Case Analysis - Scenario Planning

Multi-scenario Budgeting and the Risk of Inaccuracy

 

Facts

Annual budget preparation and re-forecasting often involves both accounting and non-accounting personnel and these tasks are often undertaken simultaneously with finance’s usual daily tasks. Often put together with a combination of multiple scenarios and assumptions there is always the potential for mistakes as many different factors like the ones below are taken into account :

 Product mix and profitability examples such as 10% growth in product A , 20% growth in product B, new products introduction, changes in price plans or margin changes to resellers.

 Departmental overhead budgets may vary by location and function, e.g. salary increments.

 CAPEX:Measurement, recognition rules such as depreciation and amortization policies

 Budgeted independent influences such as interest rate, inflation rate, or tax rates.

 Cashflow scenarios such as DSO, creditors days, seasonality of sales and etc.

When each user is required to modify or amend different data sets, the potential is there for the process to get muddled and for errors to occur.

Expectations

The system must reduce complexity and its associated risk through the separation of budget computational logic from the data source.

Solutions 

FlexCalc offers a full spectrum of computational rules to support group consolidation as well as budgeting. Our approach of setting these rules rather than the usual traditional method of hard coding these rules substantially reduces the time of implementation or modification.

Benefits

Benefits The lead time for each budget scenario is reduced significantly and budget data is stored in a more secure environment through a process of data validation and authorization. So, the overall quality of budget reports is improved substantially.

Issues with the Management of a Large Number's of Spreadsheets

 Facts

Different budget variations always involve the amendment of the same spreadsheet and these various iterations increase as the year progresses. This function is not well managed within Excel as each iteration contains small or major differences compared with previous versions resulting in making the process difficult to manage on an on-going basis.

Expectations

Proper validation and authorization controls for spreadsheets is critical and should always be done by the system rather than by professional accountants.

 

Solutions

FlexCalc has a built-in sophisticated mechanism to control the process of data collection, data validation, data transformation as well as data storage during each iterative stage. As data files are uploaded by different users it is the system that controls the version numbers and authorization controls for each data file.

 

Benefits

Professional accountants can leverage their core competency to focus on value added activities thus improving overall productivity and continued enhancement to their financial operations.

Not Capable to Include All Valid Amendments

Facts

Budget planning and rolling forecasts usually involve very frequent amendments and problems can arise when there are no proper procedures to govern the process during each stage of preparation. Approved amendments might be missing despite the fact that they have been approved or conversely amendments might be made without prior approval.

 

Expectations

Users always demand the existence of a robust planning management process that governs any changes made by anyone to underlying data.

 

Solutions

FlexCalc is capable of addressing root operational issues of data management for budget planning and rolling forecast processes with every authorized change being rewritten automatically into the central database whilst keeping an amendment log for subsequent audit purposes.

 

Benefits

This achieves a significant saving in time and improves the quality of the underlying data resulting in quality reports.

 

Printing Pivot Table and Re-inputting

Facts

There is little improvement in the budgeting process after the implementation of any new accounting system as users often continue to use Microsoft Excel in the preparation of budget data. Additionally most of these Excel worksheets are designed using pivot table like formatting with users having to re- input budget data back into the accounting system.

 

Expectations

Microsoft Excel remains a great tool for data entry especially when it supports the fast configuration of pivot table like formatting and as a result this data should be able to be auto imported into the accounting system.

 

Solutions

The design principle of FlexCalc is to avoid any duplication of data entry so the ability to auto import spreadsheets, including pivot tables, is a basic function of the system.

 

Benefits

Any seamless integration between your accounting system and Microsoft Excel significantly decreases your investment cost as new and existing finance staff already have prior experience of using Microsoft Excel and uploading files through the email system. FlexCalc is merely changing their existing practice in so far as files are uploaded in the same way but to FlexCalc. 

Collaboration Issues Between Different Departments

Facts

Different departments have acquired different kinds of budgeting systems to support the planning process having realized that although ERP systems provide a firm basis for recording history that they are in fact weak on facilitating any view of the future. Additionally associated costs of managing these different systems are high as these systems are disconnected from each other and of course as a result there is no efficient way for finance departments to automate the consolidation of this data.

Expectations

CFO’s expect to acquire a planning system that can support the work of different departments and provide users with data access and approval controls that can enable effective risk management for future planning whilst allowing the existing ERP system to focus on recording historical data.

 

Solutions

FlexCalc provides not only an excellent multi-user planning platform, but is also a departmental collaboration platform through it’s ability to implement access and approval controls that ultimately support any risk management work undertaken by the CFO.

 

Benefits

Most importantly, the function of FESA Planning is not to replace your existing ERP system but rather to leverage the benefits that come from the segregation of duties. This leaves the ERP system focusing on the recording of historical data whilst FESA Planning focuses on the planning for the future noting that any actual’s data from the ERP system can be imported into FESA Planning so that the CFO can undertake quick and efficient variance analysis using different basis of comparison.

Cost of Maintaining Business Analytics

Facts

From time to time senior staff develop new business analytics to support business operations through knowledge management and these often require a lot of manual work for each subsequent reporting period.

  

Expectations

Management want to maintain detailed business analytics and will be more receptive to introduce new ones when systems are ready to automate the relevant updating process on a daily basis.

 

Solutions

FlexCalc has an integrated Rules and query processor that supports both automatic updates and for the ability to create new business analytics. Most importantly, the system also supports scheduled report generation based on user-defined time criteria.

 

Benefits

Maintaining an excellent and easy to use design for business analytics really benefits accelerated knowledge management and the cost of this is now reduced significantly to the point where new analytics can be created and maintained very easily.

Managing Multiple Versions During Budget Planning

Facts

The fourth quarter of any financial year is the busiest time for budget planning and involves substantial and detailed review work all of which is on top of the normal and typical monthly business routines. Ever increasing daily workloads are exacerbated by frequent amendments to budget data which continue at speed in both a forward and backward direction as different versions are explored and as KPI’s are examined for compliance with corporate guidelines. Switching between these different versions can be a very tedious and time consuming task and it can be very difficult to avoid errors when data is so interconnected and dependent on other computational relationships.

 

Expectations

If different versions of financial budgets can be maintained and monitored by the system automatically, users are able to switch amongst different budget versions very quickly.

 

Solutions

FlexCalc is equipped with strong capabilities, across different user groups, to offer automated services in respect of data collection, data validation, data transformation and data storage of budget data. Switching amongst different budget versions becomes a simple task as FlexCalc has a built-in mechanism to keep track of different versions of all incoming data files.

 

Benefits

After implementation of the system, you can obtain consolidated financial forecasts more quickly than ever before and additionally any analysis of variations between different versions of forecast becomes an easy task.

Challenge of Multiple Formats

Facts

Over time external and internal changes require additional levels of budget data to be collected throughout the organisation driving fragmentation and changes to budget models during the process.

Expectations

CFO’s demand for a budget consolidation system that can proactively support any changes in budgeting methodology with minimal disruption.

 

Solutions

Data collection using the Rules Processor is a core design strength associated with FlexCalc and the system is able to handle any unique formatting issues. Most importantly no programming is required and there is no need to use Macro’s or VBA to support the automatic import of data.

 

Benefits

The ROI for the new budget consolidation system becomes increasingly significant when the system is continuously able, over the months and years, to adapt to changes in user requirements.

Staff Turnover of Group Finance Team

Facts

Consider a Group where during the last decade it has expanded to over 100 geographical locations and as a result the very tedious work of budgeting at headquarters has now become a critical management issue especially at times of staff turnover within the group finance team.

 

Expectations

Management confirms that merely recruiting more finance staff does not solve the problem and that migration away from labor intensive budgeting consolidation tasks to advanced automation is the way to go.

 

Solutions

No matter the rate of business expansion or contraction, FlexCalc supports scalability through the elimination of data manipulation work undertaken at headquarters.

 

Benefits

The group finance team can enjoy the use of the new system and have room to upgrade themselves from any clerical work to that involving analytical thinking.

 

Significant Increase in Number of Budget Owners

Facts

Empowering your staff at an individual level to create and upload data files and ensuring that all submissions have been processed can be a painful experience not to mention very time consuming.

 

Expectations

Top management, irrespective of growing staff numbers, expect an advanced budgetary control system that is capable of directly supporting all budget owners without relying upon data manipulation by middlemen.

 

Solutions

When there are a sizable number of budget owners, FlexCalc can be deployed over the web so as to eliminate the need for installation and additionally through the use of a web browser, users can operate the system from updating data files to receiving variance analysis reports.

 

Benefits

The benefits derived from this implementation are significant as most of the planning overhead is eliminated thereby allowing not only for every budget owner to directly contribute their work but also for management to obtain relevant budget analysis on a timely basis. In addition, the internal control over the whole budgeting process is dramatically improved when management can allow for an optimized segregation of duties matrix that is supported by the system.

120 Months of Rolling Forecast

Facts

Some industrial sectors require for ultra-long term planning. The financial services sector is a typical example as is Oil and Gas but with planning periods more than 36 months it becomes increasingly more difficult to manage the process effectively.

 

Expectations

Planning accountants demand for a system that can allow a user-defined planning period down to weekly, monthly or yearly basis without involving programming or customization.

 

Solutions

FlexCalc supports a user-defined accounting period table up to 9,999 years allowing for 99 periods for each of those years and additionally users are allowed to post data to these different periods within the same processing session.

 

Benefits

The automation of multi-period rolling forecasts for 120 months, allows management to receive more meaningful and detailed planning reports on a cost effective basis.

Case Analysis - Fast Closing

Long Lead Times Associated with the Customization of New Financial Reports

 

Facts

User requirements in respect of financial reporting can change over time but getting those adjustments made in a timely manner can be very difficult and involves the scheduling of time with an already busy IT department. As a result this leads to an explosion of ad hoc Excel reports that take data from different systems or which may simply be for a more complex computation.

 

Expectations

The implementation of financial reporting tools that are suitable for end-users is important to avoid preparation of reports manually.

 

Solutions

FlexSystem has developed technologically advanced new financial reporting tools for supporting end-user computing. Financial reporting tools integrated with FlexETL is LamiShow. FlexETL provides standard report function allow users to generate report in X, Z, Y, WX, WY direction, while LamiShow provides the specific needs of Accounting Practice in term of measurement & presentation of information for statutory audit as well as internal management.

 

Benefits

Upon implementation of the system, inter departmental tensions amongst management, the financial department, the IT department and service vendors are gradually reduced. Management can have access to more timely information to support their decision making when the system allows for end-users to create and run financial reports very quickly and costs associated with this process are reduced significantly.

IAS 1: Presentation of Financial Statements

Facts

Key distinctive features of this accounting standard are its overall requirement governing the minimum allowable presentation of financial statements (rather than specific measurement, recognition and disclosure requirements) and compatibility with released previous period information on what is assumed to be an annual basis.

To ensure compliance in the preparation of financial statements, understanding implementation issues deriving from these overall requirements such as comparative information, materiality and aggregation, reclassification, and offsetting are crucial.

Requirements governing the presentation of financial statements change over time so to achieve continued compliance your accounting system must have a strong capability to adapt to required changes with minimal effort.

 

Expectations

An accounting system must able to meet continuing changing requirements in respect of presentation of financial statements and is critical to maintain timeliness and quality of financial information.

In addition, costs associated with each change can be great if your accounting system cannot offer the required infrastructure to facilitate the transformation of financial data and reports. Any speed improvement through adoption of software technology that reduces system waiting time and improves productivity at the cheapest deployment cost is vital.

 

Solutions

FlexCalc minimizes costs and times associated with implementations offering a dynamic approach supported by a sophisticated rules and query engine. Most importantly the processes of setting up financial reports are separated from data collection, data transformation and data storage. Any change in presentation of financial statements may not necessarily result in a change in all other processes and additionally the system is able to support concurrently different presentation scenarios.

 

Benefits

The system is able to follow continual and incremental changes in presentation requirements through the configuration of new processing rules and query formulas so that the useful life of the system can be greatly improved.

 

Inter-company Reconciliation

Facts

Increased time is being spent on the reconciliation of accounts over different companies within a group as they dynamically evolve across different business sectors and locations.

 

Expectations

A system that allows for the preparation of cross ledger vouchers as if it were a single company would in fact avoid most issues within inter-company accounts.

 

Solutions

FlexCalc supports the user-defined auto-generation of vouchers attributed to individual legal entities as a result of the preparation and posting of cross ledger vouchers.

 

Benefits

Upon implementation of the inter-company automation module of FlexCalc, inputting inter-company vouchers no longer requires the input of relevant account codes and avoids most of the typical discrepancies of inter-company accounts.

Detailed Information of Debtors and Creditors

Facts

Financial management relating to debtors and creditors can involve looking at very detailed information and to achieve this finance staff have to export raw data from their accounting and related systems to spreadsheets in order to compute account settlement and foreign currency revaluations for all relevant accounting transactions; this is necessary as the existing accounting system can only provide debtors and creditors at a macro or highest level.

 

Expectations

Finance staff want an accounting system that can handle business transactions at a micro level so as to support the relevant automation of account settlement and foreign currency revaluations.

 

Solutions

FlexCalc has a built-in a Contra Item module to support the automation of account settlement and foreign currency revaluation at a micro level. This supports management in the review of the relevant detailed information for debtors and creditors directly from the accounting system.

 

Benefits

Relevant information for debtors and creditors can be provided on a more timely and accurate basis. Most importantly finance staff can now focus on providing more insightful management reporting based on various analytical reports generated by the system.

Non-IFRS Requirements of Credit Control

Facts

The recognition criteria for accounts receivable for IFRS is different from that of credit control due to the fact that it also covers unearned income for signed sales agreements. This motivates finance staff to delay the recognition of accounts receivable to avoid doing reversal adjustments of unearned income during each financial close. Most up-to-date accounts receivable positions thus rely on the use of spreadsheets that cannot be deployed effectively over a multi-user effectively.

 

Expectations

Accounting systems that support the posting of accounts receivable to future periods in order to support both IFRS and non-IFRS requirements is crucial to avoid manipulation of data within the accounting system.

 

Solutions

FlexCalc supports an impressive data import capability when used together with the posting of any multi-period contracted income thus avoiding any tedious work.

 

Benefits

The credit control function can be implemented and executed to enhance your short-term liquidity position and most importantly all relevant staff can retrieve the most up-to-date accounts receivable information in both a multi-user and multi-location environment.

Challenges in Handling Complex Rules of Cost Allocation

Facts

The most common cost allocations are related to reallocation of cost from shared service centers to other service centers and business units. There are three main types of cost allocation methods namely direct method, step-down method and reciprocal method.

The results of cost allocation will trigger the preparation of additional vouchers with a lot of accounting entries. Additional problems are that relevant voucher posting will affect inter-company current accounts, inter-company management fees, computation of staff incentive payments, taxation and consolidation adjustments of consolidated financial statements. Any additional adjustment will trigger a series of further adjustments.

Expectations

It is highly expected that a system improvement project is able to eliminate most mechanical work in respect of cost allocation.

Solutions 

FlexCalc is a rule-based accounting system and not only allows for the configuration of different types of cost allocation rules very efficiently but also allows for them to be stored and reused. It is very useful when users want to avoid massive volume of adjustment vouchers posted to the ledger system during the monthly closing review.

Benefits

The mechanical works in respect of cost allocation are eliminated and in addition, the readability of each account ledger is improved significantly as most of the dummy adjustment vouchers are removed by the ledger system.

Shortening Cut-off Date of Financial Close

Facts

For every delay of financial close finance staff always claims that there are a lot of creditor invoices and statement of accounts pending to receive in relation to previous month’s business activities.

Expectations

CFO believes that for any good received and service rendered of the company there shall be existence of signed documents such as purchase order, good delivery note etc. So finance department shall be able to complete the financial close within few days immediately after every month-end.

Solutions

FlexCalc has built over a lot of specialisation of modules and functions. The bottleneck of the above situation is due to the issue of recognition of liabilities. The CFO can consider implementing the Contra Item in order to capture all relevant liabilities as soon as practical prior receiving invoices and statement of accounts. Most importantly, FlexCalc can implement along with other accounting system as FlexCalc is merely one of implementation options working with Contra Item despite it is the best combination for long term consideration.

 

Benefits

Upon completion of implementation of Contra Item, most of incurred liabilities can be captured by the system within one business day no longer rely on receiving all relevant invoices and statement of accounts in order to complete finance close despite there are triggering minor adjustments upon settlement as resulting of close book much earlier than before.

Frequent Amendment of Computational Rules

Facts

Changes in the speed of business often with proportionately less resource together with legislative change causes major issues in keeping up not only with reporting but keeping users fully appraised of what is happening in their business.

 

Expectations

One can adapt fast to changing environments but this can be greatly enhanced by technology that facilitates the tasks to be undertaken by users.

 

Solutions

FlexCalc is supported by the latest in-memory and compression technologies that allow users to be very productive and also uses a visualization interface that gives you fast results even to mobile devices.

 

Benefits

An incremental return on investment as changes can be done iteratively and in a timely manner.

Maintenance Issues of Chart of Accounts

Facts

Every business day involves chart of account maintenance especially when there are new combinations of analysis dimensions or whenever a new segment of account code has to implemented causing a time consuming exercise to re-do data migration.

 

Expectations

Users expect that a new accounting system can provide a flexible design of dimension code setting so as to motivate them to input most of the analysis data directly into the accounting system.

This is an example of why finance staff usually escape from the input of data into the accounting system when an alternative use of a spreadsheet allows them to design a lot of independent dimensions across different columns which in the long run is a more expensive option.

Solutions

In addition to a long account code, FlexCalc also supports users to configure user-defined dimensions so that there is no rigid dependency between the chart of accounts and differing dimensions. Most importantly users can configure validation rules for each account code and dimensional code so as to avoid invalid combinations of relevant codes that may exist in vouchers.

 

Benefits

Upon implementation of the new system, there can be a substantial reduction in the number of account codes which supports reduced administrative work in respect of adding new dimensions to the accounting system.

Comprehensive Related Party Disclosures

Facts

Existing modular designed accounting systems struggle in respect of related party transactions when prevailing accounting standards demand for disclosure of a related-party transaction of a balance sheet type account as well as including a profit and loss type account.

 

Expectations

Users expects the voucher preparation process to support the posting of all relevant associated dimensional codes that cover both balance sheet type accounts, and profit and loss type account.

 

Solutions

FlexCalc can be implemented on a modular design basis to support the operation of multiple modules including payable and receivable ledgers without losing any dimensional codes whilst recording related party transactions. In addition, FlexCalc is integrated with an impressive query engine that can support both fast and comprehensive aggregation of financial information across different modules for a group of companies.

 

Benefits

The lead time for completion of statutory audits is greatly reduced as well as supporting for more frequent monitoring of related party exposures.

 

Localization Issues of Global Standardisation

Facts

As each economic region has differing sets of regulatory and business requirements, unifying the accounting practices of a company throughout the world will motivate regional finance offices to maintain two separate accounting systems meaning that accounting costs increase for every business transaction.

 

Expectations

Regional finance staff have the expectation that their headquarters will understand their individual needs for localization and are willing to work together to reach an implementation model that supports both fast consolidation as well as maintaining compliance for local requirements.

 

Solutions

The ability to support the implementation of multiple homogenous sub-company groups is a basic function of FlexCalc. In addition, the headquarters’ finance staff can configure the ledger consolidation module of FlexCalc to run the standardization process automatically for different charts of account and currencies across different companies that may be located in different economic regions.

 

Benefits

Regional finance teams no longer suffer from the duplication of work and are able to easily meet local and global regulatory requirements plus any underlying financial information for consolidated financial statements will becomes more reliable when regional finance staff can concentrate on local requirements.

Project Level Trial Balance Not Balance

Facts

Managing construction and engineering businesses usually involves focusing on project level financial statements but existing implementations of an ERP suffer from non-balancing trial balances for every project. Extensive reconciliation work has to be done to rectify these trial balance reports in order to support the preparation of project based financial statements.

 

Expectations

The expectation is that when a system can support voucher validation and double entry recording for every business transaction then a project based trial balance should be easy to achieve in practise.

 

Solutions

FlexCalc is capable of interfacing with third-party ERP systems thereby ensuring the successful implementation of a double entry recording methodology for every business transaction.

 

Benefits

The management of construction and engineering businesses can obtain a full set of financial statements for every project and every group of homogenous projects without suffering from the issue of a non-balancing trial balance.

Case Analysis - Group Accounts

Diversity of Data Source Formats

 

Facts

Finance operators within corporations face many challenges associated with the consolidation of a large number of financial reports and as a result request regional finance offices to submit their financial reports in a pre-defined standard format. These formats are often different from those used locally and hence work has to be done to produce the new formats thus reducing staff productivity.

Expectations

Users want to simplify data collection and formatting time in the production of these documents both at the office producing the report and those that are doing the consolidation.

Solutions

FlexCalc has been designed to recognise the different data sources despite the fact that it contains different presentational formats and formatting features.

Benefits

Finance headquarters and regional finance offices can use the same set of financial reports for daily operations and decision making so that the quality of information and efficiency of the group consolidation process is enhanced simultaneously thus improving productivity.

Using processing rules to process data also minimises the need for manual intervention and as a result the quality and internal control over the preparation of these financial reports are improved substantially.

Professional accountants can leverage their core competency to focus on value added activities thus improving overall productivity and continued enhancement to their financial operations.

Differing Financial Year End Dates

Facts

When preparing consolidated financial statements all subsidiaries and associates of a group company shall prepare their financial statements with the same financial year end date. As a result some of those companies may have to undertake additional work when their financial year end dates differ from the parent company.

Expectations

Transformation of financial statements with different financial year end dates is a laborious and tedious task and one expects that the work can be performed by the system automatically.

Solutions

FlexCalc has a built-in mechanism offering specific data transformational services to consolidate any financial statements that have a different financial year end date.

Benefits

The system can offer responsive support for decision making as the preparation of consolidated financial statements is no longer delayed by the effect of different financial year end dates.

 

Recognition of Chinese Characters within a Data Source

Facts

Financial Statements may not contain an account code and therefore recognition of account names becomes critical to get the relevant financial information inside of your financial statements. The preparation of two sets of financial statements in differing languages is a costly exercise which also affects the timeliness of financial information.

Expectations

It is expected that modern accounting software can handle multiple languages and that the system is able to recognize and validate financial statements in different kinds of languages.

Solutions

FlexCalc provides comprehensive mapping functions, allows for the configuration of multiple language mapping tables for each ledger. This allows users to upload their financial statements prepared in Chinese Language directly as the system has a built-in lookup process to automate the recognition and transformation of different languages. So consolidated financial statements can be processed and generated automatically.

Benefits

Productivity of finance offices at a regional level as well as at headquarters are greatly improved as users are not required to prepare two independent sets of financial statements in different languages manually.

Time Pressure to Maintain Multiple Scenarios of Group Consolidation

Facts

Time is of the essence and a listed group has to prepare its consolidated financial statements with multiple scenarios with the two main classes of scenario being as follows:

 Statutory consolidation

 Management consolidation

To comply with the requirements of statutory consolidation the following reasons will trigger the need for different multiple scenarios of the financial consolidation:

 To comply with regulatory requirements for different regulatory bodies

 To comply with accounting policies of its immediate holding companies and ultimate companies

 To comply with the management requirements for preparation of consolidated financial statements having different scenarios of business planning

To satisfy the management requirements of consolidation the following reasons will trigger the need of multiple scenarios for financial consolidation:

 To prepare different types of consolidated financial statements (i.e. Budget, forecast, preliminary, flash and actual etc.)

 To prepare consolidated financial statements with different currencies, entity combinations and recognition assumptions

Expectations

It is highly expected that the new system can manage the generation of multiple scenarios effectively and with a high degree of automation.

Solutions

FlexCalc is supported by 1) calculation rules specification, 2) the scenario group and the scenario group adjustment and these items are all important functions available during the configuration process. In addition, the implementation of these scenarios allows users to select the following options:

 Output to multiple adjustment ledgers

 Output to multiple ledger sets

 Output to multiple scenarios inside a ledger

Benefits

The work of professional accountants can be improved fundamentally as they can support management for differing scenarios and most importantly reduces the lead time of preparation and the quality of the consolidated financial statements.

IFRS 8: Operating Segments

Facts

Using a “managed approach” to identify, measure and disclose the financial performance of a company or a group of companies is a distinctive feature of this accounting standard compared with other accounting standards. The requirements are not only limited to dealing with a single company or a group of companies as a whole, but also includes the disclosure of financial performance for some of the material operating segments.

Key implementation issues are that the standard requires disclosure of financial performance for some of the material operating segments and these are reviewed by internal management and often involve a crossover between financial accounting and management accounting. More sophisticated internal control procedures over the preparation of financial statements is required and as a result control procedures and control environments are aligned with financial accounting for the purpose to comply with IFRS 8.

Expectations

Ease of integration of accounting systems and operational processes between financial accounting and management accounting is vital to ensure that management is using correct information and is in full compliance with the standard.

Solutions

Strong integration with Microsoft Excel enables FlexCalc to provide an integrated solution for the preparation of financial statements for both internal management plus stakeholders and financial accounting and management accounting tasks are executed using controlled procedures environment.

Benefits

Long term costs and risks associated with the Shareholder value can be increased gradually as results of increased quality and timeliness of financial information percolate through the organization.

Operational Challenges with Foreign Currency Translation

Facts

This is to analyze the operational issues associated with the implementation of the current rate method. In general, there are two main classes of exchange rate used in the conversion of financial statements which are denominated in foreign currencies which are:

 Historical rate – exchange rate prevailing at the date of transaction

 Current rate – closing rates that are applied to all transactions

Most items appearing in financial statements are translated at current rate except for share capital, share premium, and retained earnings.

Since there may be a large number of transactions it may not be practical to translate these items at the actual prevailing exchange rate at the date of the transaction during the consolidation process and therefore typical methods of approximation are used:

 Simple average rate measured on daily basis

 Simple average rate measured on monthly basis

 Weight average rate measured on monthly basis

The methods of approximation adopted above will therefore result in different amounts of exchange reserve so there are two routes for the completion of the translation for share capital, share premium and retained earnings accounts and these are:

 Translate at the current rate initially, and preparation of adjustment vouchers for the calculation of exchange differences between current rate and historical for each class of asset and liability.

 Translate at historical rate and calculation of net effect on exchange reserve directly.

Although the end results of consolidated financial statements are identical for each of the above routes only the first route can generate the breakdown of individual voucher adjustments to explain the exchange reserve movement of the components.

Expectations

Most customers will not accept changes in accounting policies as result of the implementation of a new accounting system and there is no way to generate the same results for the financial statements when the new system does not allow them to apply the prevailing accounting policies.

Solutions

FlexCalc offers implementation options to fit a particular situation. In addition, the system allows users to define their method of approximation for the historical rate and for the different routes of translation for each of share capital, share premium, and retained earnings accounts.

Benefits

Consistency of accounting policies can be maintained upon implementation of the new system so implementation costs and uncertainty can be reduced effectively.

Collection and Confirmation of End User Requirements

Facts

Knowing how to approach this complex area by leveraging your existing systems could lead to significant compliance issues if existing controls and processes are not taken into account.

Expectations

Customers are looking for an iterative approach for process customization and for a continuous iterative mechanism to speed up the putting in place of additional compliance reporting features.

Solutions

FlexCalc can be implemented and managed using an iterative approach and can continually be fine- tuned to optimize processes.

Benefits

Implementation costs can be dramatically reduced as the work focuses on the real requirements of an organization for each stage of iteration.

Differing Reporting Currencies within Overseas Companies

Facts

Financial reports come from your different entities in differing currencies and therefore a lot of exchange rate data and computational rules within the spreadsheets are common place when there is no standardized reporting currency. As a result control over the amendment of exchange rate data and its associated computational rules in respect of foreign currency translation becomes an operational problem especially when the number of consolidation reports increases over time.

Expectations

Centralization of the storage and maintenance of exchange rate data and its associated computational rules in respect of foreign currency translation is essential to rectify the root problem caused by the duplication of data and its associated rules which are spread across a large number of spreadsheets.

Solutions

FlexCalc stores exchange rate data and computation rules within its central data warehouse. Exchange rate data can be classified into five operational types namely opening rate, closing rate, average rate, historical rate and composite rate. Each exchange rate type can be configured to an individual account or class of account by an administrator. In addition, the processing rules are very comprehensive allowing for foreign currency translation to be according to end user requirements.

In addition the operations are user friendly throughout the consolidation process. The headquarters can use the well regarded Excel user interface to retrieve the required financial information directly on any individual company or on consolidated basis from FlexCalc and users are no longer required to insert a lot of exchange rate data and associated computational rules into spreadsheets.

Benefits

Internal control over the management of exchange rate data and computation rules are improved significantly so that the management of headquarters can obtain high quality and timeliness of financial information to support their work in respect of performance management and decision making.

Operational Problems for the Implementation of Multiple Consolidation Methods

Facts

There are three main kinds of consolidation method namely full consolidation method, proportional consolidation method and equity method that a company may use. Each method has its own set of distinctive computational rules and extra work can arise when frequent changes of method are applied to a particular company within a group. Change of methods may be due to following reasons:

 Change in ownership and voting rights

 Change in interpretation and requirements of accounting standards

In accordance with the new accounting standard “IFRS 11 Joint Arrangements” that comes effective on 1st January 2013, the proportional consolidation method will be eliminated for jointly controlled entities but they will still have to include relevant information in the financial statements of its parent company. However, the method of computation can be more complicated than the proportional consolidation method as it is no longer restricted to a share of individual assets, liabilities, income and expenses based on an ownership percentage. In order to reflect the financial information in respect of joint operations, a more sophisticated account allocation method is applied to replace the use of the proportional consolidation method.

Expectations

Reading accounting standards often provides limited guidance on how to implement the standard from an information system perspective. However, it does provide guidance on how to determine the selection and application of a specific accounting practice. Customers expect any new system to be adaptable to adapt to frequent changes in an accounting practice on a continuing basis without significant investment in the existing financial system.

Solutions

The accounting practice of FlexCalc can be defined and configured dynamically by the combination and configuration of calculation rules, mapping tables, data filters and statistics. FlexCalc can support the full consolidation method, the proportional consolidation method and the equity method. In addition, FlexCalc can support frequent changes in the accounting practice for a group of companies.

Benefits

Long term costs and risks associated with the implementation and continuity of a new accounting system can be reduced and controlled significantly as the system is able to adapt to changes in the accounting practice on a dynamic basis.

IFRS 11: Joint Arrangements

Facts

Proportional consolidation becomes history when IFRS 11 becomes effective in 2013. The accounting for joint venture or joint operations becomes more sophisticated as proportional consolidation will no longer be an acceptable accounting practice under IFRS 11. According to BC32 of IFRS 11, there are two key differences between recognizing assets relating to the activity of the joint operation compared with proportional consolidation.

These differences are:

  The IFRS requires an entity with an interest in a joint operation to recognize assets, liabilities, revenues and expenses according to the entity’s shares of the joint operation as determined and specified in the contractual arrangement, rather than basing calculations on the ownership interest that the entity has in that joint operation.

  The parties’ interests in a joint operation are recognized in their separate financial statements rather than in the consolidated financial statements despite relevant information being captured from the legal entity which is operating the joint operations.

Expectations

Increase in complexity to deal with accounting for joint ventures is expected as proportional consolidation is no longer an acceptable accounting practice upon implementation of IFRS 11. There will be high demand for automation of accounting for joint ventures when the same group of joint ventures are classified as joint operations rather than joint ventures under the requirement of IFRS 11 so, both proportional consolidation and equity method will not allowed under this situation.

Solutions

The strength of FlexCalcis not limited to group consolidation as defined by IFRS as FlexCalc has a built-in account allocation engine to deal with complex account allocations for joint operations. User can opt to create a separate ledger to collect and store all relevant allocated account balance for each joint operation or absorb the same set of data into the ledger of the holding company.

Benefits

Benefits The incremental return on investment of FlexCalc is accelerated when the decision maker opts to maximise the usage of FlexCalc for different areas of computerization as the functionality of FlexCalc will help in the collection of all or sub sets of financial and non-financial information.

Differing Account and Analysis Code Setting

Facts

A group of companies may not implement a standard set of uniform accounts and codes for the following reasons:

 Different business segments operate autonomously from other companies within the same group.

 Companies are incorporated in a country where the account code is governed by law.

 A new company is added by acquisition.

 Information required at an individual company level maybe significantly different from information required at a consolidated level within a group.

Non standardization of account and other codes could have significant impact on the operations of the group consolidation function as extra work will be required for the transformation of diversity of financial information manually.

Expectations

Users no longer want to be involved with the transformation of account and other code settings on a manual basis each month so that productivity can be increased.

Solutions 

FlexCalc is able to support different implementation options for Multinational Corporations to fit the particular situation as follows:

 Through uniform accounts and other code settings during implementation of a new accounting system at an individual company level or group level 

FlexCalc is supported by a ledger system in which it is able to handle financial and management accounts of individual companies and it also supports the configuration of common account codes and other code settings which can be applied to the ledgers of each company or at the group level. In addition,

FlexCalc has built-in capability to deal with data migration.

 Through using an account mapping table for each company upon the implementation of the new group consolidation system at group level 

FlexCalc has comprehensive mapping functions which allows users to manage the account code mapping table in a centralized mode or a decentralized mode.

Benefits

Manual work in respect of account code transformation is eliminated effectively so that the lead time for preparation of consolidated financial statements can be shortened significantly.

Case Analysis - Other Services

Issues for the Computation of Executive Compensation

 

Facts

Computation of executive compensation can be a tedious exercise as the basis of computation is associated with the financial performance of business operations responsible by an individual executive.

Unlike preparation of tax computations for each fiscal year, computation of executive compensation will involve more frequent changes of computational rules. In addition, the measurement is not limited to financial performance of their responsible business unit but is often broader in nature with both short and long term components. The measurement, recognition, disclosure and presentation for these management accounts can be fundamental different from financial accounts.

The workload for the preparation of the management accounts in this situation can be significant and costly when most of the transformation work is manipulated manually on a spreadsheet system. To integrate all relevant information into financial accounts is not practical as it may violate the measurement rules of accounting standards.

Expectations

The preparation of management accounts should be improved to support strategic human resource management and in addition, new systems should be able to support fast changing computational rules for performance management.

Solutions

FlexCalc is able to allow for the configuration of calculation rules with different computational basis being applied to different effective dates. In addition, preparation of management accounts with multiple scenarios is also supported by the system.

Benefits

The system can motivate and support the management team within organizations to closely monitor business and financial performance for their responsible business units as the system can generate relevant financial information very quickly and reliably.

Senior Executives Consume Excessive Time to Digest Sales Reports

 

Facts

Traditional consolidated financial reports are often presented in excessive detail and it is not easy for senior executive to digest them quickly.

Expectations

Mobile devices offer senior executives a great opportunity to fully utilize time and by using different types of data presentation like graphs and tables allows for quick detailed assimilation of data.

Solutions

FlexCalc supports to output decisive numbers to PowerBI for effective implementation of Executive Dashboards. It can be deployed on mobile devices and can allow users to retrieve summarised information by different chart types.

Benefits

Incremental benefits derived from mobile solutions are significant in that they can be real time or time lapsed allowing for quick on-the-fly analysis.

Achieving Performance Management Improvements for Strategic Business Units

Facts

Strategic business units are different from legal entities so management accounting is different from financial accounting. Preparation of financial accounts reflects the financial position and performance of a legal entity as a whole. However, each legal entity can operate multiple strategic business units and different legal entities can be involved in the business operations for the same strategic business unit at the same time so the preparation of management and financial accounts can be a challenge.

Expectations

Customers believe that their primary objective is to execute performance management effectively and that the preparation of management accounts and consolidation for strategic business units is just one task. However, the preparation of management accounts is still important and processes should be automated by a modern accounting system.

Solutions

FlexCalc is capable of handling the mechanical work very efficiently. Through the proper configuration of processing rules and relevant lookup tables, FlexCalc is able to generate relevant scenarios of vouchers for both financial and management accounting.

Benefits

The return on investment is significant as the system can output most of financial information relevant for performance management as well as statutory reporting. Professional staff can focus on providing professional insight of the information this enhancing shareholder value.

Consolidation of Consignment Sales

Facts

Inventory management and sales analysis for consignment businesses can be a complex area as often there is no direct interface to integrate data flows between the point-of-sales system of the consignee and the inventory management system of the consignor. So, managing the inventory level for each retail outlet on a real time basis is not practical. The use of spreadsheets to record daily consignment sales information by each retail outlet can be an interim solution however consignors are still required to be involved in intensive data manipulation to consolidate and summarize data files collected from each sale outlet.

Expectations

Users expect to spend more time reviewing and analyzing the sales and stock movements of consignment stock rather than spending extensive time for data manipulation.

Solutions 

FlexCalc can be deployed on the web with zero installation for retail outlets. Each retail outlet can upload relevant consignment sales information through a web login to the system and most importantly, FlexCalc is able to recognise a lot of data files with different presentation and formatting. In addition the consignee can opt to export relevant consignment sales data from the system managed by the consignor rather than be input by the retail outlet.

Benefits

Consignor can obtain most updated information in respect of sales and inventory movement and can be managed on a more proactive basis.

Reducing the Tedious Preparation of Multi-dimensional Reports

Facts

Preparation of sales analysis reports for a global retail network is not that simple. It involves massive volumes of sales transactions and different combinations of data dimensions. Most of reports will involve aggregation of sales amounts and /or quantities in a different combination of dimensions such as sales transaction date, outlet code, product code, salesman code, currency code etc.

Using spreadsheets to analyze the sales data will involve extensive mechanical work for the transformation and standardization of the sales data exported from the different kinds of point-of-sales systems operated by a global retail network so some users may try to write some spreadsheet macros to automate at least some of the data manipulation processes.

Expectations

Extensive effort spent on manipulation of sales data is not justified for cost or quality concerns. Since the presentation and design of sales analysis reports always change over time, the new system should allow users to customize the required financial reports efficiently.

Solutions 

FlexCalc offers different kinds of data source extractors to enable relevant sales data to be collected, validated, transformed and stored directly. When all relevant sales data is contained within the centralised data store of FlexCalc, users can design their sales analysis reports by using our calculation functions.

FlexETL and LamiShow allow users to define aggregated values (e.g. sales amount and quantity) for different combinations of data dimensions. In addition it can define date range, product code range, market code and other dimensions and present these in a very easy to use format.

Benefits

Without changing the existing systems each business unit can obtain their sales analysis reports very quickly for a portfolio of retail outlets on a timely basis.

Budgetary Management for Retailing

Facts

Traditional accounting systems provide limited assistance for budgetary management in modern retailing businesses which are not just limited to managing the performance for individual products, but also in managing performance at different operational levels and which may involve the oversight of regional or global product managers.

A great deal of dimensional information needs to be analyzed over time on, for example, an individual basis or group basis, at a shop or multi shop level and these details are often inaccessible from traditional systems on a practical basis.

As a result it is not deemed cost effective for the preparation of budget reports from a control and decision making perspective as it demands extensive work to manipulate large volumes of actual and budget data often in the form of spreadsheets.

Expectations

Systems integration between POS systems and accounting systems is necessary to improve the process of budgetary management and to allow budget owners to manage the budgeting process more efficiently by allowing them transparency into past data trends so that they can utilize most of their time for data analysis rather than manipulation of data.

Solutions 

FlexCalc has an integrated ETL to integrate different kind of external systems to its ledger system. It allows budget owners to retrieve relevant information quickly and directly giving rich analysis for control and decision making.

Benefits

Budget owners of different business units and departments can work with the finance department more efficiently and effectively on strategic rather than procedural tasks.