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SAP Analytics
Thought Leadership

Adding Value Through the Consolidation Process - Part One

Posted by
Mike Sullivan
Mike Sullivan
on Wed, Feb 06, 2013 @ 09:02 AM
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If you have recently evaluated replacing your consolidation system, you were undoubtedly faced with justifying the value of the solution. While a new solution will have a plenty of new features and performColumn5 Value Processance benefits, at the end of the day, the accounting rules that need to be followed and the results being generated are the same. Today, we are seeing more consolidation system evaluations based not only on adding value, but more importantly their ability to integrate with and add value to the overall enterprise performance management (EPM) processes. Implementing SAP Business Planning and Consolidation (BPC) is one way of accomplishing that, particularly through the use of business process flows (BPFs).

It's easiest to think of a BPF as a step-by-step guide that walks a user through a process from beginning to end. Within each step of a BPF, you have the ability to enforce that certain criteria are being met before moving on to the next step. An administrator or central owner of the process can easily see where every user is at in the process at any time. While there are benefits to guiding a user through the multiple steps in a process, in addition to reporting on the process centrally, the companies that benefit the most are the ones that use BPFs as a mechanism to move responsibility for key tasks upstream.

Here is a brief list of tasks that can often benefit from a BPF methodology:

  • Data Loading: This applies most often to companies that do not have a single general ledger. Subsidiaries often play a key role in loading the data in this scenario. The people closest to the data and the related source systems take responsibility for this task.
  • Data Validation:This step assists the user in verifying that the numbers that were loaded are accurate. Common tasks in this step are:
    • Providing a reconciliation between the data loaded in BPC and the general ledger
    • Validating that certain conditions are met, such as a balanced trial balance and that assets equal liabilities plus equity.
    • Obtaining sign off from the subsidiary that the data loaded is accurate
  • Qualitative Review: Typically financial analysts who are part of a corporate team are responsible for analyzing the data from all of the subsidiaries and finding discrepancies such as large variances, abnormal trends, or skewed ratios. An analyst would then have to work with the subsidiaries to understand and comment on or correct the discrepancy. In Column5's experience, a portion of this analysis can be automated and presented to the user at the time of data load. This way the subsidiary can see this analysis in real time and start doing their research immediately. In addition, the subsidiary can provide their own commentary and make any necessary adjustments--which changes the focus of the corporate analyst to higher value-added activities.
  • Intercompany Reconciliation: This is the process of reconciling intercompany balances for each subsidiary with each of their subsidiary counterparts. In many organizations, this process is managed centrally and it can be extremely time consuming, often taking as much as two weeks per month. In addition, one of the challenges with this process is security access. Most companies don't allow a subsidiary to see other subsidiaries' books, thus making it difficult to involve them in the reconciliation process. BPC has built-in functionality that addresses this problem, allowing the subsidiaries to report on intercompany balances with their counterparts and easily identifying out-of-balance situations. This allows this task to be completed by each subsidiary instead of having in centrally managed by a handful of people for the entire organization.
In Part 2 of Adding Value Through the Consolidation Process, I will dive into how value is added to other areas by having the right consolidation model.

Topics: Process Improvement, Enterprise Performance Management (EPM), Consolidation, Value, Data, BPC (Business Planning & Consolidation)


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