Why is Integrated Reporting rising up the CFO agenda?

13th July 2015

As FSN writer Lesley Meall discovers, there are many possible answers 

If you Google ‘integrated reporting’ a curious and potentially confusing divide becomes apparent – which may or may not come as news to many chief finance officers (CFOs). At the tops of the many pages of millions of hits you will find ‘paid for’ advertisements for software for business intelligence (BI), corporate performance management (CPM), financial analytics and other variations on this ‘integrated reporting’ theme. Below these paid for advertisements, perspectives are different. Here, ‘integrated reporting’ is about demonstrating and disclosing the linkages between an organisation’s strategy, governance and financial performance and the social, environmental and economic context within which it operates. 

 

 

 

Both types of integrated reporting may be rising up the CFO agenda, but senior finance professionals are less likely to explore the benefits of the integrated reporting framework (as a successor to silo-style corporate reporting), and more likely to explore the benefits of an integrated reporting platform (as a successor to disparate and disconnected systems and finance processes). However, using software to unify processes such as budgeting, planning, consolidation and reporting does hint at what might be possible if ‘integrated reporting’ that encompasses financial and other types of capital eventually becomes standard practice rather than emerging best practice. 

Meanwhile, Chris Bullock, director of finance, at family-owned Oberto Brands, outlines the reasons why the United States provider of meat snacks recently decided to implement an integrated BI and CPM platform from Board International. “As we continue to grow we want to make sure that we have the right processes and systems in place to enable smart decision making and provide visibility and accountability across the organisation,” he says. Adopting an integrated system means that Oberto can begin by improving its budgeting, planning, and forecasting processes, then move on to financial consolidation and reporting using the same solution. 

The renewable energy specialist Solarcentury is using a unified CPM from (the mid-market specialist) Prophix to automate budgeting and reporting, support consolidated global financial reporting, and to better analyse company information to improve decision-making. Finance can easily build their own reports and models (aka ‘cubes’) to meet new reporting requirements and there is a ‘detailed planning manager’ module which specialises in computing financial and non-numerical information together.  “The ability to seamlessly link to multiple data sources is wonderful,” says Jenny Burbridge, business analysis and reporting manager, Solarcentury.

Solarcentury pulls data from underlying systems into a series of multidimensional cubes for finance, customers, projects, CapEx, HR planning and revenue planning. As Prophix is integrated so are the cubes and any change is automatically reflected in all of them. The flexibility of the CPM has also been a boon. “By using alternate hierarchies, branch and subsidiary financials can be added together easily for reporting and all of the data can be shown in GBP,” says Burbridge. This simplified consolidated global financial reporting and the transition when a Solarcentury branch recently became a subsidiary mid-way through a financial year. 

As organisations change and grow, their operations many become more complex, and the benefits of having a single unified view of financial consolidation, reporting and planning processes may become more apparent in other ways too. Witness Graco Inc, a global provider of industrial fluids and coatings, which opted for the OneStream XF integrated platform. Tammy Meinhardt, consolidation and internal reporting supervisor at Graco cites key benefits including minimising the number of entities to streamline maintenance, inter-company eliminations and improve reporting. 

Graco exploited the end-user workflows in the system to decentralise its consolidation processes for weekly bookings and billings; replacing a centralised spreadsheet-based data collection processes. “This is critical as we continue to grow, and has also improved the timing of reporting, allowing for more analysis of this critical data,” she says. The risks associated with volatile currency markets have also become easier to manage. “With the European currencies in flux, the finite detail and extended analysis of currency consolidation and reporting that OneStream XF offers is invaluable in both actual and plan data,” explains Meinhardt. 

At Fiat Chrysler Finance, the centralised global treasury function for the group, using a single unified CPM platform to manage financial budgeting processes is aiding forecasting for the profit & loss and the balance sheet. Fiat Chrysler Finance opted for Tagetik, a CPM solution with built-in intelligence that allows it to build these (and the cash flow impact) into the planning process. As plans are developed, the financial statement impact is automatically calculated – and because the system is unified, the impact of adding assets or staff and the associated depreciation and costs is
immediately reflected in all financial statements. 

“We rely on our accounting and management database to apply both external information as well as key strategic variables to our business,” says Giuseppe Novello, manager, processes & IT systems, Fiat Chrysler Finance. “The software will allow us to forecast our financial statements using this data and identify specific financial indicators such as average exposure, interests and average rate of each balance sheet, to make more informed decisions,” he adds. The system can be used to develop detailed forecasts on economic and financial trends, assessing risks and analysing alternative market scenarios. 

Only time will tell whether the other type of ‘integrated reporting’ takes hold and becomes standard practice rather than emerging best practice. However, both types of integrated reporting do seem to share some common drivers. For example, the need to make the most of available resources, and the need to look beyond traditional organisational silos and traditional financial reporting to gauge the impact (on an increasingly broad range of stakeholders) of corporate behaviour and performance.  The CFO and software seem destined to play a vital role in both types of integrated reporting.

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