| 10th April 2006
After several false dawns, the benefits of centralised web based processing for group financial reporting are beginning to come through strongly. Improved communications capability allied to functionally rich consolidation software is supporting accelerated timescales for reporting and greater collaboration between group finance, its subsidiaries and reporting units. FSN reviews the progress being made in enterprise financial and management reporting.
Collecting and consolidating financial information from trading operations scattered throughout the globe is a time consuming and challenging task. The process is constantly under strain as group finance seeks to balance the growing burden of information required by regulators with the accelerated reporting timescales demanded by management and shareholders, whilst at the same time maintaining high standards of data integrity and control.
Against the odds, many groups have embedded a reasonably reliable process for data collection, submission and consolidation at the centre. But they are often labour intensive and spreadsheet bound with all of the risks that this implies for data quality. Earlier doubts about the effectiveness and performance of web based deployments, at the turn of the millennium, which may have been justified at the time, discouraged many groups from moving to a web centric model of group reporting. As a result, a large number of group reporting processes are still rooted in twenty year old technology with little scope for process improvements, increased collaboration or reducing reporting timescales. However, a Hyperion sponsored conference on group financial reporting last month revealed several companies that were early adopters of the new technology and have found that web based processing has given them a large number of benefits, some of which were unexpected.
According to John Adams, a director, at consulting firm Deloitte, early web based implementations were hampered by the limitations of internet bandwidth. “There has been a huge improvement in the quality of internet based communications in the last three years, both in terms of availability of access from different geographies around the world and in terms of performance. This broad based improvement in communications capability means that it is now realistic to roll out web based group reporting to a much larger number of people.”
The traditional eighties style of distributed databases is increasingly being replaced by a web centric architecture, where end users are all connected to the centre, rather like the spokes on a bicycle wheel. According to Adams , this leads to significant efficiencies in the way that systems are maintained and used. “Chart of account structures can be updated at the centre and made available immediately to end users everywhere via the web,” says Adams . Indeed, a major global publisher and user of Hyperion Financial Management (HFM) commented to FSN that the web had transformed the level of visibility and control of group reporting within the organisation as well as reducing the level of administrative effort. Errors can be resolved very quickly and revised charts of accounts made available immediately at the push of a button.
However, Deloitte's Adams cautions that notwithstanding the improvements in technology, the web should not be regarded as a universal panacea for all problems connected with group reporting. In particular, the trend towards segmental financial and management reporting has greatly increased the volume of multi-dimensional information that needs to be captured from reporting entities. “Web based data entry of large volumes of multidimensional data is still quite a burden and not ideally suited to a web browser,” he says. Adams favours the use of automated links between operational systems and group reporting systems so that multidimensional data can be pulled in automatically. “The web browser is fine for smaller entities but if you are trying to collect a large amount of data from a shared service centre, then it is better to use an ETL (extract, transfer and load) tool or other mapping tool provided by the supplier to load the information into the group reporting application.”
In common with voice communications, Adams says that web based communications can suffer from ‘latency' when used over very large distances. “You have to be flexible. If the communications infrastructure is not great in certain geographies it is sometimes easier to implement alternative communications links using technologies such as Citrix. The main thing is to understand the limitations you are dealing with early in an implementation and plan accordingly,” he says.
Interestingly, web based deployments have created unexpected benefits in the areas of work flow, collaboration, support and training. For example, one Hyperion user found that the web based infrastructure provided an ideal medium for communicating changes in group policy or amendments to reporting deadlines. Another user found the web an ideal medium for hosting relevant training materials and web cams illustrating how to use the application.
Adams says that the collaborative nature of the internet allows a much more cohesive process. “You can involve far more people in the process and can see what they are up to. Effectively, it joins up the lines between group finance, its divisions and the reporting entities at the lowest level.”
One group finance professional told FSN that in the past, group adjustments had to be processed at the centre and then passed to individual reporting entities to put through their books. But using the web, he could simply speak to the individual concerned in the operating unit and see immediately over the web whether the transaction had been effected correctly.
Not all web based consolidation products are made equal. Adams draws a distinction between older software that has been “web enabled” and more modern software that has been completely designed for the web. “Web enabled software will take you some of the way down the line but does not offer the full benefits and functionality of a web architected product such as, maintenance of chart of account and structures over the web,” he told FSN.
One of the benefits of web-centric architectures based on a single centralised database for management and statutory reporting is that it allows processes to be streamlined and ‘physical' sub-consolidation levels to be eliminated since capacity is no longer a real constraint. By ironing out the wrinkles between successive processing steps, removing the need for intermediate spreadsheets in the reporting supply chain and increasing collaboration at every level, overall processing times can be accelerated. For example, one Hyperion Financial Management (HFM) user reported a saving of around two days per monthly cycle when moving to HFM from a system that was already considered to be finely tuned.
It seems that Web based processing has truly ‘arrived'. Concerns about processing capability and internet bandwidth, no longer seem justified. At the same time, a web centric model provides the real prospect of a step-change in capability over older distributed systems. Given the inevitability of increased information demands and tighter timescales for reporting, it seems that web based architectures provide a realistic means of squeezing even more performance out of the reporting supply chain.
Related FSN articles:
The Hyperion answer to the IFRS challenge
SAS Financial Management (FM)
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