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Tagetik provides financial performance management software. One particularly useful aspect of its suite is the Collaborative Disclosure Management (CDM). CDM addresses an important need in finance departments, which routinely generate highly formatted documents that combine words and numbers. Often these documents are assembled by contributors outside of the finance department; human resources, facilities, legal and corporate groups are the most common. The data used in these reports almost always come from multiple sources – not just enterprise systems such as ERP and financial consolidation software but also individual spreadsheets and databases that collect and store nonfinancial data (such as information about leased facilities, executive compensation, fixed assets, acquisitions and corporate actions). Until recently, these reports were almost always cobbled together manually – a painstaking process made even more time-consuming by the need to double-check the documents for accuracy and consistency. The adoption of a more automated approach was driven by the requirement imposed several years ago by United States Securities and Exchange Commission (SEC) that companies tag their required periodic disclosure filings using eXtensible Business Reporting Language (XBRL), which I have written about. This mandate created a tipping point in the workload, making the manual approach infeasible for a large number of companies and motivating them to adopt tools to automate the process. Although disclosure filings were the initial impetus to acquire collaborative disclosure management software, companies have found it useful for generating a range of formatted periodic reports that combine text and data, including board books (internal documents for senior executives and members of the board of directors), highly formatted periodic internal reports and filings with nonfinancial regulators or lien holders.
Tagetik’s Collaborative Disclosure Management automates the document creation process, eliminating many repetitive, mechanical functions and reducing the time needed to administer the process and ensure accuracy. Automation can shorten finance processes significantly. For example, our benchmark research on trends in developing the fast, clean close finds that companies that use little or no automation in their accounting close take almost twice as long to complete the process as those that fully automate it (9.1 days vs. 5.7 days). Manually assembling the narrative text from perhaps dozens of contributors and combining it with data used in tables and elsewhere in the document is a time-consuming chore. Regulatory filings are legal documents that must be completely accurate and conform to mandated presentation styles. They require careful review to ensure accuracy and completeness. Complicating this effort recently are increasingly stringent deadlines, especially in the U.S. Anyone who has been a party to these efforts knows that there can be frequent changes in the narratives and presentation of the numbers as they are reviewed by different parties, and those responsible need to ensure that any change to a number that occurs is automatically reflected everywhere that amount is cited in the document; to use the depreciation and amortization figure as an example, that would include the statement of cash flows, income statement, the text of the management discussion and analysis and the text or tables of one or more footnotes. Moreover, automated systems afford greater control over the data used. They make it possible to answer the common question of where a number came from quickly and with complete assurance. While inaccuracies in other types of financial documents may not have legal consequences, mistakes can have reputational or financial consequences.
Those managing the process also spend a great deal of energy simply checking the document to ensure that the various sections include the latest wording, that the numbers are consistent in the tables and text, that amounts have been rounded properly (which can be really complicated) and that the right people have signed off on every part of the filing. Automation obviates the need for much of these tasks. Tagetik’s CDM workflow-enables the process, so handoffs are automated, participants get alerts if they haven’t completed their steps in timely fashion, and administrators can keep track of where everyone is in the process. Workflow also promotes consistent execution of the process, and the workflows can be easily modified as needed.
In designing Collaborative Disclosure Management, Tagetik took advantage of users’ widespread familiarity with Microsoft Excel and Word to reduce the amount of training required to use its product. CDM’s workflow design makes it relatively easy for business users to define and modify business process automation. Typically, individuals or small groups work on different sections of the document. CDM enables multiple contributors from finance, accounting, legal, corporate and other functions to work with their part of the document without being concerned about other contributors’ versions. Work can proceed smoothly, and those administering the process can see at any time which components have been completed, are in progress or have not even started. Tagetik’s software can cut the time required to prepare any periodic document, since once a company has configured its system to create what is in effect a template, it’s relatively easy to generate these documents on monthly, quarterly or annual bases. The numbers relevant to the current period are updated from the specified controlled sources, and references to tabular data within the text are automatically adjusted to tie back to these new figures. Often a large percentage of the narrative text is boilerplate that either must not be updated or requires only limited editing to reflect new information. Starting with the previous edition of the report, contributors can quickly mark up a revised version, and reviewers can focus only on what has changed. Other important automation features are data validation, which reduces errors and revisions, and the system’s ability to round numbers using the appropriate statutory methodology.
CDM also handles XBRL tagging, which is essential for all SEC documents and necessary for an increasing number of regulatory filings around the world. The software specifically handles tagging for the two main European prudential regulatory filings for banks and other credit extending institutions, COREP (Common Reporting related to capital) and FINREP (Financial Reporting performed in a consistent fashion across multiple countries).
Companies can gain several key benefits by automating the production of their periodic regulatory filings and internal or external financial reports that combine text and data. One of the most important is time. Automation can substantially reduce the time that highly trained and well-compensated people spend on mechanical tasks (freeing them to do more productive things), and the process can be completed sooner. Having the basic work completed sooner gives senior executives and outside directors more time to review the document before it must be filed or made public. Time that can be devoted to considering how best to polish the narratives or if necessary lengthen upstream deadlines to handle last-minute developments and consider options for how best to treat accounting events. Automation can also reduce the chance of errors, since the numbers tie directly back to the source systems and (if properly configured) ensure that references in the narratives and footnotes to items in tables and the numbers in those table agree completely. Restatements of financial reports caused by errors are relatively rare but when they occur are exceptionally costly for public companies’ reputations.
Disclosure management systems are an essential component for any financial performance management (FPM) system. All midsize and larger corporations should be using this software to automate the production of their periodic mandated filings and other documents that combine text and data. They will find that they are useful in cutting the time and effort required to produce these documents, provide senior executives and directors more time to review and craft the final versions, and reduce the chance of errors in the process. Companies that are using older FPM software should investigate replacing it with an FPM suite to gain the additional capabilities – including disclosure management – that newer suites offer. Tagetik’s should be among the financial systems evaluated for office of finance.
Robert Kugel – SVP Research
Our benchmark research on enterprise spreadsheets explores the pitfalls that await companies that use desktop spreadsheets such as Microsoft Excel in repetitive, collaborative enterprise-wide processes. Because people are so familiar with Excel and therefore are able to quickly transform their finance or business expertise into a workable spreadsheet for modeling, analysis and reporting, desktop spreadsheets became the default choice. Individuals and organizations resist giving up their spreadsheets, so software vendors have come up with adaptations that embrace and extend their use. I’ve long advocated finding user-friendly spreadsheet alternatives.
One of the first adaptations was for application vendors to use a spreadsheet (either a grid format or Excel itself) as a user interface. In these products users seem to be working in a familiar spreadsheet environment, but the interface is tied to an application that has controlled business logic, formulas and workflows, and the data is held in a relational or multidimensional database. This approach can give organizations the best of both worlds: the familiarity of a spreadsheet but in a structure that addresses most of the technological flaws inherent in desktop spreadsheets. Yet this approach isn’t always enough. It is fine for business processes in which a third-party application is the appropriate choice, but in many other situations where people collaborate using the same model, analytical methods and data, a spreadsheet – not an application – is the better choice. Moreover, our research finds multiple reasons why companies continue to rely on spreadsheets. More than half (56%) of participants pointed to user resistance to change, and many others cited a business case that wasn’t strong enough (that is, the benefits of switching did not merit the costs) and a related issue: that alternatives are too expensive.
In collaborative processes where a spreadsheet is the most practical tool, another alternative is a technology developed by Boardwalktech. The company’s Collaboration Platform (BCP) products support a secure, two-way exchange of data between multiple users.
Instead of having to collect multiple spreadsheets through the email system and then combine them, BCP users can automatically share information at the individual cell level when they want. For instance, working offline in a spreadsheet model individuals can enter actual results and evaluate changes to a forecast or plan, playing with whatever what-if scenarios they see fit. When finished, they can connect to the Boardwalktech server and click to share the updated information with others in the organization. Those people will have immediate access to the changed data.
This approach offers advantages to the way most organizations collaborate with spreadsheets. For example, the exchange of data between spreadsheet users is immediate and takes place at the cell level rather than replacing the entire spreadsheet. Thus, unlike when spreadsheets are exchanged through email, updates can be automatic and far more secure. When spreadsheets are connected through a server, contention (that is, two people trying to change the same data at roughly the same time) is an issue. Most server-based spreadsheets (such as applications built on an Excel server) deal with contention by controlling changes at the file or record-object level, employing a check-in and check-out methodology or record locking to control concurrency. This means that an entire spreadsheet or large portions of it cannot be altered until one person has finished making changes. This process can cause substantial delays. In contrast, BCP enables concurrent, multiuser collaboration at the cell level. Especially in larger spreadsheets shared among multiple users, that can cut down on delays in updates and changes because multiple people can be making updates to different parts of the spreadsheet at the same time.
Another attractive feature of Boardwalktech’s approach – especially when compared with collaborating on spreadsheets over email – is that individuals can share only a portion of their spreadsheet (even just the contents of a single cell) with other individuals. Adam, for example, may want to share only a few lines of summarized information from his forecast with Betsy, who needs it to drive some – but not all – of her projections in her part of the business. Adam and Betsy have different spreadsheets with different row and column structures, yet the shared data remains synchronized regardless of the changes they make to their individual spreadsheets. Colleen, a business analyst, may have a complex formula that every other analyst must use, and this formula will evolve over time because of changing business conditions. David and Ed will always be using the same, correct and up-to-date formula in their own, individual spreadsheets that used by others in the organization without having to check for updates.
Boardwalktech offers several prebuilt templates that support inter- and intra-business collaborative processes. For the latter, one area in which a third-party application often is not a viable solution is where analytical models of data and reports must be shared between companies. Cost, implementation times, existing software environments and licensing issues often make that impractical. Browser-based solutions may be more difficult for people to navigate through compared with a spreadsheet, especially if substantial amounts of data must be updated and people need to enter data across multiple dimensions. As well, people in different organizations may use incompatible approaches to modeling that reflect the different needs of their organizations. The ability to share only essential elements of spreadsheets without having to homogenize models and data structures eliminates serious barriers to collaboration. In addition, even within companies these issues can come into play, especially for cross-functional processes or among different business units.
Boardwalktech’s products include configurations for processes where spreadsheets are heavily used today. These include sales and operations planning (S&OP), trading partner collaboration, supply and demand planning and sales and revenue forecasting. For finance organizations the company offers treasury and cash management and tax planning as well as budgeting and planning. There is also a project and portfolio management offering, which can be used by IT organizations, facilities management, R&D and others to plan, assess and forecast projects and project-like efforts. These can be deployed singly or in combination. One of the advantages of implementing, say, a sales and revenue forecasting application along with budgeting and planning is that the sales forecasting can easily tie in with the budgeting, meaning that these top-line numbers, which are managed by the sales organization, can be updated instantly in the budget and at whatever level of granularity is necessary. As well, Boardwalktech’s IT Process Platform allows companies to take any spreadsheet-driven collaborative process and eliminate many of the inherent defects.
In 2013 Boardwalktech had couple of key steps forward with new integration framework using its ‘SuperMerge’ technology and advancements to configuring templates that are used for access and input. Both of which help further embrace and extend use of spreadsheets. For most organizations, spreadsheets are an indispensable tool but they are not always the appropriate technology, especially when used in repetitive, collaborative enterprise-wide processes. It’s important to understand their limitations and not abuse them. In some cases, third-party or internally developed dedicated applications are the right choice. In others, embracing and extending existing spreadsheet-driven processes is the most practical approach. If your organization is currently using desktop spreadsheets for some collaborative business process, it probably is putting up with a host of issues that are the inevitable result of the spreadsheet’s inherent shortcomings. If so, I recommend evaluating Boardwalktech’s collaboration platform.
Robert Kugel – SVP Research