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Case Study

 

Speeding the Monthly Financial Close Process at Allergan

by Dave Hannon | insiderPROFILES

July 1, 2011

Two years ago, delays in the financial close process at healthcare products maker Allergan drove the company to replace its legacy consolidation and reporting system with SAP BusinessObjects Planning and Consolidation. This profile gives a behind-the-scenes look at the implementation, as well as the specific benefits that Allergan is seeing today as a result—from a speedier close process to more up-to-date and granular data to more self-sufficient users running their own reports.
 

No one wants to be the person who has to tell a team of business executives anxiously awaiting the company’s quarterly financial numbers that these reports will be delayed because of a systems snag.

Yet, it’s a scenario that many finance professionals — such as Elizabeth Elmore, Director of Corporate Financial and Management Reporting Systems at healthcare products maker Allergan — have encountered at one time or another. Elmore says that delays in the financial close process were the primary motive for her company’s decision to replace its legacy consolidation and reporting system with SAP BusinessObjects Planning and Consolidation two years ago.

But the move to the new application has done more than just streamline Allergan’s financial close process — it has provided the company’s executives and finance team members with around-the-clock access to more detailed financial data and more flexible reporting capabilities, giving the business leaders more timely insight into their company’s operations.

Growing Pains

Today, nearly all of Allergan’s global financial operations run on a single instance of SAP ERP. “The fact that we just have one ERP instance makes our jobs in finance a lot easier,” says Elmore. But even before the business implemented SAP software — its first SAP systems went live in the US in 1996 — it was running another solution to consolidate and report its financial data. And for 15 years, it continued to bring financial data from its SAP system into its legacy solution for consolidation and analysis.

“We built a customized ABAP program that took the data out of SAP ERP and went through numerous tables to translate it and bring it into the legacy application,” says Elmore.

Gradually, as the amount of data the finance organization was managing increased, this time-consuming process became more cumbersome. “The process of bringing the data into the legacy application was confusing to begin with,” says Elmore. “But after a major acquisition — when we had to integrate many different types of high-level financial data — that’s when it became clear how manual our processes were and that it was time for a change.”

Those manual data processes were slowing down the monthly reporting process significantly. As more time was needed for data loading, less time could be dedicated to actual data analysis and reporting during the month-end close process. Typically, the slow data loads meant that the finance team couldn’t start its close processes until the fifth business day after month end, which left very little time to hit the consolidation and reporting deadlines.

Finding “The One”

In a business that recognizes that technology can significantly increase efficiency, the finance department doesn’t have to work too hard to convince upper management to invest in new systems. At least, that was the case at Allergan.

In 2008, the finance organization got the green light to begin searching for a new consolidation solution that could automate its data collection processes and expedite the close process. The team reviewed several different commercial products and finally found “the one” — they decided that SAP BusinessObjects Planning and Consolidation was the right solution for them. According to Elmore, the consolidation functionality among the various tools on the market was similar, but this solution’s ability to integrate with SAP ERP stood out as a big advantage. She also says that the reporting flexibility of SAP BusinessObjects Planning and Consolidation was a step above that of the other solutions being evaluated. 

Because the legacy consolidation application actually predated the SAP ERP system, the data flows were not optimized for smooth integration between the new application and SAP ERP. Clearly, some significant reworking was required. To help with the data migration and application deployment, Allergan brought in consulting firm Column5, which provided implementation guidance and managed the extensive testing that was done leading up to the go-live. (For more information on the integral role that Column5 played in Allergan’s implementation and data migration, refer to the sidebar to the right.)

timeline

Freeing Up Time for Validation and Analysis

One of the biggest improvements the project brought to the finance organization was the increase in how frequently the team can update financial data. In the legacy system, the data was loaded only once or twice a day, and only at month’s end, during Pacific Time working hours, because each data load could take many hours to complete.

Today, Allergan’s financial data flows into the new application three to six times a day, and every four hours during close. The data loads take about 15 minutes. Now that the finance team updates data more often, there is no longer a need to wait until the end of the closing cycle to review and validate the financial results.

And that’s a big relief for Marc Veale, Assistant Corporate Controller at Allergan. “I appreciate the fact that data is coming in all day, every day,” he says. “Now, people have more time to validate the data even before we start the consolidation phase.”

In the past, issues with the data being uploaded from one of the company’s global divisions would often not show up until late in the closing cycle, leaving very little time to resolve them before the reporting deadlines. And if an issue came from an overseas division, there was a good chance the consolidation team would discover it after the international division’s business hours, making it very difficult to correct the information in a timely manner.

With SAP BusinessObjects Planning and Consolidation, there is no more “trucking of data,” as Veale puts it, from one system to another, and no more waiting for files to load at quarter’s end. Instead, the finance team has visibility into the data in progress and can get a headstart on resolving any issues as they come up during the month.

“The data problems we used to see late in the closing process are typically solved now before our ERP system closes,” Veale says. “With those issues out of the way and with the quicker data loads, we’re done a whole day earlier than we were in our old system. On the reporting side, the time we’re saving in the closing process has been reallocated to reporting and data analysis, which helps us answer management’s questions much more effectively.”

Delivering Data Faster — and with More Detail

But the benefits of SAP BusinessObjects Planning and Consolidation extend beyond just saving time in the close process, according to Veale. The more frequent updates also allow the executive team to review consolidated financial data throughout the month, rather than just at month’s end.

“Now, those executives get a clear view of what data is going to roll up in their entities — multiple times a day,” says Elmore. “And they can monitor their results much more easily than before, particularly in Europe and Asia where we are consolidating multiple currencies.”

Allergan

In addition to better visibility into the data, the new system presents more detailed information, according to Elmore. While the legacy system provided high-level data, users could not drill down into general ledger account-level data. The design of the new system allows easier and deeper drill-down into data through a single, flexible report.

“You can run a profit and loss or balance sheet report just by using the pull-downs and picking the kind of data you want to see in your rows,” says Elmore. “We also have time options on there, so it’s actually a trend report as well.”

Users can see even more detailed data by double-clicking on a general ledger account or cost center to drill into a deeper report. That reporting capability has enabled better analytical review. “If we want to find out why a balance sheet category fluctuated from the same quarter a year ago, we can run a quick report, drill down to the detailed general ledger account level, and see exactly what types of transactions are driving that change,” says Veale. “That has been a giant leap forward for us in terms of the efficiency of our analytics.”

People First, Solutions Next

Elmore’s advice for companies looking to implement any sort of financial solution is straightforward, yet very important: Put in place — both internally and on the partner side — the right people who understand the processes before you implement a solution that will affect those processes.

According to Elmore, automating or streamlining processes is difficult for people who don’t understand critical, company-specific processes. “We had a great experience by matching up an expert in business planning and consolidation, Column5, with our internal people who are experts in how Allergan does consolidation,” she says. “Between those two, we were able to have a terrific outcome.”

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