Understand the phases for scoping & design of a financial reporting framework

by The Tip Doctor

November 11, 2011

Tip Doctor, Insider Learning Network.

The following excerpt has been taken from Deepak Khosla’s presentation “Strategies for Integrating Financial and Management Reports into a Single, Integrated Reporting Framework” which took place during the Financials 2011 conference in Amsterdam this past June.

Phase 1: Introduction Phase

  • This phase has the following critical elements:
    • Identification of boundaries of the project
    • External vs. Internal reporting
  • Agreement on scope
  • Team setup 
  • Roles and responsibilities

Phase 2: Identify the Boundaries

  • Geographic (Regional\Area\Country) needs
    • These reports do not go down to transactional level
    • There could be certain processes which cannot be harmonized across geographies
    • Local/Alternate currency reporting needs; identify what can or cannot be done (like sales value currency conversion is possible, but converting global COGS value is tricky)
  • Which Business Units (BU)/support functions
    • Business enabling functions that submit their cost in the Global consolidation system (e.g., R&D, Finance, Global Supply , etc.)
    • Alternate reporting needs independent units (like certain BU needs to be structured differently or grouping of countries for certain regional needs, etc.)

Phase 3: External Reporting

  • Statutory reporting is best done in source systems, because of compliance requirements
    • Financial reports (Balance Sheet, Income Statement, etc.)
    • Legal forms/reports
    • External reporting (analyst meet, investor meet, SEC)
  • Certain external reports might require manual inputs, which might not be present in the BI system
    • Board level reports require other data types also (competitor analysis, share price analysis, industry analysis)
    • Non-Financial KPIs such as Customer Retention ratio, life cycle, of blockbuster products

Phase 4:  Management Reporting

  • Scope should include a standardized set of core management reports which is used for various closing events (e.g., month end, budgets, etc.)
    • Reports that are used for performance discussion
    • Reports that are used for day-to-day financial controlling 
    • Reports that require data to be viewed along organizational dimensions (geography, business unit, etc.)
    • These will include summary reports (P&L, Income Statement, etc.), but with management approved KPIs
    • These reports provide different views of the same KPI (sales by geography, sales by product line, etc.)
      • Don’t forget: Management reporting should facilitate users towards effective performance dialogue, by slicing and dicing data as per the business models.  It is the Reporting view not the Legal view.

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