Robert Kugel's Analyst Perspectives

Longview FXR Automates Close-to-Report Cycle

Posted by Robert Kugel on Nov 27, 2010 11:59:29 AM

With its FXR offering, Longview Solutions becomes the latest entrant into the market for software that automates the close-to-report cycle. Addressing the steps in the accounting cycle after the books are closed, the product assembles this accounting data, data from other sources (for example, management data such as a business segment breakout of revenues and operating profits or nonaccounting data such as the amount of real estate owned or leased), and the written commentary that accompanies such data in external reports, such as a legally mandated filing by a public company (for instance, in the United States, form 10-Q, 10-K or 8-K) or a periodic filing required by a creditor or lien holder. Longview FXR and its competition come at an opportune time for both vendors and users. Until recently, companies prepared these documents manually with little if any automation. However, the mandate of the U.S. Securities and Exchange Commission (SEC) that U.S. public companies must tag their filings using the eXtended Business Reporting Language (XBRL) is forcing companies to rethink this manual process because of the time it will take to perform once the requirement is fully phased in. Larger companies may have thousands of items that they will have to tag at this stage. If history is any guide, the number of tagged items is likely to grow over time. For example, items in the management discussion and analysis and in the compensation table are not covered by tagging at this point because of how long it will take to create a useful taxonomy for these items. Moreover, governments worldwide are likely to increase the scope of business reporting that must be tagged.

Although the XBRL tagging requirement places a new burden on reporting companies, I think it’s a classic “step in the mud and wind up with a shoeshine” situation. The manual close-to-report process that most companies have been using is extremely inefficient and wastes the time of high-value employees. Software that automates this process allows companies automatically to assemble text, tables and charts using data and text from source systems, and it ensures that the numbers are accurate and consistent and simplifies the process of creating, editing and reviewing text and the completed document. Along the way, it embeds the XBRL tags in a streamlined fashion that “bolt-on” XBRL tagging software cannot match. In almost all cases, fewer people will need to spend less time on the process.

Furthermore, although periodic SEC filings may be the main reason for purchasing close-to-report automation software, the system can be used to manage the creation of various other legal or statutory reports or filings for government agencies or business partners that combine text and numbers.

I recommend that all U.S. public companies that fall in the category of “large accelerated filer” or “accelerated filer” automate their close-to-report cycle to make it more efficient and more accurate, and that they use the same technology for all regulatory filings. Longview has been around for decades, initially making a name for itself in handing statutory consolidation for some of the largest and most complex companies. FXR is one of many financial performance management capabilities the company offers, and it’s worth looking at if your company is considering automating the final steps of its financial cycle.

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Robert D. Kugel CFA, SVP of Research

Topics: Financial Close, LongView, Business Performance Management (BPM), Financial Performance Management (FPM), Workforce Performance Management (WPM), Financial Performance Management

Robert Kugel

Written by Robert Kugel

Rob heads up the CFO and business research focusing on the intersection of information technology with the finance organization and business. The financial performance management (FPM) research agenda includes the application of IT to financial process optimization and collaborative systems; control systems and analytics; and advanced budgeting and planning. Prior to joining Ventana Research he was an equity research analyst at several firms including First Albany Corporation, Morgan Stanley, and Drexel Burnham, and a consultant with McKinsey and Company. Rob was an Institutional Investor All-American Team member and on the Wall Street Journal All-Star list. Rob has experience in aerospace and defense, banking, manufacturing and retail and consumer services. Rob earned his BA in Economics/Finance at Hampshire College, an MBA in Finance/Accounting at Columbia University, and is a CFA charter holder.