Earlier this year we published our Trends in Developing the Fast, Clean Close benchmark research findings. The most significant was that, on average, it takes longer for companies to close their books today than it did five years ago. In 2007, nearly half (47%) we closing their quarters within five or six days, but now only 38 percent can do it as quickly.
Topics: Office of Finance, close, closing, Consolidation, Controller, effectiveness, XBRL, Business Performance Management (BPM), CFO, Data, Document Management, Financial Performance Management (FPM), Financial Performance Management, FPM
Unless you have some combination of a very strong credit rating, a high income-to-debt payment ratio and a relatively low loan-to-value ratio, it’s not especially easy to refinance a mortgage these days. That’s a shame, because there are plenty of people who have stayed current in meeting their credit obligations and whose mortgages are comfortably below current market value who could benefit from today’s record low interest rates. One major reason they can’t refinance is the collapse of non-agency mortgage-backed securities (MBS) – that is, those not backed by government agencies such Federal National Mortgage Association, or Fannie Mae – in the wake of the 2008 financial crisis. The crisis, in turn, was caused largely by the collapse in value of mortgage-backed securities. To be sure, a significant portion of the drop in the issuance of non-agency paper is the lack of demand these days for the risky and even fraudulent sub-prime mortgages that were a root cause of the financial collapse. Yet there would be a bigger market for MBSes (and therefore more money available for refinancing) and less need for U.S. government guarantees if there were greater transparency in the quality of the underlying assets of mortgage-backed securities. Technology exists today that would address the transparency issue relatively easily and inexpensively. In particular, eXtensible Business Reporting Language (XBRL) can provide an efficient and relatively inexpensive means of collecting needed information from a large number of disparate parties without requiring them to standardize or modify their systems.
Topics: Office of Finance, XBRL, Analytics, Business Analytics, Business Performance Management (BPM), finance, Financial Performance Management (FPM), capital markets
If you’re considering purchasing a financial performance management (FPM) suite, you shouldn’t overlook a recent entrant in the category, Tagetik (which sort of rhymes with “magnetic”). The company, which was founded in 1986 and is based in Lucca, Italy, began by focusing mainly on Europe, but has extended its efforts in the United States in the past two years. Tagetik 4.0 is an elegant implementation of a financial performance management suite running on Microsoft’s SharePoint infrastructure.
Topics: Big Data, Planning, Office of Finance, Reporting, Budgeting, close, Consolidation, Controller, SharePoint, XBRL, Business Analytics, Business Collaboration, Dashboards, Business Performance Management (BPM), CFO, Financial Performance Management (FPM), Tagetik, Workforce Performance Management (WPM), FPM
People used to use the phrase “the last mile” solely to refer to a condemned prisoner’s path to execution. Then the telecommunications industry picked it up to describe that part of a circuit between a major trunk line and a subscriber. Later still a defunct software company, Movaris (now part of Trintech), used the phrase in an analogy to refer to the set of activities that take place between when a company closes its books and the point where it finishes its external reporting activities, such as disclosing periodic earnings and financial conditions to investors or filing financial statements with regulators or lenders. It was an attempt to focus attention on the need to automate and better coordinate the multiple, disparate but interconnected threads that have to be orchestrated to complete the external reporting tasks accurately and on time. Personally, I’ve never cared for the phrase being used in this context; there are really multiple “last miles,” with multiple and sometimes overlapping destinations. I prefer “the close–to-report cycle” because it’s more precise in its description, and because rather than pointing to finality, “cycle” defines it for what it is – a repetitive periodic activity. And because it is periodic and repetitive, it benefits from process optimization and automation, which can substantially reduce the effort required to complete a cycle and alleviate the stress certain departments often feel as deadlines loom.
Topics: Customer Experience, Governance, GRC, Office of Finance, Reporting, audit, close, Consolidation, Controller, XBRL, Governance, Risk & Compliance (GRC), Business Performance Management (BPM), CFO, compliance, Financial Performance Management (FPM), FPM, SEC
For several years the U.S. Securities and Exchange Commission (SEC) has mandated that filers apply eXtensible Business Reporting Language (XBRL) tags to their financial statements. XBRL was developed to make it easier for investors to use a company’s financial information. Now XBRL US has kicked off its second annual XBRL Challenge, a contest designed to encourage development of open source analytical tools that can use XBRL-formatted corporate financial data from the SEC’s EDGAR database. Sponsoring the effort are the American Institute of Certified Public Accountants, the CFA Institute (of which I am a member) and the Wharton School of the University of Pennsylvania. XBRL US hopes to raise awareness of the wealth of available XBRL data and provide incentives for application developers to create open source software that enables broader and more frequent use of the standard. The contest will award $20,000 grand prizes to the two teams, and judging will be based on how well each submission improves access to corporate data and provides analytic capabilities in an original, user-friendly way. This competition is a terrific idea because it addresses the least well developed element in the drive to improve the communication of corporate data to investors. Earlier this year I reviewed some of the submissions to the first XBRL Challenge. Although the first round of software offered a good start, much more needs to be done to encourage use of XBRL.
Topics: Office of Finance, Reporting, closing, XBRL, Analytics, Business Analytics, Business Performance Management (BPM), finance, Financial Performance Management (FPM), Information Management (IM), Financial Performance Management, SEC
What’s a fast, free and reasonably reliable way of gauging the effectiveness of a finance department’s management? It’s the number of days it takes it to close the books. Companies that take six days or fewer after the end of the period to close their monthly, quarterly or semiannual accounts demonstrate a basic level of effectiveness that those that take longer do not. In my judgment, finance executives should regard a slow close as a negative key performance indicator pointing to less-than-effective management on their part. I draw this conclusion from our recent benchmark research, which followed up similar research we completed in 2007.
Topics: Office of Finance, close, Consolidation, Controller, XBRL, Business Analytics, Business Intelligence, Governance, Risk & Compliance (GRC), Business Performance Management (BPM), CFO, Data, Document Management, Financial Performance Management (FPM), Sales Performance Management (SPM), Financial Performance Management
I have commented before on the movement to adopt International Financial Reporting Standards (IFRS) by the United States to replace US-GAAP (Generally Accepted Accounting Principles). Most recently I discussed the drive to harmonize the significant differences between US-GAAP and IFRS on revenue recognition and lease accounting. To those who are interested in but not intimately involved with the subject, I suspect the current situation is a bit confusing, since there are multiple groups involved in the discussions on how best to proceed, each with its own agenda. The full adoption issue remains in flux, but let me weigh in the matter.
Topics: Reporting, audit, Consolidation, IFRS, US-GAAP accounting, XBRL, Business Analytics, Business Collaboration, Business Performance Management (BPM), Financial Management, Financial Performance Management (FPM), financial standards, FPM
For at least a couple of decades completing the financial close within five or six business days after the end of the period has been accepted as a best practice. As such, that creates an expectation that finance organizations that take longer should work to reduce their closing intervals. In updating our last benchmark research on the closing process, Ventana Research has found this not to be the case. In fact, the latest research shows that many companies are taking longer to close today than they did five years ago. Whereas nearly half (47%) were able to close their quarter or half-year period within six business days back then, just 38 percent are able to do so now. Similarly, five years ago 70 percent of companies were able to complete their monthly close in six days; today only half can. To be sure, closing quickly still gets lip service: The research confirms that most companies (83%) view closing their books quickly as important or very important. Yet far from demonstrating progress, the results show slow closers are regressing.
Topics: Office of Finance, close, Consolidation, Controller, XBRL, Business Analytics, Governance, Risk & Compliance (GRC), CFO, Data, Document Management, Financial Performance Management (FPM), Information Management (IM), Financial Performance Management
Host Analytics has added new analytics and reporting resources to its cloud-based performance management suite. Business Analytics will offer a broad set of built-in analytics and reporting capabilities or, for companies with an existing business intelligence infrastructure (from vendors such as IBM, Infor, Oracle or SAP), the option of a self-service approach. I believe these new analytics and reporting capabilities give companies considering only on-premises performance management deployments another reason to consider a cloud-based option; for Host Analytics it broadens the set of features it has to compete with other cloud-based vendors.
Topics: Planning, Operational Performance Management (OPM), Reporting, Budgeting, closing, Consolidation, Host Analytics, XBRL, Analytics, Business Analytics, Business Collaboration, Business Mobility, Cloud Computing, Business Performance Management (BPM), Data, Financial Performance Management (FPM), Sales Performance Management (SPM), Workforce Performance Management (WPM), benchmark, Decision Hub, Financial Performance Management, SEC
The mandate by the U.S. Securities and Exchange Commission (SEC) that requires its filers to apply eXtensible Business Reporting Language (XBRL) tags to their financial statements has been in effect for several years. (XBRL is a core element of our Office of Finance Research Agenda for 2012.) One of the most important ideas behind this “interactive data” requirement was to make it as simple as possible for investors to be able to consume and analyze corporate financial data filed with the SEC. This intent sets the SEC mandate apart from most other XBRL tagging requirements, which are designed for the needs of regulatory bodies such as the Bank of Japan, the Australian federal and state governments and the U.S. Federal Deposit Insurance Corporation (FDIC). Moreover, I believe the depth and breadth of the SEC’s database and the size of the U.S. equity capital markets make this the most important public-focused use of XBRL in the world. Considerable progress has been made toward the main objective, but considerably more is needed, and the sooner the better.
Topics: Office of Finance, extended close, US-GAAP, XBRL, Analytics, Business Analytics, Business Collaboration, Business Intelligence, Governance, Risk & Compliance (GRC), Business Performance Management (BPM), CFO, compliance, Financial Performance Management (FPM), Information Applications (IA), Information Management (IM), financial reporting, SEC, Digital Technology