Planning & Forecasting

Modern Accounting: The Impact of Investing in Accounts Receivable

September 29, 2022 by Revelwood

This is a guest blog post from our partner BlackLine, explaining how to gain confidence cash flow.

Historically, accounts receivable (AR) has been the victim of a lack of investment from a technological perspective. Primarily, this lack of investment in AR is the result of something simple: a misunderstanding.

AR is largely regarded as a necessary but transactional back-office function and not something that creates a “value-add” for the business. Unlike the core accounting of bookkeeping, AR’s reputation is that of a kind of conveyor belt. Necessary, but low impact in the grand scheme of things. As a result, AR is the victim of fundamental misunderstandings regarding how it can be optimized—and the business impact that the right optimization can have.

When finance professionals think about how to streamline or optimize AR, typically it has been viewed as something that may be better offshored or that the ERP already handles. This is due to it being largely manual, time-consuming, and often transactional. But this simply moves the problem elsewhere, rather than solving the underlying issue.

Investing in technology that automates the accounts receivable function grants you complete visibility over the flow of cash into your business, in real-time. The data, intelligence, and real-time oversight of working capital that optimized AR offers to businesses are invaluable, for several key reasons.

Unlocking Working Capital

Applying customer payments to customer accounts quickly and accurately is the cornerstone of successful AR. However, manual processes lead to significant delays in unlocking crucial cash flow.

Money owed by customers is one of the largest assets on any balance sheet. A recent report by PwC estimated that the amount of working capital held hostage in this way is an enormous €1.2 trillion globally. According to PwC, releasing this cash would be enough for global companies to boost their capital investment by 55%, without the need to look externally for funding or put their cash flow under unnecessary pressure. With interest rates as they are right now, never mind what might be on the horizon, looking internally to find opportunities to streamline cash flow and payment processes is a no-brainer.

Let me give you an example: on average, organizations are paid on day 50-55. For a business with $500m revenue, each day is worth $2m. By automating and optimizing payment processes, businesses can potentially release a significant amount of cash into the bottom line that can then be put to work in the business.

Releasing cash from receivables is the quickest and cheapest way to more working capital, yet organizations continue to rely on manual processes which don’t provide proper visibility and tie up cash for far longer than necessary. Investing in AR frees up more working capital, which means stronger business resilience and enables more effective decision-making. Put simply, it puts much more power in your hands and leaves much less up to guesswork.

Maintaining Lasting Customer Relationships

Credit controllers used to be a lot more persistent. This was clear in the terminology they used. They looked at customers as “debtors.” This sounds more akin to something you’d read in a Dickens novel than the way a business refers to its trusted partners.

The way you treat your customers not only reflects your efficiency internally but crucially shapes perceptions, both for potential new customers and those who might be on the fence about jumping ship. Chasing a customer for a payment that was made days before, simply because you’re reliant on manual processes that don’t give you proper visibility, could reflect poorly on your organization. Aside from the wasted time and effort, receiving an erroneous demand for payment on a bad day could be the difference between a continued relationship and a swift parting of ways.

Customers provide the value for our organizations. It’s our customers that are going to support us through the tough times. A mindset shift is required here at all levels of business, including the C-suite. Customers should be treated with the same respect when they owe money as when they don’t. Investing in AR creates the visibility over customer payment behaviors that is essential to this.

The right solution can unlock decision intelligence by removing time-consuming and error-prone processes involved in preparing, transforming, and visualizing data. This lets your teams make more informed decisions around credit risk policies, collection strategies, or credit limit increases to create greater value for the business. It can help you gain visibility into customer behavior changes. This could unlock opportunities for you to work with customers to solve payment challenges before they become a major problem, or increase their line of credit and in turn, your revenue. This can improve profitability by reducing the financial risks posed by write-offs and late payments.

Creating greater visibility over real-time payments allows you to leave the war of attrition over unpaid invoices behind. This leads to a more customer-centric approach to credit, collections, and complaints that can help you to maintain good customer relationships.

Retaining Talent for a Competitive Advantage

In an increasingly competitive business environment, the ability to attract and retain top talent is crucial to business success. A recent survey commissioned by BlackLine suggests that one of the first steps finance and accounting needs to take to retain their best workers is to eliminate transactional, mundane work. More than a quarter (28%) of FP&A professionals surveyed said there weren’t opportunities to learn new skills because transactional work takes up so much time, while a similar number (26%) claimed that they had become bored of the mundane, repetitive nature of their jobs. What’s more, a quarter (26%) also claimed not to have time to focus on future career development.

It’s clear that your talent wants to spend their time adding value, regardless of function. Completing a long list of manual tasks, which could be automated, is not adding value. If 80% of your time is spent on routine tasks that can be automated, that’s 80% of your value gone before any major or strategic tasks arise. This wasted energy wastes your employees, which passes on up the chain.

Automation frees up F&A team members to focus on strategic, more career-focused goals, ensuring their motivation and energy is spent bringing value to your business (and not someone else’s).

Don’t Let Manual Processes Decide Your Fate

Many organizations have now automated processes such as accounts payable, but the prevalence of manual processes in accounts receivable continues to pose serious health issues for businesses. The problem is that automating some processes and not others could ultimately cost you more than you bargained for. If the budget only stretches so far, it’s essential to upgrade the process that will have the biggest impact. Let me explain by way of an analogy.

Imagine you need to dig a hole somewhere in your back garden. You could do it with a shovel, but it needs to be a very large hole, so doing it that way would take a huge amount of time and exhausting effort. So, you hire a contractor with the right equipment. This gets the job done much faster and with much less effort. The problem is, you didn’t know where exactly to dig the hole to begin with and you’ve dug it in the wrong place. Now, not only do you still need to dig the hole, but you need to repair the large area of back garden that is now a building site.

Automating some FP&A processes but leaving AR up to manual processes creates a similarly traumatic scenario. Choosing to invest in accounts receivable opens up a treasure trove of intelligence and profitability that could make the difference between success or failure. When it comes to accounts receivable, investment is no longer a nice-to-have, it is now a must-have for survival.

IBM Planning Analytics Tips & Tricks: New Filter Option in Set Editor

September 27, 2022 by Dillon Rossman

Did you know IBM Planning Analytics Workspace (PAW) update 76 introduced a new filter option in the set editor? Previously, you could create a filter or multiple filters and the set would show the members that meet the criteria for every filter. Now you can have the set show any member that matches any of the filters.

Within the set editor, when you click filter you will now see two options, “Match all of the following” and “Match any of the following”.

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“Match all of the following” is the equivalent of what previously existed. “Match any of the following” is new functionality. For a simple example, I will try to filter this set to show months containing “Jan” or “Feb”.

Using the “Match all of the following” functionality this will return nothing because no month will contain “Jan” AND “Feb.

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However, if I use the new “Match any of the following” functionality to search for members that contain “Jan” OR “Feb” I will get the results I am looking for.

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Revelwood has worked with IBM Planning Analytics / TM1 for more than 27 years. We’ve partnered with hundreds of companies on the design, development, maintenance and updates of IBM Planning Analytics applications, across every industry. Have a challenge with Planning Analytics / TM1? We can help you!

IBM Planning Analytics Tips & Tricks: Garbage Memory

August 23, 2022 by Lee Lazarow Leave a Comment

I recently had a customer ask me why Windows was showing a much larger memory footprint than what was expected (based on their cube sizes). After further analyzing their model, we saw a large amount of garbage memory … which led to the question “what is garbage memory?”

As you know, IBM Planning Analytics uses various approaches to minimize the amount of RAM needed for a model. PA (Planning Analytics) is very good about only taking what it needs to support views, calculations, and processing. However, I sometimes like to compare PA to a small child – it is very good at only taking what it needs, but it’s not so good at giving it back when it’s done. This is does this on purpose since results are stored for future reference, thereby providing faster results for your users. The excess memory that was being and is no longer needed is called garbage memory.

You can determine how much memory is being used by enabling performance monitoring and reviewing the }StatsForServer control cube.

So how do you release (or reset) the amount of memory used by PA? You can do this by simply recycling your PA server. Revelwood recommends recycling your service at least once per week. Not only will this reset the amount of memory used on the machine, but it will also help with other basic maintenance tasks such as ensuring your transaction log data is properly written to disk.

Workday Adaptive Planning Tips & Tricks: Data Integration and the Planning Data Source

August 17, 2022 by Marc Assenza Leave a Comment

Did you know that Workday Adaptive Planning integrations can use the metadata in Adaptive Planning as a part of the integration?

It’s true! The process requires setting up the credential and setting up a data source for Adaptive Planning. You must have the proper credentials yourself within Adaptive Planning to set this up.

To set up the credential you will need to do the following:

From the Workday navigation button, go to Integration🡪Design Integrations

You will arrive at the following screen. Under the Component Library section click on the Credentials option.

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From the list that is presented, the first option is to Create a new Credential, select this.

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Once clicked, the following list will be presented, select Planning Credential, and give it a name. Giving it a name that is meaningful matters, Adaptive certainly fits the bill here.

Once created, you will see that your credential exists under credentials in the Component Pane, but no access to the data source has been granted yet because no authorized user has been assigned. To assign an authorized user (a user with the rights to perform all these steps) to the credentials, you follow the on-screen instructions and click “Authorize” under the Actions panel.

When you click authorize, the following appears, enter the credentials in the pop-up screen and click “Authorize” on the lower right-hand portion of the screen.

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Next you will want to click the Save button to save the login information with the credential.

The next step will be to Test the connection. This is done by clicking on “Test Connection” under the Actions pane. A pop-up window will display, click on “Test.” If the login credentials are valid, the following window will appear and the credential is all set up.

To set up the data source, you will need to do the following:

Under the Component Library, click on Data Sources.

Click on the option “Create New Data Source.”

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Here again select Planning Data Source and give it a meaningful name, keeping the name the same in this example and calling it Adaptive.

Once the Data Source is created, the following screen will appear. Here you will assign the Data Source the Credential that was created in step 1 and save it.

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You will notice that no tables have appeared. That is because we have not defined them yet.

On the left-hand side under Actions, click on “Manage Sources.”

The following popup window will appear, click on the sources folder first, then click on the Add button.

You will now see a list; in the example we will import metadata about Accounts and Levels. Those two will be selected.

You have the option to rename the source, so Accounts and Levels will be used in place of the default name.

No tables are in the Data Source yet because the Data Source needs to be saved and the structure needs to be imported. Click the Save option first followed by “Import Structure.”

The table structures are now present as seen below.

The next step is to import the data, this is done by clicking “Import Data” under the Actions pane.

That’s all it takes to set up the credential and the Adaptive Data Source, now you’re ready to utilize it in the Staging area for integration however you see fit!

Visit Revelwood’s Knowledge Center for our Workday Adaptive Planning Tips & Tricks or sign up here to get our Workday Adaptive Planning Tips & Tricks delivered directly to your inbox. Not sure where to start with Workday Adaptive Planning? Our team here at Revelwood can help! Contact us info@revelwood.com for more information.

Modern Accounting: Why Does Intercompany Accounting Crash Your Close?

August 11, 2022 by Revelwood

This is a guest blog post from our partner BlackLine, explaining why intercompany accounting is killing your close.

It’s a fact of life that if you can’t reconcile your intercompany accounts, you can’t close your books. The goal of intercompany accounting is netting to zero across the entire company. However, as multinational companies know, that is easier said than done—especially when it comes to billing services.

Deficient processes anywhere in the intercompany chain cause delays in controllership and impact a company’s monthly, quarterly, or annual close.

The Challenges of Intercompany

Without standardized intercompany processes, the risk of problems and delays that “kill your close” is high.

Poorly executed intercompany agreements

Intercompany accounting starts with an agreement between parties acting as either a seller and/or buyer to other entities in the multinational corporation. An intercompany agreement specifies what type of products will be delivered or services will be billed. It will also include details such as who is to be invoiced, what indirect taxes apply, and may even note restrictions around getting money out of the country where the buyer entity operates. If no actual agreement is in place, or if the agreement is poorly executed, mistakes must be undone and disagreements resolved. This takes extra time.

Incorrectly booked invoices

Problems progress from there as some invoices are simply not booked correctly. Perhaps a lower-level employee new to their position inadvertently books an invoice incorrectly or in a way that is inconsistent with the intercompany agreement. When it comes time to roll up the accounting, there is a disconnect between how the entities involved in the transaction accounted for that invoice. Ultimately, late in the game, the accounting team discovers these inconsistencies and must investigate where the disconnect occurred and effect a correction. This problem is further compounded as a multitude of inconsistencies roll up through the organization increasing by both number and associated value. If these issues cannot be rectified by the end of the month or quarter, they will become costly to plug.

Lack of communication

A lack of communication and standardized processes creates problems on both sides of intercompany transactions. For example, if a seller sends an invoice to the wrong distribution list or responsible person, the invoice never gets booked. Without proof of a counterparty confirmation, of a person saying, “I agree to book this,” the risk of a delay is high.

Problems on the buyer’s side arise when invoices are not processed properly. The buyer needs to book whatever service or product they receive to the right function, to the right department. This must be done in a timely manner to minimize disruptions.

Inquiries and disputes

The expedient management of inquiries and disputes presents a final challenge. Even when intercompany invoice trafficking is efficient, the person receiving the invoice may disagree with the charges. In some cases, buyers don’t communicate that they have a dispute until an invoice is overdue, putting additional time pressure on the resolution process.

Considering how many invoice disputes happen throughout the year, it’s easy to see how a poorly executed inquiry and dispute management process can critically slow a company’s close. This is further frustrated when buyers or sellers are organized in silos managing their own entity’s books while working to keep their costs down. With this perspective, if they don’t agree to pay an invoice, it doesn’t affect their margins, targets, or KPIs. They are not concerned with how an outstanding intercompany invoice impacts the larger organization.

Is a Shared Services Team the Answer?

These intercompany challenges often drive the creation of shared service centers or centers of excellence which are tapped to manage intercompany invoicing across the enterprise. When well-formulated, these organizations can streamline intercompany invoice management and, seeing the larger picture, should increase accuracy and timeliness. However, these teams must be more than dedicated personnel assigned to intercompany tasks. Without thoughtful process design and automation and separated from the sourcing decisions by continents and time zones, a shared services team may actually increase errors. A poorly run, poorly trained shared services team also suffers from staff turnover—exacerbating mistakes.

Pressure On the Accounting Team

For the accounting team, trying to tie up the intercompany accounts at the corporate level can be extra challenging. They must track down knowledgeable parties at the entity level that may be operating in different time zones and with different work rules and holiday schedules. They face additional stress when the accounting close deadline looms, often having to spend days and nights trying to source information and resolve issues. Often, they are forced to make unfortunate write downs when time is up. The pressure becomes worse at the end of the year when issues cannot be carried over to be resolved in the next quarter.

How to Address These Intercompany Challenges

It is important to get your intercompany process right from the start. Make it well-defined and executed so that you’re not wasting time, money, and resources. Intercompany should be a net-zero game so a good policy ensures that information is right on both sides of the transaction at every stage of the process.

To prevent intercompany from killing your close, you need to establish a global intercompany standard. It should:

Eliminate the silos and outline how to get things done
Make sure invoices are booked into the right accounts and in a timely manner
Specify timing—for example, dictate the last day in the month/quarter that intercompany charges must be billed
Improve training for the shared service center team, especially new members
Make entity-level staff or shared services teams tie up outstanding intercompany transactions early enough so that the business unit and corporation are completed in a timely manner
Give you time to reconcile

How BlackLine Can Help

BlackLine helps companies centralize the management of intercompany processes, technology, and master data to create improved tax and resource efficiency while reducing operating costs. Our solution automates intercompany accounting by translating relevant data into compliant invoices and documentation to support intercompany transactions, real-time audits, and improved transaction transparency while reducing operational costs.

The art of establishing company-wide process uniformity requires experienced intercompany pros. BlackLine has guided consistency across customer organizations improving compliance and reducing risk at some of the world’s largest corporations. Uniformity and consistency are important defense lines in any transfer pricing audit as they communicate a sense of control and defend against disorder.

IBM Planning Analytics Tips & Tricks: Customizing Background Colors for Data and Header Cells

August 9, 2022 by Dillon Rossman Leave a Comment

Did you know that update 76 of IBM Planning Analytics allows you to customize background colors for data and header cells within your Planning Analytics Workspace (PAW) views?

To customize these colors, click on a view within a page in PAW and open the “Properties” menu.

Within the “Properties” menu expand “Text Properties”. Within this section you will notice three subsections: “Data Cell”, “Row Header”, and “Column Header”. Each of these sections includes a setting called “Fill Color”, which defines the background color.

In this example, I will update the data cell background color to a light blue.

The data cells are now a light blue.

The same can be accomplished for the row and column headers, giving complete control over the colors in your PAW view.

Workday Adaptive Planning Tips & Tricks: Utilizing Split Rows in Modeled Sheets

August 3, 2022 by Dillon Rossman Leave a Comment

Do you know how to utilize splits in Workday Adaptive Planning for a modeled sheet? Splits allow you to have multiple lines as part of one record and you can set splits on a column-by-column basis.

A use case might be a personnel model in which you want the ability to allocate a single employee to multiple departments. To turn on splits, navigate to the settings of your modeled sheet and click “Columns and Levels.”

From here, click on the “Sheet Properties” button

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Within the pop-up menu, click on “Settings” then enable “Allow Splits” and hit “OK”

Once this is completed, you will notice each column now has a checkbox for “Split.” In this example we will turn this on for the “Department” and “Allocation” columns.

Within our sheet we have an existing row for John Smith. In order to create split rows we just have to right-click on John Smith’s row and select “Split Row.”

Once the split row is added you will see that only the two columns we designated with splits are split. The information from the consolidated row gets carried down to the split rows for the non-split columns.

In this example I will create two split rows. I’d like to allocate John Smith to two departments. After adding a second two split row, updating the information, and saving the sheet, you will now see two split rows that are each allocated 50% to their department and a consolidated row that totals up to a 100% allocation.

You could have accomplished the same end result with multiple independent rows, however, splits provide several benefits including:

Non-split columns will automatically copy the consolidated row data to the split rows.
Split rows are grouped together.
Groupings show the summations of split column values, in this example you can see the allocation percentages add up to 100%. Independent rows would not clearly show you an employee is allocated 100%.

IBM Planning Analytics Tips & Tricks: Excel MAXIFS and MINIFS

July 12, 2022 by Lee Lazarow Leave a Comment

Many of you know that Excel’s MAX function will define the largest value within a range. And many of you also know that Excel’s SUMIFS function will allow you to merge IF checks into your sum formulas. But did you know that Excel has a function called MAXIFS which merges these two concepts together?

The MAXIFS function is used to determine the largest number within a range that satisfies one or more conditions.

The syntax of the function is:

=MAXIFS (max_range, criteria_range1, criteria1 [,criteria_range2, criteria2] [..])

Max_range
- This is required
- This defines the range to search
Criteria_range1
- This is required
- This defines the range to perform the IF check
Criteria1
- This is required
- This defines the criteria of the IF check
Criteria_range2 and Criteria2
- These are optional
- These allow you to have multiple IF checks
- You can have more than 2 criteria

The following example shows how to define the maximum value for Lee.

Other iterations of this formula include MINIFS, AVERAGEIFS and COUNTIFS.

Workday Adaptive Planning Tips & Tricks: Loan Amortization

July 6, 2022 by Robert Nordhagen Leave a Comment

Loan amortization schedules in Workday Adaptive Planning are slightly different than those done in Excel.

In Excel the typical amortization schedule looks like this:

In Workday Adaptive Planning most versions only go 1-5 years into the future. Creating a complete 10-25 year amortization schedule is not the best practice. Here is an example of an Amortization Schedule in Adaptive:

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In Adaptive we show inputs in rows 2-8. Rows 10 through 14 are the formulas that calculate the interest per period, the principle and the declining principal balance.

Row 2: Input the initial loan balance for every month the loan will be active. If you are keying it in, as opposed to uploading a file from Excel, you can use Copy Forward rather than key it in every month.

Row 3: Input Balance (if acquiring the loan). Instead of the initial balance, put the balance as of assumption date.

Row 4: Principal Payment. This is used for variable rate loans

Row 5: The months will be the same just like the Initial Balance for every month that the loan is active.

Row 6: Amort Month is a counter that increases by 1 each month until the loan matures, then the field should go blank. In most cases the version will max out before the loan matures.

Row 7: Interest Rate %. This will be the same every month for fixed rate loans. For variable rate, forecast the expected rate by month.

Row 8: Draw Down. This is for additional payments.

The formula rows will calculate as follows:

Row 10: Beginning balance is equal to prior month ending balance.

Row 11: Total Payment. This is the most complicated formula and takes many scenarios into account using nested ifs. The basis of the formula is the payment formula; ie, Balance x i / ( (1+i) * (1- 1/( 1+I )^n ))

Row 12: Interest Payment. This takes the Beginning Balance * the Interest rate (monthly rate: rate/12)

Row 13: Principal Payment. This takes Total Payment – Interest Payment

Row 14: Ending Balance. This takes the Beginning Balance – Principal Payment – Draw Down

Follow up to Amortization is Conversion to Straight Line

Previously, we showed how to do a loan amortization in Adaptive Planning. Now we will go to the next step: Straight-line the interest according to GAAP in certain situations. Below is a loan amortization that takes the loan payments to maturity. The interest payments are summed. That sum is then divided evenly among the payments and the amortization schedule is redone with constant interest every month as shown in the second schedule.

This is tricky in Adaptive Planning because a typical Excel schedule is run out to term since there are almost always sufficient columns in an Excel sheet to handle all the monthly payments. However, in Adaptive Planning, a typical version will be only 3 to 5 years into the future so only loans within 60 months of maturity could follow the same pattern.

For any longer maturities we have to apply the following logic. For loans with a constant monthly payment (which is most loans), calculate the payment. Then multiply the payment by the number of payments such as $9541.10 * 120 months, which is equal to $1,144,932.00 (slightly different by $0.37 due to rounding). Subtract the initial balance $1,144,932 – $1,000,000 = $144,932 which is the total of the interest. Now the Interest Payment will be equal to the total interest divided by the number of payments as seen below.

Now the GL account for Interest Expense can be linked to SL_Interest_Pmt and the GAAP reporting of Straight Line interest will be in the P&L.