Automating your cash flow statement can streamline month-end close and eliminate manual spreadsheets

An Automated Cash Flow Statement Isn’t a Myth

Look at Your Cash Flow Statement to Get to a Faster Close

I’ll be the first to admit that the world of accounting and financial reporting has changed significantly in the nearly 12 years since I was last in a role devoted to the practice. The start and stop efforts of U.S. GAAP and IFRS convergence, changes to revenue recognition standards, heightened focus on risk and controls, the need to quickly develop a cash flow statement, and the increase in required disclosures are just a few of the areas that have added complexity to the industry I once called home.  There’s no rest for the weary as things don’t look to be slowing down anytime soon with the upcoming lease accounting changes.

The Challenges of the Cash Flow Statement

However, as the old saying goes, the more things change the more they stay the same. What I’m referring to in this case is the manual effort that is involved in the ‘Last Mile of Finance’, the critical part of the month-end close process which includes the preparation and filing of financial statements that is getting scrutinized more than ever.  While financial statements, in general, are never as simple as the push of a button, in particular a focus for this post, is the creation of the Statement of Cash Flows.  When I was a manager in a financial reporting department for an SEC company 13 years ago, we cobbled together our cash flow statement using an intricate web of Excel spreadsheets that were manually populated based on information from our consolidation system, supplemental schedules provided by our business unit accountants, and details from our underlying general ledger and sub ledger systems.  Somewhat surprisingly, the vast majority of companies that we work with to implement SAP BusinessObjects Planning and Consolidation (BPC) are still relying on a similar process to prepare their cash flow statement today. This manual and time consuming effort slows the entire month-end close, quarterly close and year-end close.

The Solution

Most often when we work with companies to implement BPC to support their financial consolidation process, we aim to automate roughly 80% of the Statement of Cash Flows. I always tell them that there’s no way that we can automate 100% as there are always transactions that cannot easily be carved out for presentation purposes and it really makes no sense to make changes to the system every month to account for these one-off transactions.  Rather, we focus on automating as much as possible and allow for manual entry to adjust the presentation of the system calculated results.  This results in a few key benefits: 1) utilizing the consolidation system to automatically perform rules-based calculations increases the speed and frequency at which the cash flow statement is prepared and 2) utilizing a system to calculate and store the results increases the accuracy of the cash flow since it is no longer manually compiled in disconnected spreadsheets.  This usually shaves at least a day or two off of the close process and shifts the efforts from a gathering of data toward the analysis of the cash flow statement results, which is what many finance and accounting professionals are looking to achieve when implementing a solution such as BPC.

More Information

There are many considerations in designing BPC to handle the creation of the cash flow statement and several ways to go about configuring the system to automate the starting point. Watch our on-demand video on Automating Cash Flow to find out how utilizing BPC to create your cash flow statement can help you save time and effort as part of your month-end, quarterly or year-end close.

Jim Link
Jim Link
Design Consultant

Jim brings 10+ years of SAP experience to NTT DATA Business Solutions, with exposure to BPC, SEM-BCS, SEM-BPS, BW and FI/CO. Jim’s industry experience includes real estate, banking, power and utilities, and food products and he has acted in many different roles ranging from business subject matter expert to lead solution architect. A CPA by trade, Jim’s background also includes 6 years as an auditor with PwC and in financial reporting departments. Jim is active in the SAP community as an ASUG Volunteer, specifically the ASUG Enterprise Performance Management SIG Chair, BPC Influence Council Chair, and Business Process Architecture SIG Program Chair.

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