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All Together Now

New technologies help companies produce consolidated financials without tinkering with the underlying systems and processes


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Abstract

This company has grown through acquisition to become one of the nation’s largest energy companies. As a serial acquirer, one of its greatest challenges is rapidly integrating newly acquired operations into its existing financial structure. To tackle this challenge, the company recently implemented a global application that makes financial consolidation for a merger relatively fast and easy. The new tool allows the combined company to quickly and efficiently produce consolidated financials that satisfy GAAP reporting requirements and help demonstrate the true value of the merger.

The Challenge

One of the main stumbling blocks in an acquisition-based growth strategy is figuring out how to quickly and efficiently integrate newly acquired businesses. Financial consolidation that takes too much time and effort can quickly undermine the economics of the deal.

The traditional approach to financial consolidation in a merger involves a detailed analysis and reconciliation of the entire financial infrastructure for both companies – from systems and processes to reports, policies and charts of accounts. This approach is painful, slow and expensive. For example, consolidated management reports are typically not available until six to 12 months after the merger. Even worse, the entire process must be repeated from scratch for every acquisition.

How We Helped

Technology advances have made it possible to produce consolidated financials without requiring changes to the underlying financial systems and processes. The company’s new global consolidation tool pulls financial data from a wide range of existing data sources that reflect different business models and data structures. Major sources include: SAP financials, Oracle financials, PeopleSoft financials and various operational and corporate budgeting systems.

The tool also integrates financial data with other critical information including key performance measures and scenario modeling. Decision makers can produce pro forma financial statements to test the impact of various adjustments and can then pick-and-choose which adjustments get posted to the final report.

With Deloitte’s assistance, the company developed a plan for transitioning from the current General Ledger to the new Global Consolidations system, including the transition of current users, approvers, and reviewers through training and other change management activities. The company also defined and executed an approach to test and validate the consolidated output.

Major implementation activities included:

  • Design, build, and test journal processing, period and year-end processing, inter-unit reporting and reporting infrastructures
  • Establish configuration procedures and tool sets to support development migration and production maintenance for all configurable data and business rules
  • Define and implement an execution plan to transition the organization to global consolidations and consolidated reporting

Solution

The new tool supports the company’s aggressive acquisition strategy by enabling consolidation processing for a newly acquired business to be up and running in less than 90 days from the time the merger is announced. This includes SEC and regulatory reporting, as well as key management reports that typically are not available until six to 12 months after a merger. In addition, the tool can be used for any business situation that requires rapid changes to the company’s consolidated financials, including divestitures as well as acquisitions. As part of this project, the number of days required to close the company’s books improved from four days to three. The calculation engine for consolidation processing sits atop a performance management warehouse. By drawing upon various warehouse table structures and data sets, this design minimizes the impact on the company’s day-to-day transaction systems. GAAP consolidation processing can be completed in less than 20 minutes, including report generation. This represents a 70 percent improvement over the company’s existing financial systems. Additional processing for managerial reporting (based on more than 12,000 detailed business rules), can be completed in less than four minutes.

The initial release of the tool provided consolidated GAAP reporting for nearly 300 business units. It also provided managerial reporting across 1,800 departments. Subsequent releases provided additional detail to help the company optimize its energy rates, as well as specialized reports to meet their strict requirements of the Federal Energy Regulatory Commission (FERC).

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