Automation of Financial Consolidation and Reporting using HFM - Requirements Document - Part 2

Namaste!

 we are continuing from the last blog.,

https://padmaja-vemireddy.blogspot.com/2020/01/hyperion-financial-management_16.html

There, we were discussing how to put together a requirement document and so far we have touched on topics.,

• Organization Finance Landscape and stake holder identification ** 1
• Organize various data/processes/report templates from related parties ** 2
• Document current system overview **3
• Identification of current pain areas **4
• Draw high level AS-IS Process **5

Fair enough. However the question remains. how did we link the requirement questionnaire from the workshop to the requirement document that is work in progress, now?

If yes, how? If no, then how did we write the above sections of the requirements document?

You are right! The responses from finance users have to be analyzed to be able to write a decent requirements document.

In this blog, I am going to give my view point on what should we expect and how do we analyze the responses from the requirement Questionnaire:

1.   Please explain the current consolidation close cycle

Here we expect to see a write up from the finance department Subject matter Expert (SME) who is familiar with the end to end financial consolidation and reporting close. It starts with explaining the requirement of monthly and quarterly close cycle processes.

It should describe, how many General Ledger (GL) Systems does client have (For example: Oracle EBS, PSI ) and any other 3rd party data sources like Quick books etc.

Upon arriving GL data from all divisions and/or entities, what would be the target place? Since client may have different ERP systems in place, it would not be possible to consolidate all GL's into one ERP system unless they have a customized system in place.

Eventually we should expect details on how the consolidation happens currently, up on arriving various GL's and 3rd party generated Trial balances (TB) to the Corporate Consolidation Division?

Does consolidation happens with one to one mapping of GL Chart of accounts (COA) or using a global COA which is many to one mapping?


Further to this, please expect a write up from finance folks on how  the reports from these GL TB's are being manually plugged into a excel consolidation spreadsheet.

What are the next steps and processes involved to generate the Balance Sheet, Income Statement, Statement of Equity, Cash Flow, the notes to the financial statements and all?

What are the balance sheet re-class adjustments are being done manually and anything else we should be aware of.



Based on the above response from client, we were able to put together following sections of the requirement document.

• Organization Finance Landscape and stake holder identification ** 1
• Organize various data/processes/report templates from related parties ** 2

The above information helps not only the processes and potential functional requirements for future consolidation system, it would enable Implementation team to estimate on the following important tasks of High level design milestone:

Number of Source systems would determine the:

•     Data Integration requirements for various source systems (GL's, 3rd Party and Excel sheets)
•     Build vs Buy the source and target adapters
•     Data Processing and Cleansing requirements 
•     Hardware and Software sizing for Application and Database servers
•     Load balancing and Application server clustering
•     Availability and outage for maintenance windows

2.   How many users do you anticipate using the system? 

Currently there may be just a handful of users from the corporate reporting team might be

responsible. But in future they may expect all division/location/entity controllers must be responsible

for the data they submit to the corporate on monthly basis. That decision would result in increase the

number of users accessing the future consolidation system. For instance, if client organization has

legal entities to generate and submit the monthly Trial balances (TB), we expect to see 50 users from

divisions and handful users from Corporate.

The above information helps  to determine the product licensing requirements (Number of power 

users, view users etc). Also it would help implementation team to determine:

• Potential load on Application Servers
• Potential load on Database Servers
• Stress and Load Testing needs
• Fail over and Switch over needs 

3.   What are some of the key business process issues you are trying to address?

Inter company transactions

Here you expect to see a description from the client how an inter company transactions are being recorded? Usually, many GL Systems are configured with separate elimination companies to book the inter company transactions. of course elimination of inter company balances are manual in those systems. Client must provide you the current process to eliminate the inter company balances

Foreign Exchange and Cash flow

Here client must describe how the cash flows are being created using excel or any 3r party tools? How cash flow balances agree to the income statement? Explain what is the effect of "foreign currency on cash and cash equivalents" in the cash flow statement? What are the expectations from the future consolidation and reporting solution?

Prior Period Adjustments

Here we expect to see client explaining how the opening balance sheet changes are made at source system level, which result in adjustments to the consolidation balance sheet, cash flow statements, foreign exchange balances when comparison is being made

Explain how Prior period adjustments are being made currently when P&L or balance sheet items have been re-classed to meet any GAAP or IFRS reporting requirements

Bottle necks in the consolidation process

For Instance, the current consolidation process is done in one consolidation spreadsheet which can only be worked on by one person at a time.  This creates a bottle neck in the overall quarterly reporting process.

Are Location/Division/Entity controller teams involved in the consolidation process? or is it only corporate reporting team taking care of the close? Any delays with this approach?

External Reporting

How client generate the note disclosures and any other foot notes for external reporting purpose?

Based on above response from client, we were able to put together following sections of the
requirement document.

• Document current system overview **3 (partially)
• Identification of current pain areas **4 (partially)
• Draw high level AS-IS Process **5 (partially)

Let me continue with the rest of the requirement questionnaire responses in the next blog.
Happy Weekend!

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