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Supply Chain – end of period analysis

Posted on: 07-08-2017 14:52:431102

It’s August… a beautiful month. Summer and vacation period in our region, so very few traffic jams on the road and, above all, no ‘end-of-reporting-period-closing’ trouble on our head. Whether it is an end-of-month, end-of-quarter job or an end-of-year job (for the lucky ones), ‘end-of-reporting-period’ (‘EoRP’) is always stress.

Financial controllers get in overdrive status when the ‘EoRP’ time gets in sight. Digging into the data, producing the financial figures and drawing the responsible managers’ attention to possible anomalies (which of course they want to see clarified at least a couple of days before period-end closing. All that analysis is based on general ledger information, the natural habitat of the financial controllers. It is their job to properly prepare the financial figures for internal auditing, external reporting and managerial KPI reporting and decision making.

Coming from another background (like Supply Chain Management) it is not always easy to understand the terminology, rules and assumptions financial people use to do their job. I still remember being confused at first to see that financial people present income (e.g. sales turn-over) as a negative amount and expenses (e.g. material costs) as a positive amount. That was different than what I noticed in my household book and wallet, wasn’t it? But back to the anomalies on which the controllers need answers.

Now it is up to you…

…to figure out whether they’re really anomalies and if so, figure out how to correct or explain it. So, there you sit in front of the general ledger accounts report concerning your department. If you are lucky, then the controller already highlighted the suspicious financial bookings for you and, if you aren’t, you can search for them and highlight them yourself. In an integrated ERP system, most of the financial bookings are generated automatically when an execution transaction is booked and one execution transaction can trigger a maze of financial bookings (at least two of them). That can make the way back (from financial posting to execution transaction) complex. It can often only be achieved by intensive line per line jumping around in the history of transactions and postings. To not to have to do that again in the future, most people ‘document’ the research work by copying and dumping data in various lengthy and ingenious Excel sheets (by preference with lots of VLookups, indirect referencing and loads of error-prone formulas). Love that work? I guess you don’t… And you are not alone. The other department managers have the same. All this downloading, Excel sheet building and line-by-line analysis costs loads of time and money. Time you cannot spend on solving the underlying problems generating the anomalies you’re trying to figure out.

It seems as if ERP systems are perfectly equipped for integrated booking of execution and financial bookings, but they forgot to add proper functionality for agile analysis and troubleshooting… While all the data and links are there. This drives us to clicking, copying and pasting order- and account numbers and downloading stuff to Excel. Not only is this incredibly frustrating work, yet normal execution must be managed too, so we do the digging after work hours.

And there is more work coming up, because Working Capital is also very important these days. The information you have to deliver to the controller has to be ready days before the real ‘EoRP’ closing, otherwise the controllers don’t have enough time to deliver the reports. So, you will also probably be asked for your inventory levels and value… not now, but at the end of the period. Which is quite a number-cracking job to get done, isn’t it? Too bad if you wanted to hit some balls at the golf green: it’s going to be the Excel-green again.

Again, all the necessary data for the calculations is already stored somewhere in the ERP data store. If we figure out where it is and what logic is needed to do the math, then IT guys can build a solution that does most of the calculation work for you or allows you to browse faster through the information.

This is possible, and it is a way to significantly lower costs and (even more important on a personal level) to get more quality time.

Jacques Adriaansen
Business Improvement Thought Leader | LinkedIn

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