Accelerating the Financial Close

CFOs Insights into the Benets of

a High-Quality Close
A report prepared by CFO Research Services in collaboration with SAP
Accelerating the Financial Close
CFOs Insights into the Benets of
a High-Quality Close
A report prepared by CFO Research Services in collaboration with SAP

zo1o cvo vusIIsuIo IIc )uv zo1o 1
Contents
Executive summary 2
Financial excellence in times of change 4
Closing faster, reporting earlier 5
More security, less error 8
Optimizing across the close cycle 10
Improving the value of management 13
reporting
Managing change in nancial 15
close processes
Sponsors perspective 16

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About this report
In the rst quarter of 2010, CFO Research Services
(a unit of CFO Publishing LLC) conducted a series
of interviews with top nance executives at large,
multinational companies from around the world.
Our goal was to gain insight into the impacts
that accelerating nancial close processes can
have on business performance and management
effectiveness: What are the most time- and
resource-consuming portions of close cycles?
Where do companies feel their strengths are? How
does good execution of the nancial close process
affect a companys performance overall and its
competitivenessbeyond simply reducing effort
and cost for the accounting function? What kinds
of changes in the business environment might af-
fect the need for exibility and speed in the nancial
close process? And what, if any, changes are compa-
nies likely to pursue in their processes?
We interviewed executives at the following
organizations:
AES Brazil (Brazil)
Catlin Group Limited (UK)
Companhia Energtica de Minas Gerais (Brazil)
IDT Telecom (U.S.)
Infosys (India)
Roche (Switzerland)
Rossi Residencial (Brazil)
Tesco Property (China)
A CFO at a privately held distributor of consumer
products, who wished to remain anonymous
We supplemented material gathered through in-
terviews with secondary research to develop our
conclusions.
Executive summary
In an economic environment characterized by uncertainty
and volatility, the quality of the nancial close assumes even
greater importance as an indicator of a companys nancial
excellence. Shareholders, creditors, lenders, and analysts
are all looking for evidence that a company is well run and
nancially viable during these troubled times. In addition,
the same processes used to conduct the nancial close
for external reporting are also being optimized to deliver
internal management reporting more quickly and more
accurately. Putting critical nancial information into the
hands of managers faster allows them to react more eec-
tively to changing markets.
A high-quality, well-managed close
process is important for building
investor and marketplace condence
in a company.
For this study, we interviewed CFOs at complex and
multinational companies in several regions of the world to learn
what they see in this environment as the keys to accelerating
their consolidation and close processes, the challenges they face
in doing so, and the challenges they have overcome. We learned
that leading companies are nding ways to close within days of
the end of the period, rather than weeks. Tey view their ability
to conduct a fast, high-quality close as a competitive advantage,
rather than simply as a regulatory obligation. A high-quality,
well-managed close process is also important for building
investor and marketplace condence in the company.
Overall, however, the executives we interviewed feel that while
the actual speed of the internal close is important, it is, by
itself, no longer the sole driver of changerather, greater secu-
rity, having condence in the quality of the nancial data, and
managing nancial risk are increasingly paramount. Tony Ho,
nance director at Tesco Property in China, comments, Te
advantages of a ve-day close are not so much the speed but
reduction of risk, more security, and less error.
Some of these companies have integrated their nancial
and information systems across their reporting units, and
they have revised their close processes to nearly eliminate
manual intervention, reduce redundancy and rework, and
streamline and standardize reporting. Tese CFOs also stress
that their companies are proactive in anticipating and plan-
ning for changes in reporting standards and requirements.
zo1o cvo vusIIsuIo IIc )uv zo1o 3
Interviewees discussed their approaches to optimizing the
close cycle across all of its stages:
Local close. Preparation is key for coordinating a
smooth close across widely dispersed reporting entities.
Standardizing formats and processes, even if dierent
nancial reporting systems are still in use, helps get
everyone on the same page. Te goal is to reduce the
level of manual intervention needed for reconciliation
while still allowing the local organization to meet local
statutory requirements.
Group consolidation and close. Having a common
language for reporting across the enterprise provides
greater control over the data, ensures data quality, and
improves responsiveness. Automating closing activities
and standardizing nancial systems provide substantial
advantages in terms of implementing a high-quality
close. Multinational companies can also benet by
actively monitoring regulatory discussions so that they
can be prepared to respond with the least
amount of disruption to data collection, preparation,
and reporting processes.

Te last mile: Post-close activities. Keeping in close
communication with both auditors and regulators is
important for reducing the time spent resolving unan-
ticipated issues or unclear interpretations of reporting
requirements.
Te interviewees also cite the value-added benets their
companies derive from accelerating the close cycle, beyond
simply lowering costs and complying with reporting and
ling deadlines. Interviewees stress the value of knowing
where we are.
By moving beyond the spreadsheet culture and automating
close processes, companies are able to tie internal manage-
ment reporting more closely to external nancial reporting.
As Erwin Schneider, head of Corporate Finance Accounting
and Controlling at the Swiss pharmaceutical rm Roche,
notes, Te rst and most important driver behind the Fast
Close project was really the need for management to know
the results within a short period of time, to be able to under-
stand important critical developments, and to be able to
act fast. Marcelo Fischer, CFO of the large U.S. communi-
cations company IDT Telecom, says, When it comes to
nancial reporting and the closing process, we nd that our
biggest challenge isnt getting our GAAP nancials and SEC
reporting in good shape under tight deadlines; rather, its the
ever-evolving managerial reporting needs which are more
di cult to deliver when the organization is complex.
Interviewees stress the value of
knowing where we are, in addition to
lowering costs and meeting deadlines.
In addition, letting the nance sta focus more of its time on
what it does best enhances the quality of the nance function
itself. V. Balakrishnan, the CFO of Indian software multinational
Infosys, says, A high-quality workforce, which focuses more
on the high-end aspects and does not do traditional transac-
tion work, helps to build a good nance team that can last for
a long time. Similarly, Neil Freshwater, CFO at the UK nan-
cial services rm Catlin, says he believes that his company
will get better value out of freeing up more [nance] time in
the process, so that the balance between production, analysis,
and understanding the numbers shifts and we have more time
to really get into the numbers.
Simply installing the technology is not enough, however
just as critical is changing the company culture and peoples
mindsets so dierent groups work together better and take
ownership of nancial results. In the end, it is the people
who will make the system work better, as well as the system
that allows the people to work better. In describing how they
moved from a spreadsheet culture to a fast and e cient
automated process, several of the interviewees stress the
importance of getting everyone on board with the need to
change and the intensive training at all levels that allowed
them to be successful.

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Financial excellence
in times of change
In recent years, increasing pressures from markets, stakeholders,
and regulators have made it more important than ever to close
a companys books quickly, accurately, and transparently. Both
regulators and stakeholders have intensied their scrutiny of
corporate nancial performance. Following increasingly rigorous
accounting standards being put in place around the world, as
well as a global recession, shareholders, creditors, lenders, and
analysts are all looking for evidence that companies are well run
and nancially viable. Te quality of the nancial close is a key
indicator of nancial excellence to a wide range of a companys
stakeholders, both internally and externally.
Global recession and the drying up of the credit markets pushed
protability and cash management to the forefront of manage-
ment attention, intensifying the need to compile and generate
nancial information quickly and accurately. Finance executives
are poring over nancial output on a weekly, if not daily, basis,
where before monthly management reporting was the norm.
Te internal close gets accurate and timely information into the
hands of decision makers, allowing them to react more eectively
to uncertainty in the marketplace.
At the same time, the unprecedented volatility in market outlooks
has shortened forecasting horizons to the point where executives
urgently need faster access to more-detailed nancial data on a
more frequent basis. Te same processes used to produce quar-
terly, half-yearly, and yearly statutory reports are being pressed
into double-duty to deliver internal management reporting.
For their part, legislators and regulators in many countries began
to demand more transparency in nancial reporting after the
large-scale nancial scandals at the turn of the century. More
recently, they are reacting to the dubious decisions made in the
nancial industry that helped precipitate the economic crisis,
and they are debating ways to tighten or alter oversight of that
industry. Meanwhile, governments around the world are keeping
their ngers rmly on the pulse of their economies as they search
for signs of recovery.
Heightened scrutiny of nancial reporting has also resulted
in demands for increasing accountability, transparency, and
comparability in those reports. For example, with new rules
from the U.S. Securities and Exchange Commission (SEC)
for the mandated adoption of eXtensible Business Reporting
Language (XBRL) for all public companies in 2011, accounting
teams face a new layer of complexity and new demands on their
scarce time.
Troughout our global interview program, in many cases we
found that the executives we spoke to were highly cognizant of
the added importance being placed on the quality of their nan-
cial close. As V. Balakrishnan, the CFO of Indian software giant
Infosys, notes, Closing quickly and e ciently gives the market
more comfort with our numbers. Closing faster reduces uncer-
tainty in the market, which investors appreciate and support.
His view is echoed halfway across the world by Luiz Fernando
Rolla, CFO at Companhia Energtica de Minas Gerais (Cemig).
Cemig is the largest Brazilian electric utility, with 6.2 million
customers and annual group revenues of about $6.3 billion. Of
course, there is the question of the regulation, which imposes a
very tight schedule, Mr. Rolla says. But the main motivation
for improving our close is to be more e cient in providing the
information to investors, because the pressure is strong from
the shareholders. Tey are demanding that the report be made
public faster.
And in China, Tony Ho, nance director of Tesco Property, says
that its very important to show that we are capable of running
the business. We have all the information on a timely basis and
use it to manage the business, so its very important that we
channel that information o to the public as well.
Changing regulatory and economic landscapes make it essen-
tial to have the processes and systems in place for a high-quality
close. Accounting standards and ling formats continue to
evolve around the world, particularly as more countries push
ahead to adopt some version of the International Financial
Reporting Standards (IFRS) as their nancial reporting stan-
dard, replacing versions of the Generally Accepted Accounting
Principles (GAAP). Local variants of IFRSthe principle-based
framework developed by the International Accounting Standards
Board (IASB)have been implemented in European countries,
and fast-developing economies such as Brazil and India are
on track to require IFRS conversion within the next two years. In
the United States, foreign issuers are allowed to use IFRS in their
U.S. lings, although requirements for domestic adoption are still
being debated.
In addition, regulatory oversight continues to tighten, as evidenced
by the Sarbanes-Oxley Act of 2002 (SOX) and current debates in
the United States and Europe over the next wave of regulation
in nancial industries. And, at the same time, a multinational
may still be using local versions of GAAP for individual reporting
entities. With the increasing globalization of markets and busi-
nesses, many large corporations are in the same position described
by Mr. Balakrishnan. He notes that Infosys reports its numbers in
eight countries, using both Indian and European GAAPs, while
also adapting to Indias conversion to IFRS and adjusting its U.S.
lings for SOX regulation.
zo1o cvo vusIIsuIo IIc )uv zo1o 5
Closing faster,
reporting earlier
Even within this complex environment, some companies are
nding ways to close within days of the end of the period,
rather than weeks. Tey often view their ability to conduct
a fast, high-quality close as a competitive advantage, rather
than simply as a regulatory obligation. Mr. Balakrishnan
at Infosys, for example, points with pride to his companys
record as a leader in closing and reporting quickly, noting the
positive inuence on market perceptions of the company that
its closing capabilities have fostered.
Mr. Balakrishnan notes that Infosys consistently reports its
audited numbers ahead of any other company in India, and he
says that the company receives high marks from investors for
the detail and transparency of its nancial reports. Infosys
historically has adopted the best accounting standards in
India and across the world, he says, and I think people are
happy with what we are doing here.
Companies often view their ability to
conduct a fast, high-quality close as
a competitive advantage, rather than
simply as a regulatory obligation.
Your closing e ciency will always be compared with that
of your peer groups in the marketplace, Mr. Balakrishnan
explains. In India, we are always the rst company to
announce numbers across our industry, and across all compa-
nies, for that matter. I think that is a good indicator of the
e ciency of our operation.
According to Mr. Balakrishnan, Infosys has made sure that
the operating structure of the company does not become too
complex, and it has implemented an ERP system across its
units that is scalable and enables us to get timely informa-
tion on the ground. Infosys has continually integrated other
systems into its ERP system, which enables us to get struc-
tured data and analyze the data, and helps us scale our opera-
tions, he says.
Companies are once more starting to
shave days off their close cycles.
Companies in each region of the globe are nding ways to
come to grips with increasing demands from stakeholders and
from regulators for timely, detailed, and transparent nan-
cial information. According to BPM International (BPMI),
a network of European consultancies that publishes annual
close cycle rankings, the largest companies in the United
States and Europe have been making steady progress in
shortening their close cycles. BPMI benchmarks these
companies in terms of the number of elapsed days following
year-end until they release their preliminary announcement
of results, and then again the number of elapsed days until
they receive an audit signature.
In 2009, the 30 fastest-closing companies in the FTSE Global
100 averaged 23 days from year-end to public announcement
of results; the fastest company, Cisco Systems, announced
its results only 10 days after year-end.
1
Te companies in
this group averaged about a month of additional time until
audit signature.
According to BPMI, European companies still lag their U.S.
counterparts in time to complete their annual close, and,
indeed, the list of the fastest closers is dominated by U.S.
companies. Tis may be at least partially due to the head start
U.S. companies have by ling quarterly reports throughout
the year, instead of half-yearly as is more common in Europe.
However, BPMIs latest compilation of cycle times shows that
European companies have begun to close the gap, especially
in terms of their release of audited statements. Overall, the
average close time for European companies has declined from
six years ago.
BPMI reports that the average time to announce results for
U.S. companies actually went up in 2009 from its low point
six years previously. CFO Researchs analysis suggests that
close cycles in the United States were inated as companies
sorted through rigorous new requirements imposed by the
Sarbanes-Oxley Act of 2002, and then again in 2005 following
revisions in the way o-balance-sheet items are treated. As
these changes are absorbed into nancial and accounting
systems, CFO Research believes that companies are once
more starting to shave days o their close cycles.
1
Data cited from Close Cycle Rankings 2009: Top 30 Country and Industry
Rankings, BPM International, 2009, http://www.bpm-international.com/
close2009.html. Averages calculated and analysis provided by CFO Research.
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In fact, the number of U.S. companies that failed to meet the
year-end ling deadline has always been relatively small, and
has been decreasing substantially since 2004. (See Table 1.)
Te general reason cited most often for late lings is simply
insu cient time. A look at specic reasons cited in Table 1
shows a spike in 2008 in the number of companies missing
the deadline due to nancial disruption (bankruptcy, funding
issues, etc.)most likely a legacy of the global recession. Te
number of companies citing outright errors as the cause of a
late ling has persistently been very small.
Sources interviewed for this report are at dierent stages
in their nancial close process optimization, ranging from
best-practice levels of two to three days to consolidate their
numbers for quarterly and year-end nancial close, to more
than three weeks. Interviewees provided these estimates for
their internal closes in which they collect and consolidate data
from local nancial reporting. Post-close activitiesmanage-
ment review and sign-o of the consolidated gures, annota-
tion, audit, and report preparationcan add two weeks to a
month or more until nancial results are published, the inter-
viewees say.
Te companies represented in the interviews we conducted
for this report also represent dierent types of business
models (see Dierent directions, the same destination:
Faster, higher-quality closes), and are at dierent levels of
close cycle automation. Some of these companies already
have years of experience working with a fully automated
enterprise system in rapidly uctuating markets, both at the
group level (Rossi Residencial in Brazil, Infosys in India) and
at the local level, with reporting responsibility to a distant
parent (Tesco Property in China). Te sources from these
companies describe how they have integrated their nancial
and information systems across their reporting units, and
have revised their close processes to reduce manual inter-
vention, eliminate redundancy and rework, and streamline
and standardize reporting. Tese CFOs also stress that their
companies are proactive in anticipating and planning for
changes in reporting standards and requirements.
Other interviewees come from companies at dierent stages
of automating and streamlining their close processes to
reduce cycle time and improve data quality. Tey include a
company that has completed a successful fast close initia-
tive (Roche in Switzerland) and companies that are in the
process of transitioning from a spreadsheet culture to enter-
prise systems (Catlin in the UK and IDT Telecom in the
United States). Two power companies in BrazilCemig and
AES Brazil (the subsidiary of a large U.S. power company)
are at similar stages of standardizing their nancial processes
and optimizing automation in their closing cycles. We also
interviewed the CFO of a private company that still relies
exclusively on the manipulation of hundreds of spreadsheets
to consolidate its numbers each month and generate manage-
ment reports, but which is starting to look ahead to the time
when it can fund its automation initiative.
Table 1. Reported Reasons for Late Annual Filings in the U.S., 20042009
2004 2005 2006 2007 2008 2009
Total companies ling late
186 182 153 123 104 40
Financial disruption
20 20 26 17 63 19
Organizational disruption
7 10 3 5 3 1
Errors
16 13 8 17 5 4
Financial disruption: Bankruptcy, litigation, contingency, non-compliance of credit agreement; going concern or
nancial difculty matters; funding/re-nancing, administer/extend/amend credit agreement, capital restructuring, obtain waiver
Organizational disruption: Reorganizations, restructurings and/or disposals, change or dissolution of business
Errors: Discrepancies or errors discovered
Source: Audit Analytics, www.auditanalytics.com
zo1o cvo vusIIsuIo IIc )uv zo1o 7
Different directions, the same destination: Faster,
higher-quality closes
Rossi Residencial is one of the largest home build-
ers in Brazil, and is also among the fastest-growing
rms in the country. In recent years, it has expanded
both geographically and in its product line, moving
into higher-income segments and commercial units.
According to its CFO, Cssio Audi, it plans to con-
tinue to target aggressive growth over the next two
years by doubling the presence it has today, expand-
ing from roughly 64 cities to 130.
To control and manage such a large operation, says
Mr. Audi, Rossi made a substantial investment in
technology and training during the 1990s. The com-
panys ambitious implementation of a single enter-
prise system allowed it to reduce its quarterly closing
cycle from two weeks to two to three days.
In the United States, IDT Corporation, the communi-
cations and energy company, has recently completed
a period of downsizing and divestment of non-core
businesses. According to Marcelo FischerCFO of
IDTs largest subsidiary, IDT Telecomthe restruc-
turing has enabled IDT to better focus on the tech-
nology needs of its remaining core businesses. Mr.
Fischer adds that, as a result, MIS and technology
resources have also become more available within
IDT to engage in productivity and business process
enhancements.
As a result of IDTs rapid growth since going pub-
lic in 1996, IDT realized the need and importance
of leveraging core nancial data and KPIs across
the entire organization, explains Mr. Fischer. A
big step toward this goal, he says, was taken in
20002001, when the company began implement-
ing a single ERP platform across the enterprise and
automating the loading of core nancials into the
integrated system.

Now, although challenges still exist for managing
information ows across the portfolio of businesses,
Mr. Fischer says that the close process has become
much more streamlined. Since the beginning of IDTs
ERP platform implementation, IDT has reduced the
time needed for its monthly internal close by about
50%, according to Mr. Fischer, and he is spearhead-
ing the drive to get that number down even further.
We need to [shorten the close cycle further], he
says, in order to remain competitive and timely in
our reporting and our compliance.
Both companies rely on an
integrated, automated nancial
system that ties together their
distinct parts and provides
exibility.
These two cases illustrate different ends of the
spectrumthe one company growing in complex-
ity, the other refocusing itself on its core businesses.
Yet to help them control critical nancial information
ows, generate insightful management reports, and
manage their complex closes effectively, both com-
panies nd they can draw upon the same solution:
an integrated, automated nancial system that ties
together their distinct parts and provides the exibil-
ity to change with the business.
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More security, less error
Some of the CFOs interviewed for this report feel that they
have nearly optimized their closing processes; they may still
be able to improve in discrete activities, but overall, they
have invested in processes, sta ng, and systems needed to
close their books with speed and accuracy.
Others that we interviewed had either begun to make the
same kind of investment or were planning to do so. All of
the interviewees agreed, however, on the end game: a closing
process that eliminates wasteful eort while ensuring the
integrity and quality of the companys nancial information.
When the sources for this report describe their initiatives to
improve their closing processes, they often talk in terms of
more than just speed (see Moving beyond the spreadsheet
culture: Lessons from a private company). Te interviewees
variously cite the need for accuracy, uniformity, transparency,
adaptability, and repeatability to optimize their processes.
For most of the interviewees, greater data integrity is the
primary benet of a high-quality close; process and sta ng
cost reductions are tangible, but secondary. Te actual speed
of the close, by itself, is not the primary driver of change,
according to many of these sourcesrather, increasing secu-
rity, having condence in the quality of the nancial data, and
managing nancial risk are paramount. A high-quality, well-
managed close process is important for building investor and
marketplace condence in the company.
The end game: A closing process that
eliminates wasteful effort while ensur-
ing the integrity and quality of nancial
information.
For Catlin Group Limited, a global specialty insurer and rein-
surer, better control is one of the most important priorities for
switching from an over-reliance on spreadsheets to a new, inte-
grated consolidation and planning system that will underpin
its nancial close and forecasting processes. According to
Catlins UK CFO, Neil Freshwater, Tats undoubtedly top
of the listto enhance the existing controls within the close
and consolidation process. Our internal and external nancial
reporting will be driven from a comprehensive data warehouse
and the new consolidation system, which secondarily should
also allow us to realize some e ciencies. But the primary driver
is enhanced, automated, robust controls, which a spreadsheet
environment doesnt easily give you.
Because the risk of manual error is reduced with Catlins new
technology, Mr. Freshwater anticipates that eventually the
company will be able to eliminate the need to run an early
soft close and move directly to a fast close, possibly taking
a couple of days o the close. His priority, however, is data
integrity and consistency: We would be looking to improve
data, improve process, and improve the integrity of systems.
Tat should take the stress out of the process, and then once
weve done that, we could look at whether we wanted to
take time out of the process. Fully integrating all of Catlins
administration, underwriting, and insurance accounting
systems is an ambitious medium-term project and a signi-
cant investment by Catlin, but with good progress being
made, Mr. Freshwater expects that we will progressively
enhance controls, e ciencies, and eectiveness.
Erwin Schneider, head of Corporate Finance Accounting and
Controlling at the Swiss pharmaceutical rm Roche, cites a
similar rationale behind the decision to move forward with
that companys Fast Close project. At the beginning, there
was this issue about the trade-o between quality and speed,
Mr. Schneider says. But there was never really a question. I
always said we can only achieve speed if the quality is good.
So we had to invest on the quality side. Now, thats one of our
strengthsthe quality of the process and the data quality.
We have a lot of standardization and automated controls
built into the process, so when our companies report their
results, theyre mostly clean results. Te focus is more on
this, rather than speed.
Mr. Ho at Tesco Property in China agrees. Te advantages
of a ve-day close are not so much the speed but reduction
of risk, more security, and less error, he says.

zo1o cvo vusIIsuIo IIc )uv zo1o 9
Moving beyond the spreadsheet culture: Lessons
from a private company
The CFO at a privately held, international distributor
of consumer products describes many of the same
issues for his nancial close that public companies
are now grappling with. While the company pre-
fers to retain its anonymity, this CFO spoke with us
about the risks associated with relying exclusively
on manual journal entries in extensive spreadsheets
for closing.
The companys operations are concentrated in North
America, but it has several thousand employees in
dozens of distribution centers in six countries. For our
domestic units [in the United States], says the CFO,
we give them three business days to close, using an
external vendor for accounting software. We are on a
5-4-4 calendar for the domestic units and for Canada,
which means the January close covers ve weeks, Feb-
ruary is four, March is four, then back to ve for April,
and so on. That means we dont have calendar month-
ends here or in Canada. Our ofcial reporting dates are
those random kinds of Saturday dates.
Unfortunately, he continues, our South American
unit and our unit in Europe have calendar closes. All
their systems are set up to close on calendars, so we
have a disconnect there. Even though we can close
North America pretty efciently, within three days,
a lot of times were done before the business month
closes for the South American and European opera-
tions. It takes them longer because theyre on differ-
ent systems, and so we have to wait for them.
The CFO brings up the challenges to an efcient and
accurate close that are posed by the companys reli-
ance on spreadsheets to record and report nancial
information. Everything comes together using
Excel spreadsheets, he says, even though we use
the accounting software for accepting journal entries
and keeping track of everything by accountall the
details. But even though the Canadians can close
quickly and are on our calendar, theyre not on our
nancial system. So they send us an Excel le using
standardized formats, and that gets combined with
the U.S. le. The European operation and the South
American operation all send in Excel les as well. We
then take that information and dump it into an Excel
le, which is used by our consolidation guys to marry
up all the domestic detail. We do our elimination
entries, currency conversion, and everything in Excel.
Its not just the effort, but the risk involved with
the spreadsheet culture that concerns this CFO the
most: Thats the thing I am least happy about,
the fact that we have everythingall that critical
informationin a spreadsheet application. There
is just a lot of manual intervention at every step
in the close process. Its not the most stable envi-
ronmentyou run the risk of losing the data if you
bump the system.
Of course, the company has introduced a number
of checkpoints to manage that risk. My corporate
controller routinely does backups so that there is
always an alternative set of the data somewhere,
the CFO explains. We also have a bunch of checks
in the system to make sure that nobody typed a
number in a cell that distorts everything. It would
get caught by taking a look at all these numeri-
cal checks that are built in. This level of manual
oversight is substantial, and our source notes that,
even though we back it up and we have precau-
tions, its just not as good as a mainframe system.
It just seems a little too fragile.
Within the next couple of years, the CFO hopes to
be able to fund a comprehensive initiative to move
everything to a mainframe system. The value of an
integrated consolidation system lies both in the risk
reductionYoure not going to lose your data
and in the increased reaction speed it affords. This
CFO notes that such a system allows more-robust
scenario or what-if modeling, and also makes it
easier to adjust to organization changes quickly,
such as an acquisition or opening a new facility.
Integrating the different units nancial systems
would also let nance get back to actually doing
some of the things a world-class nance organiza-
tion should do, says our source. That means a lot
less of accessing data, manipulating data, and do-
ing journal entries, and a lot more of being the plan-
ner, the thinker, the business partner for the general
managers in the locations that they serve.
My team wants to be users of the data, not just
generators of the data, he concludes.
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Optimizing across
the close cycle
At the companies interviewed, accelerating the close cycle
means making changes at all stages: at the local level, at the
group level, and in the last mile post-close, when nance
and management conduct their analyses, annotate the
reports, prepare reports for auditing, announce results, and,
ultimately, le the regulatory reports. Te executives inter-
viewed indicate dierent areas of focus for improvement
at each stage, while stressing the interconnections between
all activities.
Local close. Mismatched systems and processes in the
dierent companies or reporting entities are certain to
increase the time, eort, and cost of the nancial close,
according to the interviewees. Getting everyone on the
same system and standardizing charts of accounts and close
processes from unit to unit allows a company to reduce the
need for manual reconciliation while still providing the exi-
bility needed to accommodate local statutory requirements.
Mr. Schneider explains how automating the rollups from the
local closes as part of Roches Fast Close initiative allowed
the company to shorten its cycle: All the a liates have to
report on workday three, at 6 p.m. local time. So everybody
has the same amount of time available to do the local close.
Tis means, of course, that the companies in Asia are already
starting to report here in Switzerland on the morning of
workday three. Te European companies report basically at 6
p.m. our time, and then the Latin American companies, U.S.
and Canada, and so ontheyre reporting during the night.
With our automatic consolidation, once all the companies
are in we can start our work on the morning of workday four
with the full consolidation available.
At IDT, Mr. Fischer believes that having everybody on the
same system is key to improving the close process. Any
multinational or complex corporation that wants to work
on improving the closing processes should select an appro-
priate ERP system, he says. Ten they will have to make the
investment in both resources and capital to roll out that ERP
system across their various entities within their consolidated
group. Tis usually is time-consuming because, for example,
dierent countries may require specialized customizations
of the basic ERP system to accommodate the local statutory
and/or regulatory requirements.
We have an ongoing rollout of our large system integra-
tion, with the goal of moving all of our foreign divisions and
subsidiaries into one consolidated ERP system, Mr. Fischer
says. As part of that, we have to customize our ERP software
for certain countriesfor example, France, Spain, Italy, and
Greecethat have specic statutory requirements for items
such as the general ledger chart of accounts numbering. In
other words, specic numbering of how the general ledger
has to look. Tats dierent than what we use for the rest
of the world, so that requires customization. To execute on
these types of customizations, we often need to install addi-
tional software patches on our core ERP system.
But Rinaldo Pecchio, CFO at the Brazilian arm of $14
billion U.S. utility company AES Corporation, says the work
processes are at least as important as the technology for
streamlining the nancial close. Of course, you can do some
pre-closing and try to anticipate some accounting issues [at
the group level], but there are limits to that, he says. Te
limits really are in the process, getting all the information
available [at the local level] and putting it into the ERP
system. In fact, he continues, the most important thing [for
integrating ERP systems across companies] is selecting the
right processes.
Standardizing data collection
processes and accounting standards
among different companies is central
to efciency gains, according to the
CFO of a Brazilian utility.
Due to legacy issues, AES Brazil still employs a separate
ERP system at each of its three Brazilian reporting enti-
ties, which increases the work required for consolidation.
Mr. Pecchio notes that the consolidation and close process
could be improved by integrating the systems, but, he warns,
just installing a dierent version of the system with the
same processes doesnt help you much. You have to take the
opportunity to revise the process.
Standardizing data collection processes and accounting stan-
dards among the dierent companies is central to e ciency
gains, believes Mr. Rolla at Cemig. We are optimizing this
process in order to reduce the time spent preparing the
information, in each company, he says. We are reviewing
the process of cutting certain activities that can be done in
parallel and so reducing the total [time].
Mr. Fischer at IDT talks about the importance of taking a
holistic view across the enterprise, not just concentrating on
the individual pieces: Te key is not to look at any specic
location implementation on an isolated basis. We look at
each entity within our consolidated group as an individual
organ, part of the bigger body that shares information and
zo1o cvo vusIIsuIo IIc )uv zo1o 11
data in a uniform manner. Its very important for any corpo-
ration that has multiple locations or multiple users to be
talking the same nancial language, and for all of them to
be using and accessing the same accounting and reporting
system in order to create uniformity in the data.
Mr. Fischer acknowledges the eort that is required to make
these kinds of changes. Te local units will have to get
adjusted to using the new nancial package, which currently
they are not familiar with, he explains. Te local divisions
will also need to adjust to the fact that the new system is
often more time-consuming or the user interface often not
as friendly, simply because its more robust, so it requires
more-detailed data inputs or more-detailed process steps
to be done at the local level, before it can automatically roll
up and facilitate the work at the group level. Consequently,
employee acceptance and training are signicant require-
ments in successfully implementing an ERP system rollout,
he notes.
Integrating local entities into the enterprise system is a
continuous process, adds Mr. Schneider of Roche: At the
local level I would say about 99% of the monthly data that
we need can be extracted automatically from the underlying
ERP systems, but in the future we see even better integration
of our consolidation system. Tere are still a few data points,
like headcount, that you do not nd in your general ledger,
which need to be added.
Group consolidation and close. Automating interfaces
with reporting entities and adopting a common language
enhances control, data quality, and responsiveness, note the
interviewees. Just as important is actively anticipating and
preparing for change by building exibility into data collec-
tion, preparation, and reporting processes.
Like IDT, Catlin is in the midst of integrating nancial
systems across its units to optimize its closing cycle. Catlin
operates four underwriting platformsthe Catlin Syndicate
at Lloyds, Catlin UK, Catlin Bermuda, and Catlin USas
well as a network of international o ces. Currently, Catlin
runs a monthly close for internal management reporting
and a full hard close for quarterly external reporting. It runs
an early close a month in advance and then trues up the
numbers for the nal close, if required.
Catlins local entities currently submit Excel reporting
packs, which are signed o on by their CFOs. Tese are then
consolidated in Excel by the group nance function. Tis
close process is labor-intensive, tying up the entity and group
nance reporting teams as they manipulate the spreadsheets
fed in from other functions, validate them, and maintain
controls over the whole process. With the need for running
the early close, says Mr. Freshwater, Te [nance team] is
currently heads down in nancial reporting for a large part
of the year.
Automating interfaces, adopting a
common language, and anticipating
change are important for optimizing
group consolidation and close
processes, say interviewees.
Although the early close allows Catlin to report results from its
hard close at year-end faster than its peers, the company plans
to eliminate the duplication of eort required by this practice
(which is eectively a dual close). Te company is investing
heavily in implementing a leading consolidation software
package, which Mr. Freshwater says will replace the need to
produce the spreadsheet packs they currently prepare manually
for their group consolidation and CFO sign-o.
Underlying the software package are a standard chart of
accounts and a data model that are consistent across all of the
entities. Te integrated software being implemented by Catlin
includes a full forecasting and planning system that will enable
Catlin to improve its ability to manage a rolling forecast and
ultimately replace the early close process with a robust, well-
controlled hard close, with no surprises. Tese initiatives in
progress will create more time for value-added analysis through
process improvements and automation, says Mr. Freshwater.
Establishing common and exible standards across all entities,
to the extent possible, also enhances control and adaptability at
the group level. In some cases, companies need make only minor
manipulations to conform local closes to the group close. Mr.
Ho at Tesco Property says that the Peoples Republic of China
GAAP is already very close to IFRS, which is the standard used
at the group level in Hong Kong. We just do China ourselves,
and then on the Hong Kong level, we do a consolidation, he
says. Ten we send it to the UK. Hong Kong probably has to
do some of adjustment, but not much to t the UK accounting.

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Interviewees advocate for improving
the nance functions ability to analyze
closing data, as well as for keeping in
close contact with auditors and
regulators.
Mr. Ho does not see the dierent standards as an issue. Its
not necessary for us to do double accounting or run two sets
of books, he says. All the reporting formats are the same
regardless of where they are located.
Catlin is in a similar position, but is looking to increase the
degree it can leverage standardization even further. We
report externally under USGAAP, Mr. Freshwater explains,
but within the UK we do require some conversion from
UKGAAP, although this is relatively minor.
And Mr. Balakrishnan says of Infosys, Whichever GAAP is
used [of the eight countries in which Infosys reports], we try
to align our accounting policies as much as we can. If you
look at our numbers in the dierent GAAPs, for example, the
revenue and protability are the same.
However, sometimes a company must pursue dual paths to
accommodate dierent reporting requirements. In these
cases, Mr. Schneider at Roche points out, careful planning
to integrate the dierent sets of requirements as much as
possible is essential. He explains, Our concept is that, for
all companies, the primary nancial statements are prepared
according to our internal group accounting and reporting
guidelines, which are in accordance with IFRS. Te local
statutories are prepared from those records.
Rossi Residencial takes a similar approach in order to maxi-
mize its exibility. As Mr. Audi notes, IFRS is just upon us,
and Rossi will be required to report in IFRS in 2010. However,
the company has planned ahead for the transition, and feels
it is well positioned to make the adjustment. We report in
BRGAAP, or the Brazilian GAAP and the USGAAP, says
Mr. Audi. Te scal year 2010 has to be reported in IFRS,
so that has changed the way that we consolidate. But the
good thing about the systems and the organization that
we currently have is that we have already incorporated the
IFRS reporting internally, to analyze the impact. Internally,
we follow what will be the impact on our business under the
IFRS methods. Tis is one of the challenges we face, but we
are very well prepared for these accounting changes, and the
actual impact in the reporting cycle is going to be minimal.
Incorporating best practices internally ahead of anticipated
changes in regulatory requirements has also beneted
Infosys, Mr. Balakrishnan says: For example, the U.S. made
changes in its reporting when the SOX regulation came into
eect, but we were practicing most of that long before the
regulations. So when the change happened, we did not have
any major di culty in absorbing it.
Te last mile: Post-close activities. Following consolida-
tion, improving the ability to analyze and use the nancial
data is important, say our sources, and paying close attention
to control of the data and how it is communicatedamong
companies internally and with the auditorscan streamline
the reporting cycle. Even with a high degree of automation,
notes Mr. Schneider, there are some manual steps involved
from a validation and an internal control point of view.
At this stage of the closing cycle, says Mr. Pecchio of AES
Brazil, most of the time that we spend is on the nancial
analysis, the accompanying notes of the nancial state-
ments, on the explanation of the results, and on preparing
the releaseand that takes a long time. Adopting a process
of continuous improvement is important for these areas that
require management judgment, notes Mr. Pecchio.

Similarly, Mr. Ho reports that Tesco Property actively and
explicitly pursues improvements in its close. We have
monthly management meetings where we think about how
we can do it better, he says. Not just to get to a four-day
close, but more importantly how to make better use of the
management reports or better use of the closing report, how
to make our information better.
Te auditors work is another time delay as well, notes Mr.
Rolla at Cemig. Te auditors work on the quarterly report is
three people, and today it takes 15 days to complete. On the
annual report, the auditors work takes longer. Tey have to
review the information, the balance sheet lines, and so on, so
it takes longer. Our plan is to reduce this to a week, so cut it
by half the time.
Preparation is central to Infosyss ability to maintain a
strong and e cient working relationship with its auditors.
Mr. Balakrishnan explains, Our auditors do a continuous
audit, so we do not come across any major audit issues at the
end of the quarter. Any new contracts or accounting issues
are discussed up front with the auditors.
zo1o cvo vusIIsuIo IIc )uv zo1o 13
IDT has achieved similar results through simplica-
tion. Downsizing and streamlining our close processes
have improved our relationship with our auditors, says
Mr. Fischer, in the sense that now a smaller number of key
nance sta control more of the total closing process, and
thus, the people who are responsible for the closing process
have better knowledge and a better grasp of the information
they need to have productive discussions with the external
auditor. Also, the auditors can access all the information that
they need from fewer sources. It becomes an easier process
for the auditors to get the full picture from fewer people.
Ultimately, keeping in close contact with auditors and with
regulators is important for anticipating and responding
eectively to change. [Its critical to keep] updated with
the changes [to reporting requirements]knowing what
changes are being requested, and understanding them,
comments Mr. Pecchio. He says that AES Brazil keeps
abreast of ongoing changes in reporting requirements and
tries to anticipate the discussion with the regulatory authori-
ties before the end of the reporting period. At least we know
what criteria should be used [ahead of time], Mr. Pecchio
says, and we understand the implications of the change. As
soon as we are aware of the change, we will discuss it, and we
will dene what has to be changed in the accounting.
One such change that U.S. lers will have to address will be
the SECs requirement for all public companies to use the
interactive data format XBRL by June 2011. Inserting these
data tags into nancial reportsincluding footnoteswill
allow investors and analysts to download them more easily,
search for comparable data, and conduct more-robust
comparative analyses. Te largest companies are already
required to provide XBRL lings in the U.S., with remaining
companies being phased in this year and next according to
company size. Many companies have begun preparing for
this additional requirement, either internally by adding soft-
ware modules or by outsourcing tagging activities to nan-
cial services companies. In either case, nance, accounting,
and IT sta are likely to face additional demands on their
time to prepare and monitor the data-tagging exercise.
Finally, quality and speed of the close have an impact beyond
the statutory reporting, says Mr. Schneider. For the 2009
transaction that took Genentech private, for example, he
notes that Roches ability to announce high-quality nancial
results early was instrumental for issuing the required $45
billion of debt quickly and successfully. Of course, you can
also imagine the discussions we had with the rating agencies,
he says. It was an important point that we could demon-
strate that we really have a full understanding and full control
of what is going on with the cash ow side. Te systems put
in place for Roches Fast Close project were instrumental in
providing that assurance.
Improving the value of
management reporting
Companies are nding value-added benets from acceler-
ating the close cycle across the entire process and throughout
the enterprise. Beyond simply lowering costs and complying
with reporting and ling deadlines, interviewees stress the
value of knowing where we are. Mr. Schneider says, Te
rst and most important driver behind Roches Fast Close
project was really the need for management to know the
results within a short period of time, to be able to under-
stand important critical developments, and to be able to
act fast.
The CFO at a U.S. telecommunications
company notes, Our goal is to give our
business managers better control over
how their businesses are tracking.
By moving beyond the spreadsheet culture and integrating
close processes, companies are able to tie internal manage-
ment reporting more closely to external nancial reporting.
Integration of internal and external nancial reporting
provides better controls over a companys nancial processes.
Better control translates into better safeguarding of assets,
better compliance with regulatory requirements such as SOX
in the U.S., and a stronger ability to ensure the quality and
timeliness of management reporting. As Mr. Fischer of IDT
acknowledges, Te benets [of accelerating the monthly
close] are extremely valuable in providing business managers
with a more-timely understanding of their business perfor-
mance, thus allowing managers to react more quickly and
more proactively. Our goal is to give our business managers
better control over how their businesses are tracking, both in
terms of comparisons to agreed-upon or anticipated targets
and in terms of past performance.
When it comes to nancial reporting and the closing
process, he continues, we nd that our biggest challenge
isnt getting our GAAP nancials and SEC reporting in good
shape under tight deadlines; rather, its the ever-evolving
managerial reporting needs which are more di cult to
deliver when the organization is complex.
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For example, in many companies cash ow is something
of an afterthought in the consolidation. But, as a result of
Roches reporting initiatives, notes Mr. Schneider, for us its
a fully integrated part of the closing. Now, we always have a
full understanding of the cash ows and their drivers at the
same time as the income statement.
Letting the nance sta focus more of its time on what it
does best in this way enhances the quality of the nance
function itself. Mr. Balakrishnan of Infosys says, We have
around 250 or 260 employees in nance, but we outsource
the routine transactions to our operations, so that nance
sta handles the strategic aspects of the nance function,
as well as the risk function and some of the legal and tax
functions. A high-quality workforce, which focuses more on
the high-end aspects and does not do traditional transaction
work, helps to build a good nance team that can last for a
long time.
A senior nance executive at a
European pharmaceutical rm
explains, One of the rationales for
the fast close was to free up resources
on the nance side...to shift it toward
more value-added activity.
While Mr. Freshwater anticipates that the automation of
existing manual processes and additional controls implicit
within the new systems will also result in some resource e -
ciencies for Catlins close, the primary benet is an improved
automated controls environment. He also believes that the
company will be able to free up more [nance] time in the
process, so that the balance between production, analysis,
and understanding the numbers shifts and we have more
time to really get into the numbers.
Mr. Fischer agrees, noting that, even with just partial imple-
mentation of IDTs integrated nancial system rollout, IDT
can more readily form a view of the entire pie, not just a slice
of the pie. Tis gives nance sta a faster and more accurate
understanding of nancial and operational performance. By
accelerating the close process, now we can devote more time
to analyzing the numbers and their implications, concludes
Mr. Fischer.
At Rossi Residencial, Mr. Audi notes that his companys
successful implementation of an ERP platform more than
10 years ago allowed Rossi to gain scale in the nance
department, enabling it to handle phenomenal growth in
the business without adding anyone to the nance team. By
leveraging automation to analyze variances in the close, the
nance sta can apply its expertise to provide the most value
to the company. Rather than having to do a full analysis of
all accounts, Mr. Audi says, we can cherry pick the type
of analysis to do. So its just one or two accounts that we are
analyzing out of more than 100.
Mr. Schneider makes a similar point in describing the benets
Roche is gaining from its Fast Close project. Before under-
taking the project, he notes, the companys closing activi-
ties took up much of the time of his nance people. One
of the rationales for the Fast Close, he explains, was to free
up resources on the nance side, not necessarily to reduce
headcount but to shift it toward more value-added activity.
In addition, the costs of the closing processes are clearly
lower than they were before, he says, to the point where the
initial investment in the technology has paid o relatively
quickly.
zo1o cvo vusIIsuIo IIc )uv zo1o 15
Managing change in
nancial close processes
Simply installing the technology is not enough; just as crit-
ical is changing the company culture and peoples mindsets
to work together and take ownership of nancial results.
Mr. Schneider comments on the investment in people that
underlies Roches successful adoption of the fast close: I
think the biggest challenge was on the people side. We had to
bring all these 200 companies to the point where they were
able to report, and they were on time. We did have compa-
nies that said, We will never be able to do that, and they had
all the reasons why it wasnt possiblethe organizations too
large and complex, we will have to make tradeos, we will
have poor quality, and so on.
Of course, we knew it was possible because we had compa-
nies already in the group that had done it and we had also
made visits to other companies outside of Roche, to see
what was possible, he continues. But we had to work to
change the mindset within our organization. We didnt just
say, Well, you have to do this, but it was a process of getting
involved with the people in these companies, and helping
them to overcome the issues and come up with solutions for
any problems on the quality side or on the process side. So
we didnt just leave the companies alonethe main point, I
would say, was the mindset change.
The CFO at an Indian software
multinational says about the
companys ability to improve its
closing efciency, You need to
build a high-quality team that is
focused and has the right mindset
to make this happen.
Investing in rigorous training was key to making the new
process work, according to Mr. Schneider. He says Roche has
developed industry-leading in-house training courses for
accounting and reporting. Tese are demanding courses,
notes Mr. Schneider, but they are very rewarding for the
employees attending them.
Rossi Residencial also found that implementing its ERP
system actually changed the culture of the company. [Te
vendor] obliges you to plan, so you have to input the data early
in the beginning of the cycle, in order to run the company. So
the entire cycle was organized, if you will, from the sale of the
unit to the construction to the cash ow. Everything is inside
the system, and its very easy to see on a real-time basis, for
example, the cost of a specic materiallets say, a brick in a
project in the middle of the forest.
Instilling these changes in mindset and in behaviors was no
simple task, Mr. Audi notes. Te key was training, training,
training, he says. In much the same way that Roche imple-
mented its Fast Close project, Rossi Residencial created a
kind of school inside the companya laboratory that is like
a company, with its own nance department and representa-
tivesto teach people and the new hires how to do the right
things. And then we followed up on their performance, shad-
owing them and staying closer to them in the early stages in
order for them to be able to gain velocity and acquire the
ability to report their numbers.
Being able to take full ownership of nancial data and perfor-
mance metrics across the enterprise is critical for allowing
nance to employ its expertise to the companys fullest advan-
tage. As a result of IDTs recent organizational downsizing,
which aected the nance function headcount as well, IDT
had to delegate more responsibility for nancial reporting
to fewer employees, giving the nance and accounting sta
more ownership of the data and of the processes to obtain
the data. Mr. Fischer has found that having fewer people
working on the close (as a result of downsizing) has actu-
ally improved the timeliness and accuracy of IDTs closing
processfewer ngers touching every bit of data and
introducing the potential for error and miscommunication.
In the end, it is the people who will make the system work
better, as well as the system that allows the people to
work better. In discussing Infosyss closing e ciency, Mr.
Balakrishnan says, While technology, structure, etc., are
important, you also need to build a high-quality team that is
focused and has the right mindset to make this happen.

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Sponsors perspective
SAP provides a complete set of solutions to help companies speed closing times, meet external reporting deadline require-
ments, and reduce errorsall while cutting tangible costs. Tese solutions span the entire closing cycle, from the local to group
level, and include highly automated and standardized accruals, reconciliations, consolidations, and reporting.
For the local close, scheduling tools help you sequence, monitor, and control workows across your organization, so the entire
closing process progresses e ciently. Solutions from SAP include:
SAP ERP Financials
SAP Financial Closing cockpit
SAP Central Processing Scheduler by Redwood
For the group close, solutions help you simplify intercompany reconciliation, perform accurate and timely group consolida-
tions, integrate with source systems, report and analyze, streamline communication with XBRL Reporting, and help ensure
compliance. Solutions from SAP include:
SAP BusinessObjects Financial Consolidation
SAP BusinessObjects Planning and Consolidation
SAP BusinessObjects Intercompany
SAP BusinessObjects Financial Information Management
SAP BusinessObjects XBRL Publishing
SAP BusinessObjects Process Control
In addition, SAP oers starter kits that help you streamline the installation and exploit the full potential of these applica-
tions. Tese starter kits help you reduce software implementation times, maximize compliance, and comprehensively address
your companys business requirements with minimal cost and eort. Starter kits also provide precongured IFRS-compliant
content, which can help you speed and smooth the transition process to IFRS.
SAP software has already helped hundreds of customers around the world to accelerate their closing cycles. Like them, you can
use this softwarecombined with SAP training and consulting servicesto achieve the following benets:
Speed the closing cycle and reduce the cost of nance and compliance by automating and standardizing workows
Remove intercompany reconciliation from the critical path, improving both the speed and accuracy of the closing process
Maximize productivity, minimize compliance costs, and increase condence in the results through robust data
collection functionality with integration to source systems
Minimize closing workload and potential for errors by completing tasks before you start the closing cycle
Meet new compliance challenges such as IFRS and XBRL
If you would like to know more about how SAP solutions can accelerate your nancial close, visit our website at:
http://www.sap.com/solutions/executiveview/nance/accelerate-nancial-closes/index.epx
Accelerating the Financial Close: CFOs Insights into the
Benets of a High-Quality Close is published by CFO
Publishing LLC, 51 Sleeper Street, Boston, MA 02210.
Please direct inquiries to Jane Coulter at 617-790-3211,
or [email protected].
SAP funded the research and publication of our
ndings. At CFO Research Services, David Owens
directed the research and wrote the report.
CFO Research Services is the sponsored research group
within CFO Publishing LLC, which produces CFO
magazine.
June 2010
Copyright 2010 CFO Publishing LLC, which is solely
responsible for its content. All rights reserved. No part
of this report may be reproduced, stored in a retrieval
system, or transmitted in any form, by any means,
without written permission.