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Making Sense of Financial Dots to Achieve Clarity

Sep 16, 2021

Everything is in a state of flux and therefore ongoing holistic, detailed and segmental business views will be needed more regularly to fully grasp the unfolding operational trends, as well as their interdependencies both today and in the future. All must be achieved against a backdrop of maintaining operational compliance.


Keeping focused whilst navigating through change is not easy in any year. This time around, for both financial management and operational teams, there are no firm baselines nor historical data points that can be relied upon, but at least x-application reporting is providing new additional insights at this challenging time. Specifically, as Financial, Human Resources and Budgeting data as well as other data sources can be brought together for deeper and richer productivity insights.


Disposals and acquisitions, as well as detailed operational reviews into every functional area of the business, will be part of any ongoing business development or restructuring plan for both business continuity as well as “going concern” evaluations. Regardless of which, various scenarios will have to be explored, ranked and prioritized in order to achieve optimum results and for overall desired financial impact, meaning that processes will be repeated multiple times.


Floating waypoints are a better description of today’s operational environment as everything is changing. All of us are having to turn into selfless warriors to ensure ongoing business continuity as we navigate to and from the waypoints, whilst understanding the practical aspects of what can and cannot be practically executed as borders open and close.


Vital reporting processes that are required for controls, decision support and business management activities are typically labor intensive and painful to complete, so the ramping up of reporting frequencies and management reviews to gain vital vision cannot be practically achieved through continual replication of the same process, but in fact requires deeper change.


Change management within the finance team is relatively easier to achieve, compared with broader changes where accounting processes might cross other functional areas, and therefore can be planned iteratively based on priorities. 


Business impacts from resulting economic changes are everywhere but rolling numbers and segmental analysis at entity, regional & global levels, across all relevant functional areas and applications, at least helps to identify the underlying trend changes in detailed revenue and cost run rates by geographical and operational segments. They can also indicate both positive and negative trend lines for onward business prioritization, not to mention their forward impact on cash flows plus bank balances.


Leveraging automation in financial reporting helps resolve and minimize efforts in re-running existing processes more frequently to attain better visibility, and also frees time for vital management activities. This is because related transactional processes take time to execute, due to them requiring ongoing transformational and segmental analysis. These can all now be resolved as transformations are easier to achieve with practical compute power. This is significant, as time savings can be per month and per entity, thereby enhancing on an end to end basis both productivity and operational efficiency. 


Automation can be used to execute both complex processes and complex tasks for various accounting areas. Specifically, those going across multiple people & geographical entities or even those within specialist areas undertaken by a few. Examples of each can be found within:  IFRS 9 Financial Instruments; IFRS 10 Consolidated Financial Statements; IFRS 11 Joint Arrangements; IFRS 12 Disclosure of Interests in Other Entities; IFRS 13 Fair Value Measurement; IFRS 14 Regulatory Deferral Accounts; IFRS 15 Revenue from Contracts with Customers and IFRS 16 Leases. Think of it as applying Fintech and Insurtech process know-how to all financial processes which also makes it easier to reconcile between reporting variants eg IFRS 15 and ASC 606 or IFRS 16 and ASC 842 .


Operational and financial considerations are always in the mix and one can leverage the other, together with any required compliance controls during execution etc. For example Lease Management or Bond Management are areas that illustrate this as they have both complexity and timing considerations. 


Specialist operational processes for example include leases and these need to be agile, timely and able to trigger the necessary financial entries over the life of a lease at detailed level, plus they also need to be able to roll up numbers in aggregate to give a more holistic performance view for ongoing management. Removal of data silos is the more subtle takeaway here as they are seen today in so many places, both within and across departments and cause transactional friction. Removing them requires change management.


Consolidation, is a broader process example that traditionally sucks out time from the finance function and newer systems enable all aspects of the process, including balance sheet reconciliations and reporting to be tackled. This can include instant FX movement analysis, reconciliation between GAAP and IFRS submissions and calculations of weighted average FX rates etc.


Ultra-granular transformations are the root cause of transactional issues in reporting cycles and historically they have not been easy to achieve, because of the process itself and the required practical compute power to execute them. Scenarios that require transactional transformations are numerous, and the painful ones are often not just within an application, but also across them and often involve meticulous and detailed reconciliation work. Adding various ERP software vendors and differing architectures into the mix  requires further execution barriers to be removed eg databases, middleware etc and each potentially requiring special skills, sometimes at a technical level with systems integration.


Solving transformational issues can often be achieved with iterative changes that operate securely end to end with or without spreadsheets, with financial processes both repeatable plus auditable. In other words, leveraging your existing environments as far as possible to reduce cost. At the end of the day all vendor systems produce final reports, so the difference is very much in the actual execution @anywhere @anytime ie the how and of course the total cost of ownership. 


Tackling complex tasks or processes as illustrated above removes many, if not all, of the pain points in current processes ie reconciliations, transformations for ongoing segment analysis etc meaning that time can be further freed for ongoing broader management reviews during these critical times.


Dashboards continue to change at both a technical and operational level as better refined processes bring more relevant data to them.  New data formats, enhanced transformational capability and practical compute power come together and continue to open up compliant access to all relevant information across functional business systems. 


Financials, Human Resources, and Budgeting systems together with functional data from your other applications can be brought together from on-premise, cloud or hybrid systems to support enhanced business decisions (eg workforce planning) in a more comprehensive way to help drive the business away from deeper crisis points. This digital enablement, coupled with the ability to leverage API connections with other leading service providers, is what differentiates digital systems from legacy. Again iterative steps can be undertaken to drive incremental meaningful change and does not necessarily imply a full blown system change.


Qualitative and quantitative data processes are worthy of mention here and can also be compliantly brought together for controlled auditable and repeatable execution to support core applications. All help in freeing time for management activities by removing ad hoc processes eg Employee Self Service, bringing order to decision flows. Another focused example might be CAPEX management where notes and supporting actions like insurance or IOT implications need to be executed in parallel as well.


Today’s operational environment requires that richer information be available in a much more timely manner for ongoing management activities, so that positive and negative trends can be identified, leveraged or remedied as quickly as possible to provide a much stronger operational environment. Being able to remove transactional frictional bottlenecks as data is combined & transformed across Financials, HR, Budgeting (FP&A) as well as other systems, frees time from process to management activities that help drive the business forwards during this challenging time. A timely game changer!

FlexSystem is a business software vendor to 1 in 10 Forbes Global 2000 (May 2020) and 1 in 5 Global Fortune 500 (August 2020), operating at the intersection of new process and payment technologies to provide you with iterative opportunities for value creation with or without AI at both gross and net margin levels.


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