• Technology
  • CFO IT

Virtual Close: Not So Fast

Companies once assumed they'd be able to close their books in a day, but that goal has proved surprisingly elusive.

Some companies believe they can deliver real-time closes eventually, but the majority concede that for now, they need to address such nitty-gritty issues as systems standardization and integration. Best-in-class companies such as Cisco offer some object lessons. First, all make sure their processes and procedures are consistent and reliable by, for example, introducing a single chart of accounts for their entire organization. Second, they have standard, companywide data warehousing or similar technology, and have automated most — if not all — of their processes. More often than not, that means they’ve installed Web-based applications or interfaces to connect consolidation tools and local companies’ general-ledger systems. Finally, fast-close projects at best-in-class companies are a work in progress, requiring continuous vigilance and rejuvenation.

Drilling Down

One new champion of the fast close is Germany’s Veba Oel. The $26 billion oil and petrol-retail company recently took 18 months to complete a fast-close project, “and we’re still learning,” says Bärbel Klatt-Seipelt, who began leading the project in 2000.

The learning curve has, in fact, been steep. Before the project began, fast closes at Veba Oel “were in many respects a mess,” says CFO Thomas Hetmann. A big part of the problem was that few processes were standardized across the company, which comprised three businesses for marketing and distribution, refining, and upstream production, with about 100 subgroups filing reports to them. The upshot: Hetmann’s team in Gelsenkirchen faced the monthly chore of chasing late reports, manually keying in missing data, and addressing discrepancies between the various units’ reports in order to close its books.

Needless to say, fast closes were unthinkable. “It was so frustrating for staff to deal with all our inefficiencies that they had pretty much given up trying to be fast,” says Hetmann. But pressure to be faster was mounting — E.On, Veba Oel’s parent at the time, needed to begin moving toward quarterly reporting to meet stock-exchange regulations in Frankfurt.

So Klatt-Seipelt got to work, rooting out the “information bottlenecks” at the local level while also holding workshops with unit heads, accountants, controllers, and auditors to discuss how books were closed “product by product, process by process.” From there, the final pieces were put in place: new consolidation software for the entire group was rolled out and the company’s first-ever standardized, groupwide chart of accounts was introduced. Fast closes today are a “nonevent,” says Klatt-Seipelt, who adds that group-level intercompany reconciliation now takes less than a day a month compared with four days before the project began.

Hetmann is equally pleased with the results. “We now have a much better view of the capital being used and the performance of the business at each level,” he says. All this has certainly made life for his team in Gelsenkirchen a lot easier for at least one major reason — shortly after the fast-close project was completed in February 2002, E.On sold Veba Oel to BP of the United Kingdom, where the demands for fast consolidation and reporting are even greater. “I’m convinced that a big reason why Veba Oel was an attractive acquisition for BP was because we had completed projects like the fast close,” says Hetmann. “And even though we’re being reorganized under BP, the exercise certainly wasn’t in vain. Staff have now seen for themselves how finance and accounting can be reorganized to become more efficient.”


Your email address will not be published. Required fields are marked *