Budgeting

After spending almost 13 years in various global, domestic and corporate FP&A roles at Hertz Rent-a-Car, I’m nearly one year into my position as a managing consultant at Revelwood. The turning of the year, if you will, into year two at Revelwood, gives me an opportunity to reflect on the state of FP&A in many organizations today.

When I first started at Hertz, I was a participant in the company’s Advanced Management Development Program. This was a six-to-nine month rotational “fast track” program that had me doing assignments with city managers, fleet operations, back office management, employee relations and customer service. The goal was that when I ultimately ended up working in the finance department, I’d have a “bigger” view of the organization than one that was just comprised of “numbers.” That experience helped shape my career, as it gave me a true appreciation of the importance of people and process. Throughout my FP&A career, I focused on the upstream and downstream impacts of my actions.  It is difficult to add value without an understanding of the entire process. This is the essence of a FP&A professional.

At the beginning of my career, FP&A (then Business Planning) was all about numbers. It was largely reactive and, while many hours were (are) consumed working on it, the value it added, and still adds, could, and can, sometimes be questioned. After you gather the data, create/format/validate the fancy Excel charts, and complete multiple iterations, it is too late to enact change in any meaningful way. But that’s changing, and changing drastically, in many organizations.

What’s really exciting today is that FP&A is emerging as a proactive team that is an integral part of the business. As they gather data from all the siloed departments and units, they are being recognized as the single source of a potentially complete view of what’s going on in the organization, what the cause and effects of various actions are, and where strategic changes can be made for maximum impact. In fact, according to research from The Hackett Group, “more than 90 percent of finance organizations believe that digital transformation will fundamentally change the way finance services are delivered, including the way it serves internal and external customers, suppliers and partners, as well as the talent and leadership roles it must develop.”

That probably sounds very lofty and hard to achieve in many places – especially in established businesses with codified processes. But I believe it is achievable, and that it starts with examining, understanding, and changing (where needed) processes. Not simply for the sake of change itself, but because of the importance of continuous improvement and its impact on the business and the team.

I believe the FP&A group can and should be the most empowered group within an organization. When they have access to analyze the right data, they can uncover the root cause of not just finance issues, but operational issues and stumbling blocks. They are able to do this since they understand the synergies between various aspects of operations, and how process changes or process inertia create ripple effects or institutional bottlenecks. Armed with this knowledge, they can create and execute corrective action plans.

So you might ask, why would this passion lead me to a company known for its stellar reputation as an implementation and consulting firm for IBM analytics technology? After all, I’ve not said a single thing about technology.

Analytics technology is the enabler for the transformation of FP&A. Here at Revelwood, we’re working with our clients to help them make this transformation. And it’s certainly an exciting time for all of us. I look forward to speaking with you about your processes and how Revelwood can help.

This is a guest blog post by RGP Director of Client Service, Stuart Fisher.

On May 28, 2014, the Financial Accounting Standards Board (FASB) and the International Accounting Standards Board (IASB), also known as the Boards, issued converged final revenue recognition standards, which eliminate most industry-specific GAAP and significantly changed revenue recognition. Now that the one year delay proposed by the Boards is finalized, the standards will become effective in fiscal years beginning after December 15, 2017 (calendar year 2018) for public U.S. companies, which is essentially the same for companies reporting under IFRS. Private companies are allowed a one-year delay.

Implementing these changes will be complex and time consuming. In a recent survey RGP conducted, 82% of respondents said they anticipate implementation will be somewhat challenging to very challenging. Even companies not expecting drastic changes to the amount or timing of revenue recognition will likely be affected by necessary changes in documentation and information systems to track new data requirements and support the additional disclosures, estimates, and increased use of management judgment.

Our Revenue Recognition experts offer the following tips to companies affected by the new standards:

1. Assess the impact:
   Organizations can avoid costly implementation issues and/or delays by assessing the cross-functional impacts that ASC 606 and IFRS 15 will have on their operations. Understanding what the enterprise-wide impacts are early on can help develop a clear roadmap with appropriate actions that are needed for a smooth implementation.
2. Select a transition method:
   If you haven’t already done so, now is the time to choose a transition method and implement a plan to capture contract data. The full retrospective method is a popular choice because it is preferred by the investor community.
3. Evaluate significant revenue streams and key contracts:
   Identifying required changes, and the specific business units where these changes may have the greatest impact, will be a necessary step.
4. Establish a Project Management Office (PMO):
   Revenue recognition implementation doesn’t have to be a burden. It can be an opportunity to open communication among departments and business units, and to improve processes. Ensuring your revenue recognition project is efficiently managed and successfully executed leads to sustainable results.
5. Determine the impact on your systems and data:
   From sales compensation to closing the books, your company depends on critical systems and accurate data. The system and data impacts may be greater than anticipated.
6. Establish a suitable contract management process:
   Analyzing current requirements, and creating a contract management process that fits the needs of your organization, will help reduce risk and improve efficiency.

Implementing the new revenue recognition standard is a complex and time-consuming initiative. If you have any questions about how your company should handle the new standard or how RGP can help you, please contact me at 973-401-2565 or stuart.fisher@rgp.com.

Stuart Fisher is the director of client service at RGP, a multinational consulting firm that helps leaders execute internal initiatives. RGP was founded in 1996 within a Big Four accounting firm and today it is a publicly traded company with more than 3,300 professionals, annually serving over 1,800 clients from 70 global locations.