安永财务管理最佳实践财务报告

安永财务管理最佳实践财务报告PAGEPAGE1————————————————————————————————作者：————————————————————————————————日期：RecordtoReportTheExecutiveBoardisresponsiblefortheconduct,operationalandfinancialperformanceofanorganisation.Theseresponsibilitiesaredischargedby:clearlystatingtheshortandlongtermobjectivesoftheorganisation;clearlystatingthepolicyguidelineswithinwhichtheyexpectmanagementtooperate;definingthesystemforensuringthatmanagementactsinaccordancewiththeBoardsdirection;anddefiningproceduresformeasuringtheextenttowhichprogresstowardscorporateobjectivesisbeingachieved.ThevalueofinformationInorderfortheBoardtobeabletofunctioneffectively,informationiskey.ABoardwhichoperateswithinsufficientorinaccurateinformationwillbeunabletomonitortheorganisationeffectivelywithdecisionmakingbeingbasedonflaweddata.Underthisscenario,thereisasignificantriskthattheorganisationwillfailtomeetitslongtermobjectives.PostEnron,Qwest,WorldCometcExecutiveBoardscannotfailtoappreciatethattheirreportingimpactsnotonlyontheperformanceandfutureoftheirownorganisation,butcapitalmarketsasawhole.Highquality,transparentreportingwhichisbasedonrelevantfinancialandnon-financialvaluedriversiscriticalfordrivingcorporateperformanceaswellrestoringconfidenceinthemarkets.Thefirststeptowardsachievingthisistoimplementaframeworkofmanagementreportingwhichisbasedontimely,relevantandaccurateinformation.Thiswillenableeffectivedecisionmakingaswellasmeetingtheneedsofexternalstakeholders.ScopeofRecordtoReportThescopeofthispaperisthefinancialandnon-financialreportingresponsibilitiesoftheCFO/FD.Assuchitcovers:Section2:Board/Divisional/costcentrereporting(alongwithapplicationofBusinessIntelligencetechniques)Section3:GeneralledgerandthechartofaccountsstructureSection4:MonthendcloseandconsolidationprocessesSection5:StatutoryreportingThepaperdoesnotcoverthereportingresponsibilitiesofotherOperationalExecutives(eg.Sales,Logistics,CRM,Marketing,HRetc).ManagementreportingThepurposeofmanagementinformationThepurposeofmanagementinformationisto:monitorprogressagainstcorporateobjectivesandplansidentifyactionsrequiredwhereactualperformanceisatvariancewithexpectationTheBoardReportisakeycomponentinthemanagementreportinghierarchy,collatinginformationacrossanorganisation.TheBoardReportcombinesthevariousoperationalactivitiesthroughthecommonandobjectivemediumoffinance(beitsterling,dollarsetc).AgoodBoardReportwillultimatelydrivedecisionmakingandactions,assistingtheorganisationtoachieveitsshort-termandlongtermobjectives.AssuchtheBoardReportshouldprovideallthenecessaryinformationtosupporttheBoardinfulfillingitsresponsibilities.Indoingsoitshouldbe:ExternallyfocusedMarketopportunitiesThreatsCompetitionForwardlookingDrivingvisionAligningoperationstostrategyRefiningstrategyasrequiredChallengingtothemanagementteamDrivingperformanceQuestioningthestatusquoUnderstandingandmanagingrisksManagementreporting&operationalreportingManagementreportingisabroadtermwhichmaymeandifferentthingstodifferentpeople.Itis,therefore,necessarytounderstandthedistinctionbetween:managementreportingasusedbykeyExecutivesandseniormanagement.Thesereportsareusedtodrivedecisionmakingandmeasurewhetherornotcorporateobjectivesarebeingmet.Thistypeofreportingneedstobesalient,relevant,coveringbothfinancialandnonfinancialcriteriamanagementreportingasusedfordaytodayoperationalpurposes.Examplesincludecostcentrereports,headcountanalysis,callcentreperformanceetc.Thesereportsaredatadrivenandenablemanagerstoreviewdeliveryoftheircurrentresponsibilities.Thesereportsshouldbestandardintheirpresentationanddeliveredwithinminimalinterventionoroverhead.Thistypeofreportingisdescribedas“operationalreporting”ThefocusofthispaperistheExecutivestylemanagementreportingDesignprinciplesinManagementReportingItisrecognisedthateverycompanywillhavedifferinginformationneedsforrunningthatcorporation.Assucheverycompanywillhavedifferentmanagementreportingneeds.Itis,however,necessarywhenreviewingordevelopingreportcontenttohaveinplacecoredesignprinciples.Theseshouldinclude:deliveryofinformationwhichmeetstheneedsofkeydecisionmakerswithintheorganisationdeliveryoftimely,relevantandaccurateinformationwhichmeetstheneedsoftheBusinessaswellasFinancedeliveryofinformationnotdata,basedonthephilosophyof“lessismore”(salient,concisereportingofinformationvsdeliveryofsignificantvolumesofnumericandotherdata)“oneversionofthetruth”whichdeliversconsistencyofinformationacrossthewholeorganisation(seeSectionREF_Ref31680652\r\h2.4below)useofleadaswellaslagindicators(eg.forcustomersatisfaction,servicedowntimemaybealeadindicator,customerchurnalagindicator)incorporationofoperationalKPIsaswellascorefinancialmeasuresapplicationofabalancescorecardapproach,ensuringconsiderationisgiventofinancial,operational,people/staffandcustomerperspectives.applicationofexceptionreportingtechniques,withsignificantvariancesbeinghighlightedactionorientatedreporting,intermsofcommentaryandreviewdynamicinnature.ThecontentandformatofreportsneedstobereviewedandrefreshedtoensuretheykeeppacewithchangesintheBusinessOverviewofthecascadeofinformationThemanagementreportingstrategyshouldbebasedonacascadeofinformationfromtheBoarddown(ie.fromBoardtoDivisionstoBusinessUnitsandultimatelycostcentres).Thisisrepresentedbelow:IndeliveringthiscascadeofinformationitisnecessarytoensureconsistencyofinformationfromtheBoardthroughtothecostcentres.Thisisbasedontheprincipleof“oneversionofthetruth”.Itensures,forexample,thattheresultsofDivisionXaspresentedtotheDivisionXMDarethesameasthosebeingreviewedbytheGroupCFO.AswellasconsistencyincontentthereshouldalsobeconsistencyinthelookandfeelofreportstoensureExecutivesandmanagementcannegotiatethemwithease.Definitionofcontentneedstobe“topdown”.TheCFO/BoardshoulddefinetheBoardReportcontentsuchthatitmeetstheirneeds.Italsoneedstobeconsistentwithcorporatestrategyandsubsequentlyusedtomonitorperformanceanddrivebusinessperformance.TheneedsoftheBoardshouldthenbecascadeddowntoDivisions,BusinessUnitsandultimatelycostcentres.Thisensurescorporatestrategyistranslatedintooperationaldelivery.Thiscanbecontrastedwiththe“bottomup”contentdrivenapproach,wherecostcentrereportingcascadesuptobespokeBusinessUnitandDivisionreports.WhenaggregatedattheBoardlevelthisisusuallycharacterisedbyexcelconsolidations,significantdatavolumesandtheneedtorefertoinconsistentDivisionreports.TheuseofKeyPerformanceIndicators(KPIs)Managementreportsshouldcontainperformanceinformationrelatingtothekeyoperationalissuesaswellasfinancialmeasures.Thisisimportantaschangesinoperationalmeasurestendtobeleadindicatorsonfuturefinancialperformance(eg.networkbuildisbehindschedule–cashflowsavingsintheshortterm,slowersalesgrowthinthelongerterm).TheCFO/BoardshouldagreeontheKPIspresentedinthereport.GeneralprinciplesonKPIsare:-availability:frequency&accuracyrelevance:alignmenttocriticalsuccessfactorsacceptance:levelofuseintheorganisation/industrytopical:relevancetospecificstrategicinitiativesWhenestablishingfinancialandoperationalmeasuresforinclusioninmanagementreports,thisneedstobedonewithanunderstandingofremunerationandrewardstructures.Thetwoneedtobeconsistent.Failuretodosowilldeliverconflictingmessages.Itisnotedrewardbasedmeasureswillhavethemostpowerfulinfluenceondaytodaybehaviours.ExamplecontentAsnotedabove,eachandveryorganisationwillhavetheirownneedsandopinions,drivingthelook,feelandcontentofthemanagementreports.A“leadingpractice”managementreport(BoardReport,DivisionReportandcostcentrereport)isgiven,however,inAppendix1.Thisreportdemonstratestheleadingpracticeprincipleshighlightedaboveandistobeusedforreferencepurposesonly.Intermsofcontentitincludes:[Executivesummary–AsynopsisofperformanceisprovidedbyKPIsaccompaniedbyappropriateactionorientatedcommentary.UseofdataislimitedtocoredataonlyActionplan–correctiveactionsspecifiedwithcontingenciesandsensitivityanalysisshowingbestandworstcasescenarios(usuallyintheformofcommentary)ProfitandLossstatement–P&Laccountshowingperiodandcumulativepositionswithhighlightedvariancesagainstbudget.Anymajorvariancesshouldbehighlightedandadequatelyexplained.TrendanalysisshouldbeshowngraphicallyandfullyearprojectionsshownProjectedoutturnincorporatedinP&L–ProjectedoutturnsrecalculatedeachmonthonthebasisofactualperformanceandactionplansCashflow–ActualandprojectedreceiptsandpaymentsuptotheyearendBalanceSheet-positionofworkingcapital,assetsandlongterminvestments/debt.]LeadingpracticechecklistMajorTopicsLeadingpracticecharacteristicsIndicativeissues/problemsGeneralprinciplesRelevant-Theinformationmustbebasedontheneedsofallthedecisionmakers(notjustFinance)withatopdownfocus(fromtheBoarddown)Relevant–Informationpresentedshouldbesharplyfocusedandshouldreflectthedefinedobjectivesandstrategyoftheorganisation.Accurate–Informationshouldbeofsufficientlyhighqualitythatconfidencecanbeplacedinit.Itsreliabilityisdependentonitssource,integrityandcomprehensivenessTimely–Theinformationshouldbeavailablepromptlyenoughtoplanfromitandtakecorrectiveaction(seeSectionREF_Ref31168111\n\h4:Monthendclose)Integrated–ReportinginformationshouldincludebothoperationalandfinancialKPIswheretheeffectandimpactofoperationalperformanceonfinancialreportingisclearlyunderstood.BothleadandlagindicatorsaretobeusedBalancescorecardapproach–Themanagementreportshouldincludeinformationonthedifferentaspectsofanorganisationi.e.Financial,Customers,PeopleandOperationsGraphicalpresentation-Informationshouldbepresentedinaneasilyassimilatedformate.g.inacleardashboardformatandusegraphswhereappropriateOneversionofthetruth-Bothfinancialandnonfinancialdatasourcesusedacrosstheorganisationareconsistent(eg.resultsforAsiaPacificaspresentedtoGroupCFOaresameasthosepresentedtoAsiaPacificMD)Consistency-ThelookandfeelofthereportsfromGrouptoDivisiontoBusinessUnittoCostCentreneedstobeconsistentInformation-ThemanagementreportisinformationrichanddatalightExceptionreporting–Reportbyexception,highlightingvariancestoplan(bothpositiveandnegative)Actionorientated–EnsurecontentandcommentaryexplainoperationaldriversbehindtheinformationpresentedaswellasbeingactionorientatedReportsarepurelyfinanciallyfocusedwithlittleattentionpaidtopeople,customer,orcompetitivemeasuresReportingfocusesontheneedsofnoncoredecisionmakers(egcostcentresmanagers)Managementreportsarepublished15+daysfollowingthemonthendcloseTheformatofthereportisnumberordatabasedwithlittleornouseofgraphicalpresentationOnlyfinancialKPIsarereportedThemanagementreportisviewedasa“Financetool”.Itisnotusedbyoperationalmanagement.SignificanteffortdevotedtoreconcilingBusinessUnit/Division/Groupresults–multipleversionsofthetruthThereislittleornoconsistencybetweenGroup,Division,BUs,andCostcentrereportsReportingdeliverstoomuchdetailanddatai.e.itis30pagesormorePeopleOperationalExecutiveshaveakeyinfluence/inputindefiningreportingcontentandformat.ThereportingframeworkneedstomeettheirneedsaswellasthoseoftheFinancefunctionMacromanagement:Abilityandwillingnesstofocusonthe“bigpicture”Dedicatedmanagementreportingteamresponsibleforaccuracy,timelinessandcontentofthereportingframework.Ideallythiswouldcoverbothfinancialandoperationalinformationneeds,assupportedbyamanagementinformationstrategy.ThisprovidesownershipandaccountabilityformanagementinformationacrosstheorganisationThereisconsistencybetweenthereportingKPIsandthoseusedbyHR/bonusassessedmeasures(thelatterwilldrivebehaviournottheformer)Commentaryissalientandcommercial(i.e.notarepeatofthenumbers)andfocusesonthedriversofresults.FinanceworkcloselywithoperationalmanagerstounderstandresultsandjointlypreparecommentaryManagementreportingisdeliveredbyFinanceforFinanceandisnotusedbytherestoftheBusinessMicromanagement:FocusondetailandimmaterialfiguresandadjustmentsRewardbasedmeasuresdifferfromreportedKPIsAccountabilityandownershipofmanagementinformationisdispersedacrosstheorganisationCommentaryprovideddoesnotaddanyinsightintodecisionsupport(eg.“salesaredown5%”)ProcessThelevelofdetailandfrequencyofreportingsuitsthematurityofthebusiness.(i.e.mature–canmanagewithmoredetaillessfrequently,immature/changingenvironment–managewithkeymeasuresmorefrequently)Coremanagementinformation/flashresultsareavailabletotheBusinessWorkingDay5postmonthend(seeSectionREF_Ref31168111\n\h4:Monthendclose)Thereislimitedtonodatamanipulationpriortofinalisingthefiguresandamendmentsaremademonthlyinarrears(seeSectionREF_Ref31168111\n\h4:Monthendclose)ProcessesareinplacetoassessthecompetitiveenvironmentUseofgraphicalandexceptionbasedreportingtoincreasetheeaseofinterpretationDatasourcesforoperationalKPIsarevalidatedandtestedforaccuracy,timelinessandrelevanceReportingisatthelowestlevelofdetailandisdataintenseNumerousmanualadjustmentspriortofinalisingreportsRe-keyingofdatatogeneratereportsReportsarepublished15+daysfollowingmonthendcloseImmaterialadjustmentsareallowedtobepostedduringmonthendinhibitingtheabilitytoreportinatimelymannertokeydecisionmakersOperationalKPIsanddatasourcesareinconsistentacrossthebusinessandtimeconsumingtocollateTechnologyReportproductionisautomatedfromasingledatabaseandincludesautomateddatachecksandvalidation(refertoAppendix2foroutlinetechnicalarchitecture)Re-keyingandothermanualinterventionisrarelyneededfordatagatheringThedatabaseisusedforanalysisandqueries,nottheGeneralLedgerStandardproceduresareinplaceforevaluatingrequestsfornewinformationandfordecidingwhetheritshouldbecollectedroutinelyinfutureReportingsystemsarelinkedtoallowdrill-downtoappropriatelevelsofdetail(seeSectionREF_Ref31168617\n\h2.9:BusinessIntelligence)Reportingsystemsallowsliceanddicecapability(seeSectionREF_Ref31168617\n\h2.9:BusinessIntelligence)Webbasedreportingtoaccessreal-timeinformation(seeSectionREF_Ref31168617\n\h2.9:BusinessIntelligence).Itisrecognised,however,thatrealtimereportingisnotrealisticinsomeorganisationswheredatacaptureis“lumpy”(eg.billingdataintelcos)[Toolsareavailabletomanagersandemployeeswhichallowthemtomodeltheirdecisionstomaximisetheireffectonachievementofthecorporateobjective]Enhancedquerytools,relationalOLAPtools,andmultidimensionaldatabasesutilisedtoenhanceanalysisanddeliverinformationinaflexiblemannerDataisheldinseveraldifferentdatabasesManualinterventionandre-keyingisnecessarytoproducethemanagementreportsTheGeneralLedgerisusedasananalysistoolExceptionbasedreportingisnotusedLittleornoflexibilityinpresentationofinformationwithformatbeingdefinedbyfinanceInformationisdeliveredinhardcopyformatwithouttheabilitytosliceanddiceinformationManagementreporting–processoverviewManagementreporting-detailedprocess:productionofmanagementreportsGeneralledgerandchartofaccountsPurposeoftheGeneralLedgerTheGeneralLedgerisusedcapturefinancialdataattransactionallevelwithstandardaccountsinastandardrecordstructurethataccommodatesmultidimensionalreporting.Thegeneralledgershouldallowforthefollowing;ConsistentandaccurateclassificationofaccountingdataEaseoftransferoffinancialdatathroughoutthecompanyClearflowoffinancialdatafromsourcesystemsthroughmultiplelevelsofconsolidationLatitudeforadditionaldataelementsChartofaccountsThecorestructureunderlyingthegeneralledgeriscontainedintheChartofAccounts.Characteristicsofagoodchartofaccountsareasfollows:applicationofacommonchartofaccountswherepossible,whichfacilitatesconsolidationandreconciliationacrosslargeorganisations.welldefinedsegmentsandgroupvaluesforeaseofreportingkeepitsimple–eliminationofunnecessarysegments,eliminationofunnecessarydetailwithinsegmentsuseofathingeneralledgerstructurewithdetaileddatabeingheldinthesubledgers,datawarehouseenvironmentsforanalyticalpurposesastructureconsistentwiththeorganisationalstructure(managementandlegal)astructurewhichreflectsappropriatelevelsofaccountabilitywithintheorganisation(iecostcentrestructurecascadesdowntoadecisionmakingmanagerialpositionsandnotbeyond)Appendix2providesadetailedchartofaccountsassessmentandtheapplicationof“leadingpractice”.IndoingsoitreviewsthestructureofchartofaccountsaswellastheapplicationofacommonchartofaccountsforapanEuropeancompany.GeneralledgeroverviewAnoutlineofthegeneralledgerissummarisedbelow.Figure[]:OutlineoftheGeneralLedgerstructureGeneralledgerleadingpracticechecklistThefollowingsectionprovidesaleadingpracticechecklistforthegeneralledger.ItshouldbeusedinconjunctionwithAppendix2.MajorTopicsLeadingpracticecharacteristicsIndicativeissues/problemsGeneralprinciplesCorerepositoryforfinancialtransactionaldataforthepurposesoffinancialreportingReportingtoolnotanalyticaltoolGLholdsexcessivedataquantitiesandisusedasananalyticaltoolStructureCommonchartofaccountsacrossdivisionsdesignedaroundmanagementreportingwithflexibilityforlocalandstatutoryreportingrequirementsGrouprequirementsembeddedinlocalCOAAsimplestructuretothegeneralledgerAppropriatecostcentrestructurereflectingtheneedsoftheorganisation,cascadingthroughtomanagerialdecisionmakersandnotbeyond.BeingaccountabledoesnotmeanbeingacostcentremanagerLimitednumberofgeneralaccountsNosuspenseaccountsCentralisedChartfieldmaintenancewithappropriatecontrolsandsecurityoverCOAamendmentsClearproceduresforrequestingandperformingChartfieldMaintenanceClearlydocumentedproceduresforreportingstructuremaintenanceMultiplechartofaccounts,maintainedlocallyInconsistentdefinitionsIncompletemappingbetweenlocalandgroupchartofaccountsMultipleGAAPsLackofcontrolandfrequentchangestothechartofaccountsNumerouscostcentrespenetratingdeepintotheorganisationalstructureGLcannotaccommodatelocal,baseandreportingcurrencieseasilyNumberofsuspenseaccountsnotclearedonregularbasisManualrevaluationprocessPeopleClearownershipoftheGLandunderlyingchartofaccountsstructurebyGroupFinanceDisjointed/localownershipofgeneralledgersandchartofaccountstructuresProcessAllgeneralledgeractivityusesautomatedprocessesusingEDI,automatch,electronicauthorisation,DIPetcNopaperprocessingDataisenteredonce,asclosetothesourceaspossible,movedonlywhennecessary,andvalidatedatthesourceperformalstandards&proceduresClearproceduresforreceivingbatchinterfaces(subsystems,i.e.,AccountsPayable,AccountsReceivable,Payroll,etc.)PolicyforapprovallevelstobeatthelowestlevelspossibleApprovalswilloccurinthemonththetransactioniscreatedInter-companytransactionproceduresstrictlyadheredtoAutomaticreconciliationatmonthendofallinter-companybalancesKeybalancesheetaccountsreconciledmonthly.Othersreconciledona‘rolling’basisFullydocumentedandwellunderstoodproceduresaroundGeneralledgerprocessesWellwrittenanduser-friendlyaccountingmanualavailableonlineUnclearprocessesandproceduresPoliciesandproceduresnotadheredtobyreportingunitsInconsistentprocessesperformedgloballyManualentriesrequiredtoreconcileGLInfrequentreconciliationsperformedonkeyaccountsMonthlyreconciliationsperformedanallaccountsAdjustmentsMaterialitylevelssetforallocations,inter-companychargesandjournalvouchers.ClearpolicyforadjustingentriesbasedonmaterialitylevelsMaximumuseofstandardandrecurringjournals.Alljournalsraisedon-line.NohardcopiesrequiredClearproceduresonhowtopostjournalentriesanddealwitherrorswithingiventimetableClearlydocumentedandunderstoodproceduretoobtainapprovalsforjournalentries.Embeddedcontrolsforapproval.Automatedinter-ledgerbilling(allocations).Clearlydocumentedprocedureforinter-companyjournalentries(startingpoint:supplierofservicesbookstransactionintorecipientsbooks)Allocationswillbepreparedonlyforcontrollablecostsofthereceivinglocation/departmentClearprocedureforprocessingallocations.LowminimumvalueforjournaladjustmentsHighvolumeofmanualadjustmentsrequiredMultipleslevelsofauthorisationforalljournalsComplexityofallocationmodelleadstoprocessingdelaysAllocationbasisnotclearlyunderstoodbyreportingunitHighnumberofcostcentresrequiredtomaintainallocationmodelTechnologyAsingledatabasestructurethatallowsuserstomoveeasilybetweenthegeneralledger,accountspayable,accountsreceivableandotherledgersAllfeedersintothegeneralledgerprocessareautomatedAutomatedscheduleprocessingAbilitytoenterasingletransactioninmultiplecurrenciessimultaneouslyAbilitytoautomaticallycalculatecurrencyvaluesbasedonunlimited,date-dependentexchangerateinformationestablishedbytheuser.Dataintegrityaccountabilityatsource(integritychecksinthesystemietrialbalancebalancesetc)SystemcontrolstoenforcetheappropriateuseoftheCOASystemcontrolstoensureappropri