1. 1
Point of View / Information Exchange:
Leading Practices in FP&A and Close
Financial Executives Networking Group
Workshop Presentation

2. 2
Agenda
 Forecasting, Budgeting & Planning Guidance and Leading Practices
– Bottoms-up vs. Tops-down vs. Rolling
– Best Approach for Low Volume / High Configuration Companies?
 Close and Consolidation Leading Practice
– Reconciliation Frequency
– Allocation Level of Detail: Full allocation vs. Some allocation vs. Corporate bucket
– Level of Allocation Accuracy

3. 3
Forecasting, Budgeting & Planning -
Guidance and Leading Practices
 Leading Practices – What are other companies doing?
 Approaches – How can the processes, policies, and systems be improved and transformed?

4. 4
Leading practice forecasts focus action on closing the gap
between anticipated performance and strategic goals
 Integrated forecasts linked to external
environment, based on demand, supply and
finance
 Gap between target and actual business
performance is regularly analyzed and closed
by identifying initiatives for improvement
 Extensive use of business drivers to convert
existing operational plans into financial
forecasts using relationships
 Forecasts are regularly maintained, shared
and transparent. Collaborative input is
required across the organization through
embedding into operational planning day job
 Emphasis on analysis (why and what if),
insight and judgement.
 Speed and agility are critical. Forecasts
should be completed within 5 days.
0
500
1000
1500
2000
Qtr 1 Qtr 2 Qtr 3 Qtr 4 Qtr 1 Qtr 2 Qtr 3 Qtr 4 Qtr 1
Quarters£in000s
Forecast Budget
Target
Gap
closure
*
* Gap closure
Target
Historical Forward looking

5. 5
Highly effective companies have redesigned their planning
processes
…..and improved strategic relevance, forecast accuracy and reduced cycle
times and costs
Integrated planning
Rolling Forecast
Estimate
Business
Plan
Model
Measuring & ReportingTargets & Rewards
TARGET
CASCADE
RESULTS &
FEEDBACK
STRATEGY
Strategy
Definition &
Evaluation
MANAGEMENT
OPERATIONS
TARGET
CASCADE
RESULTS &
FEEDBACK
Rolling forecast
Realised Sales
0
50000
100000
150000
200000
250000
300000
350000
400000
1
3
5
7
9
11
13
15
17
19
21
23
Months
Volume
Sales
Collaborative planning
Consistent Integrated
Automated
Transparent
Business
Units
Systems
Strategic
plans
Projected
sales Production
plans
Shared
Information
Customer
commitments
KPI’s
Inventories
Distribution
Focus on Gap Closure
0
500
1000
1500
2000
Qtr 1 Qtr 2 Qtr 3 Qtr 4 Qtr 1 Qtr 2 Qtr 3 Qtr 4 Qtr 1
Quarters
£in000s
Forecast Budget
Target
Gap
closure
*
* Gap closure
Target
Historical Forward looking
 Lifetime customer
value
 Costs
 Lost Sales
 Sales
 Customer
satisfaction
 Value for money
 Differentiation of
offer
 Brand value
Customer/Brand
 Employer of choice
 Living the brand
 Motivation
 Skills & knowledge
 Leadership
 Organisational
responsiveness
 Stock availability
 Idea creation &
application
 Quality of
information
People
Value created
Internal processes

6. 6
What Leading Companies are Doing
Company Leading Practice Observed
Based on top-down targets as an output of
LRP (deploying driver-based models )
Forecast focuses only against key elements
Top-down targets set in the form of “stretch”
in conjunction with retailer goals based on 5-
year plan
Weekly, monthly and quarterly rolling
forecasts (18 months); exception-based input
Strategy is integrated to operational levels
using Balanced Scorecard framework
Corporate growth targets decomposed to
BUs as targets; focus on cost reduction and
understanding competition
Performance measured against historical
results and competition
Deploys rolling forecast, updated monthly
• Integration of the strategic planning
process with the tactical business
plan and budgeting processes
• Target setting used to limit number
of iterations
• Rolling forecast utilized to reduce
content prep and submissions detail;
exception-based forecasts
• Less data gathering, more analysis
• Predictive “what if“ analysis /
scenarios
• Incentives linked to identifiable
target (e.g., year-over-year results)
• Use of common planning tool
• Enhanced synergy among demand
forecasting and financial forecast
accuracy
Leading Practices

7. 7
Process Components
The principles underlying these key components build the foundation of best practice
Collaborative Planning Targets & Rewards
Rolling Forecast PrioritizedPlanning Integration
Measuring & Reporting
Focus on Gap Closure
• Strong linkage to the Strategic Plan
• The critical few objectives are clearly
communicated and woven into the
planning process
• Collaborative and inclusive
‘aspirational’ planning process
• Integrated long- & short-range
planning
• Annual stake in the ground.
• Flexible – designed to promote action
• Target levels based on external
indicators and aligned to strategic
imperatives
• Targets challenging but achievable
(“owned” by the operational leaders)
• Targets set top down and then
cascaded
• Rewards and incentives attached to
performance of groups and teams
• Rewards based on performance
relative to peers, benchmarks, prior
periods
• Rolling forecasts rather than a once-a-
year process, beyond year-end, and
based on relevant cost drivers
• Consistent vision for the forecasting
process across levels, organization
department, and global regions
• Fewer data records at the corporate
level
• Budget ‘if required’ - ideally a
snapshot of rolling forecast and the
first year of the business plan
• Compare forecast to plan to identify
actions and steps to close gap
• Allow for changes to current market
conditions on the fly
• Real-time (or near real-time) scenario
/ what-if analysis
• Allow more time for judgement instead
of focusing on data manipulation
• Automated recurring what-if &
sensitivities
• Integrated Actuals, Forecasts,
Budgets, Variance and Story
• Focus on exceptions
• Few iterations
• Scorecard based on both financial and
non- financial measures cascaded to
operations
• Scorecard forms a key component of
regular management reporting
• Consistent method applied across
divisions and the globe
• Role-based information delivery -
open and transparent.
• Automated performance delivery vs.
financial delivery.
• Business planning and forecasting
process integrated with operational
planning.

8. A Rolling Forecast will reduce the effort associated with planning and improve the quality of the plan
Rolling Forecast versus Annual Budget
Typical Rolling Forecast
• Forward-looking, more
market-based, external focus,
tops-down planning
• Less overall effort
• Few top-down targets
• Fewer iterations and less
detailed churn at sites
• Fewer data lines sent to HQ
• Tightly linked with strategy
• Improved decision support
• Planning horizon refocused
to, e.g., 15 months - looking
beyond year-end
• “Annual event” reduced in the
fall, so increases continuous
planning mindset
• Improved, uniform I/T tools
and infrastructure
• Smoothes resource needs
throughout the year
Typical Annual Budget
• Internally-focused, historical
perspective, bottoms-up plan
development
• Multiple lines of targets
provided, but no formal firm
targets (e.g., revenue, EBIT)
• Multiple iterations of detailed
budget preparation
• Detailed data required at all
levels
• Excessive handoffs
• Spring and fall plans are
separate activities
• Forecast focus is only on
current year
• Fall plan process results in
large spike in workload
• Incompatible systems /
software used throughout
Without these changes, a Rolling
Forecast will INCREASE the planning
workload
Required Changes
• Changes are made to
the current plan
process and philosophy
• Timely and complete
targets
• Reduced data elements
• Improved data
collection tools
• Close linkage with other
planning processes
• Continuous Planning
• Increased line
management focus on
quarterly forecasts
versus single event
…can be
replaced
with this...
…but only
if these
changes
are made...
…Otherwise…

9. 9
Rolling Forecast Illustration
 Forward-looking, beyond
year-end
 Improved predictability of
results
 Fewer data records
 Extensive use of drivers
 Based on operational
planning
 Ideally event-based and
maintained regularly
0
500
1000
1500
2000
Qtr1 Qtr2 Qtr3 Qtr4 Qtr1 Qtr2 Qtr3 Qtr4 Qtr1
Forecast Budget
Target
Gap
closure
Quarters
$in000s
*
* Gap closure
Target
Budget
Historical Forward looking

10. 10
Understanding where you are now
Key steps:
 Understand business model and key success drivers (i.e., description of key aspects
of how the business operates, e.g. marketing, sales, logistics, alliances etc)
 Evaluate current process metrics and costs (including frequency, cycle time, FTE
effort and cost)
 Apply Benchmarks and Best Practices
 Understand current applications architecture and existing IT infrastructure
 Summary of key issues & opportunities
Business Consulting Services

11. 11
Identifying gaps between better and best practices
Process ABC Peers ABC Company Facts and Statistics
Budgeting&Planning
Integration with G/L /
Use of planning and
budgeting tools
 Planning and Budgeting is performed in Excel spreadsheets
 Results are loaded manually in to Hyperion; data is not loaded to the GL
 Reports are prepared using Excel spreadsheets
Drill-down Capability  Drill-down capabilities for analysis do not exist
Access and Delivery
 A formal Profit Plan and Quarterly Update books are prepared in Excel
 Monthly Outlooks spreadsheets are reviewed as part of the Operations Review
Preparation and
Approval Process
 Regional Profit Plans are prepared annually, Quarterly Profit Plan updates are prepared, and Monthly
Outlooks are performed; longer-term plans have not historically been performed; a 3yr. Plan is currently
under development
 Periodic additional requests for forecast updates are made; Rolling forecast not utilized
 Profit and key measure targets are provided; however, regions tend to “hold back” projected earnings due to
stretch targets; multiple iterations and submissions
 Detailed bottoms-up Plans with numerous line items are submitted; 4 month cycle-time
 Report formats within each Business Group are not consistent
 The Finance organization incurs a significant effort to prepare all Plans and Forecasts; frequent re-
submissions and reconciliations exist
 Reports and measures do not use consistent definitions across business groups; results are typically
compared vs. prior period
Link to Strategy
 Reports and measures do not appear to be derived from or directly linked to strategies and tactics;
however, performance / compensation are somewhat linked to Plan numbers
 Reports / measures do not appear to link to the drivers of shareholder value
Needs
Improvement
World-
Class
Illustration

12. 12
FP&A – Selected Benchmarks
Days to complete forecast
Cycle time
Days to produce budget
Benchmark
32 days
Median
60 days
Benchmark
3 days
Median
8 days
Cost
# of FTEs per $1bn revenue
Benchmark
2.7 FTEs
Median
7.3 FTEs

13. 13
Close and Consolidation Leading Practices
 Leading Practices – What are other companies doing?
 Approaches – How can the processes, policies, and systems be improved and transformed?

14. 14
General Accounting
Leading Practices Company Leading Practice Observed
• Implemented an integrated general ledger system
globally
• Transactions are entered in the general ledger
automatically
• Benefits achieved include time savings and
increased accuracy of transactions
• Uses an integrated accounting and reconciliation
system to simplify the management of daily business
operations across multiple locations
• Reduced its administrative workload by 22 percent
• A web-based, user-friendly system eliminates
manual steps and journal entries, and automates
bank reconciliation
• A financial portal provides a common tool to process
transactions, view activity and analyze data
• Allowed the company to reduce or reallocate
resources and reduce bank fees
• Minimize the number of manual journal
entries, and apply materiality principles to
those that are made
• Integrate systems, automate interfaces and
maintain a single source general ledger
chart of accounts
• Enable journal entries to be entered and
posted real-time
• Develop and communicate a period closing
and reporting calendar
• Ensure data quality at the source, and
assign responsibility for the accuracy and
timeliness of underlying data
• Initiate master data management (MDM) at
a global enterprise level to drive
standardization
• Implement “global process owner” concept
to help manage process commonality
• Shift from a monthly “hard” Close to
quarterly Closes with monthly soft Closes

15. 15
Close and Consolidation
Leading Practices Company Leading Practice Observed
• Adopted five day Close, consolidation and reporting
cycle
• Implemented single-level consolidation system
• Web-enabled reporting
• Integrated the general ledger with their consolidation
tool
• Implemented a single source for finance data and
warehousing of historical reports
• Consolidated reporting standardized across the
enterprise
• Common rule set defined and common consolidation
process centrally maintained
• Cost allocations minimized and, when necessary,
driven by automated routines
• Single-level consolidation system implemented and
multiple sub-consolidation systems sunset
• General ledger and planning systems integrated with
consolidation tool
• Three workday close and consolidation
(including preliminary reporting)
• Single-level consolidation system; common
consolidation process centrally maintained
• Link the general ledger to a financial
modeling system (data warehouse) that
automates reports / schedules and
facilitates communication of explanations
• Common rule sets (foreign exchange,
eliminations, etc.) applied to enterprise-
wide process
• Centralized location for reports and
warehousing of historical reports
• Cost allocations are minimized or
eliminated / simplified / automated
• The ability exists for consolidations to drill
down to the original records in any entity
• Simplify departmental relationships as far
as possible for consolidation purposes

16. 16
Intercompany Accounting / Allocations
Leading Practices Company Leading Practice Observed
• Automated allocations and journal entries in the
Close and consolidation process
• Improved intercompany transaction processing,
matching and elimination
• Implemented CitiNetting intercompany system to
enable common dispute management and common
terms settlement
• Outsourced intercompany reconciliation process
• Adopted web-based hub as a clearinghouse for
intercompany reconciliation activity across disparate
instances of SAP
• Re-designed intercompany accounting model
• Eliminated negotiated transfer pricing to speed
planning cycle
• Implemented policy to freeze intercompany transfer
prices for one year
• Maintain single intercompany charge
process
• Handle allocations in similar manner
across businesses
• Standardize the dispute management
process
• Agree on similar terms across the
company
• Implement service level agreements as
rationale for charge outs
• Freeze intercompany charge rates
• Eliminate negotiated transfer prices for
intercompany goods movement
• Automate intercompany reconciliation
process
• ERP / Hub
• Use budgeted amounts for charging non-
volatile costs

17. 17
Comparison to Leading Edge Practices – Close Process
Leading Edge Practices Conventional Practices
Timing
 Two day G/L close cycle time; one day consolidation
 Use effective Close timetables that are adhered to throughout
the organization
 Pre-close planning and post-Close evaluation meetings
 Make standard journal entries early in the month, outside of
the critical path of close
 Limited use of inter-division allocations
 Reduce the number of adjusting entries and trial balance re-
runs made after the initial trial balance
 Systematize routine journal entries, distributions, etc.
 Standard company policies for cut-offs, intercompany, etc.
 Reconcile key accounts and perform key analyses on an
ongoing basis thorughout the month
 Closing cycle time reduction efforts must be driven and
supported from top management
 5-10 day G/L close; 3 day consolidation; 1-2 days reporting
 Limited process management ( i.e., closing timetables, post-
Close evaluation meetings)
 Practice of performing entries outside the close cycle is limited
in use
 Extensive use of allocations
 Multiple iterations of trial balance prepared and reviewed
 Limited systemization of entries
 Close policies and guidelines are limited
 Reconciliations performed during month end close
 Lack of standard policies for cut-offs, intercompany, etc.
 Month-end reconciliation during Close
 Close cycle time not transparent to management
Quality
 Track errors that are made and assign responsibility
 Collect Close process measurements
 Provide cross-training for employees of the key accounting
functions
 Use one general ledger and a common chart of accounts
across all business units
 Provide for electronic approval of journal entries
 Limited performance tracking and Close measurement utilized
 Limited cross-training of staff
 Multiple chart of accounts
 Moderate use of automated approvals
Materiality
 Establish a clear statement of materiality levels for cut-offs
and reports
 Set aggressive materiality limits for intercompany
transactions in order to speed the closing process
 Materiality limits not defined
 Intercompany transactions reconciled to the penny (generally
after the Close)

18. 18
Comparison to Leading Edge Practices – Consolidations
Leading Edge Practices Conventional Practices
Process
• Single level consolidation (i.e., all reporting entities
submit directly to HQ)
• Elimination entries recorded and final
consolidation reflected on the ledger
• Process should automatically include allocations
and elimination of intercompany transactions
• Currency conversions performed at the field
locations where the transactions originate
• Automatic consolidation and eliminations
• Multi-level consolidation (consolidations at BUs,
regions, or countries plus HQ)
• Entries made on spreadsheets , off the ledger
• Allocations and eliminations manually prepared
using spreadsheets
• Currency conversions performed by Corporate
Consolidation team
• Manual consolidation process
Technology
• Use on-line data collection for all units
• Use pre-formatted requirements to streamline
month-end reporting to headquarters
• Report monthly P&L and balance sheet results to
headquarters electronically
• G/L report writer supports consolidated process;
standard reports automatically generated
• Certain units not on-line
• Format established but not entirely adhered to
• Reports extracted from Excel files
• Report writer not utilized or manually prepared

19. 19
Close Continuous Improvement Roadmap
DaystoClose
Transformation
Today Tomorrow
 Standard non-finance processes
 Common integrated non-financial systems
 Financial and non-financial systems are integrated
 Common detail level GL (BU legacy GLs sunset)
 Common project costing (legacy project costing sunset)
 Common financial sub-systems (legacy sub-systems sunset)
 All financial systems are integrated and share a common
configuration
 Scaleable systems to support M&A activity
 Flexible systems able to support a calendar Close
 Process improvement and standardization including pre-Close activities (lean)
 Enterprise-wide consolidation tool (sunset legacy consolidation tools)
 Single level consolidation
 Enterprise-wide GL
 Flexible systems able to support weekly Flash reports
15
5
3
Virtual
days
days
days

20. 20
Close Process Improvement Approach
Technological
changes
0
4
8
12
16
20
DaystoClose
Effort
Process
management
Process
changes
• Significant cycle time reductions can be made through system-neutral efforts,
managing the process and making process improvements.
• However, to achieve a virtual close, the system environment must be extremely well
integrated which often demands system transformation

21. 21
The Benefits of an Accelerated Close Process
 Facilitates world-class cost reduction in the Finance function
 Real-time information dissemination drives proactive decision making regarding
strategies, plans, and forecasts
 Shortened cycle time drives efficiency and quality at the source
 Focuses Finance on the critical set of information needed to run the business
 Enables management to spot and capitalize upon positive trends – or respond to
negative ones more rapidly
 Promotes investor confidence by telegraphing that Finance is on top of their
numbers and well-managed
 Mitigates risk through continuous feedback on key performance indicators (KPIs)
and financial performance

22. 22
Close Reduction Methodology
“How-to” Hints and Suggestions: Timing
 Measure in hours, not days
 Make use of effective closing timetables that are followed throughout the organization
 Adhere to a well-defined close cycle throughout the division
 Perform minimal or no sub-consolidations or management reports prior to Close
 Provide daily reconciliation of receivables and payables to the general ledger
 Automate the accruals process, the inter-company process, and bank reconciliations
 Move activities from the critical path (clear “bottlenecks”)
 Establish a “pre-Close meeting” early in the Closing to discuss any unusual results
 Allow no re-runs of the general ledger during the Close
 Use quarterly or annual true-ups to adjust as necessary
 Reconcile key accounts and perform key analyses on an ongoing basis during the
month
 Determine the critical path of all closing tasks and reassign month-end tasks to re-
balance workloads (again, clearing “bottlenecks”)

23. 23
“How-to” Hints and Suggestions: Costs and Allocations
 Eliminate or minimize allocations and inter-company transfers wherever possible
 Consider: what is gained by making the allocation? Can it be achieved another, simpler way?
 Increase thresholds for allocations and inter-company transfers, as this reduces manual
transactions and error rates
 Simplify cost-center structures
 Close expense systems marginally early and use estimates where necessary
 Use predetermined allocations that are automatically charged each month regardless of the
real costs incurred – track variances through the year, but only true-up at year-end (once)
 Commissions:
o Early discussion of critical cases
o Streamline process (reduce number of runs)
o Introduce estimation process (analyze and book non-material differences in the next quarter)
o Reduce complexity and consider materiality aspects

24. 24
“How-to” Hints and Suggestions: Materiality
 Review Transactions for materiality, not accuracy
 Establish a clear statement of materiality levels for cut-offs and reports
 Consider eliminating accrual process for unpaid invoices at month-end: either accrue
ahead of month-end for material items, or avoid the effort if amounts are not material
 All adjustments made at month-end are based on materiality guidelines
 Do not allow missing data to stop the consolidation process
 Stratify accounts by risk, materiality, volumes, etc. and then reconcile less-risky, low-
materiality, and low-volume accounts on a cyclical basis

25. 25
“How-to” Hints and Suggestions: Timing and Cut Off
 Measure in hours, not days
 Make use of well-defined and detailed closing timetables
 Consider use a “non-calendar-based” Closing schedule (task-driven, not time-based)
 Provide daily reconciliation of receivables and payables to the general ledger
 Move activities from the critical path – reduce bottlenecks
 Establish a “pre-Close / post-Close” meeting cadence to discuss any unusual results
 Allow no re-runs of the general ledger during the Close
 Use quarterly or annual true-ups to adjust as necessary
 Eliminate “nice to have“ elements of reporting packages
 Standardize and integrate audit process (start earlier)
 Develop a Close process manual

26. 26
“How-to” Hints and Suggestions: Physical Adjustments
 Physically consolidate transaction processing sites
 Locate closing staff where they can physically see the users of the closing data
 Centralize the accounting function and assign global process owners (manager) for
significant processes such as the month-end Close
 Reduce the number of accounts and/or transaction codes
 Allocate responsibility for all key accounts to named individuals
 Minimize month-end interfaces - feed from subsystems more frequently
 Ensure that profit center and legal entity reporting are driven from the same data source
and ensure that they always balance
 Have all / most journal entries prepared by subsystems
 Insist that there be automatic generation of accruals from the payables system

27. 27
“How-to” Hints and Suggestions: Data Quality
 Attack root cause of identified data quality issues
 Insist that all data is edited prior to its delivery into the closing process
 Track errors that are made and assign responsibility
o Use the term "unacceptable" to describe invalid transactions
o Insist that the supplier of unacceptable data is responsible for correcting it
 Eliminate inspection and review points in the close process
 Minimize reclassifications, accruals, error corrections and adjusting entries performed
during the Close—base those that are performed on predefined materiality guidelines
 Collect close process measurements
 Standardize corporate reporting data sets

28. 28
“How-to” Hints and Suggestions: Systems
 Minimize month-end interfaces; feed from the subsystems more frequently
 Insist that all feeder systems are processed during the weekend in order to provide the
complete data needed on the first workday of the close process
 Exploit all aspects of current technology to assist you (or re-new):
o Have all / most journal entries prepared by subsystems
o Insist that most entries to the general ledger are automated from other systems
o Insist that there be automatic generation of accruals from the payables system
o Use intranets and the internet to communicate financial information and to increase the
accessibility of financial data
o Interface consolidation systems with feeder ledgers and sub-ledgers
o Implement a single data warehouse for all business data
o Distribute reports electronically, allowing on-line query
o Use rules engines to calculate multi-GAAP results

29. 29
Close & Consolidation – Selected Benchmarks
Measure Median * Benchmark **
Cycle time in days to perform monthly close at the site level. 5.0 3.0
Cycle time in days to perform annual close at the site level. 11.0 6.4
Percentage of journal entry line items that are corrective/adjusting. 2.5% 0.5%
Notes: * Median is the 50th percentile performance from the sampled organizations
** Benchmark is 80th-percentile performance from the sampled organizations