation and analysis capabilities of SAP Simple Finance, what-if analysis can be run on an unlimited number of dimensions.
Benefits of SAP Simple Finance
A recent CFO.com study revealed that 87% of finance executives agreed that managers at their companies need to analyze financial and performance data much more quickly than they do now to meet targets for profitable growth. Translation – speed has an impact on the bottom line.
With the kind of instant insight that is available today, finance organizations no longer need to say, “I’ll get back to you.“
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