Finance Transformation: A Financial Services Perspective

By Sanjay Balan, Financial Services Practice Director, Perficient

Traditionally, the corporate finance function has been one of consolidating financial information within the general ledger (GL), reconciling data and reporting to internal stakeholders and external entities. This has always been a fairly complex process within the financial services industry, and companies have spent anywhere from 10 days to 30 days closing the books on a month-end or a quarter-end. Streamlining operational processes, amplified needs for analytical information and increased regulations (yes, that ‘R’ word) are the primary business drivers for finance transformation programs. Following the 2008 financial crisis, regulations have made the universe of finance functions larger, more complex, and vastly more critical to the proper functioning of a bank, brokerage house, asset manager or a global entity that encompasses all of the above.

Pre-General Ledger, General Ledger, Post-General Ledger

Expanded Responsibilities

The purview of a corporate finance department now extends long before GL processing (pre-GL) and ends long after it is reconciled (post-GL). Additionally, the overall process within the finance group tends to be far less linear and more intertwined as it progresses through various stages.

Depending on the asset classes that a firm is involved with, and depending on whether it is a bank, brokerage house or an asset manager, the pre-GL transaction systems (trading systems, loan processing systems, etc.) may have several hundred transaction types that need to be classified for accounting purposes (business events need to be converted to accounting entries). More firms are trying to create a global accounting policy with a defined set of accounting rules to enhance financial controls and to conform to International Financial Reporting Standards (IFRS) regulations that require an explanation of accounting method and the choice of accounting policy. This is typically achieved by using a centralized accounting rules engine (ARE). However, the shift to a global accounting policy is typically hampered by several legacy issues that include:

  • Current back office clearance and settlement systems have accounting rules embedded within them with limited transparency
  • Some systems are fully integrated from front to back offices, accounting rules and GLs that provide very little documentation on the exact accounting rule
  • Accounting rules are created multiple times for the same transaction type globally
  • Rules may be hard-coded into programs and spreadsheets that directly feed the global GL

Getting Things in Order

The move by various financial institutions to a global GL increases the need to have a clearly defined chart of accounts (COA) with specific global and local segments. The COA must be consistent across all the various GLs and sub-ledgers, and it should have clearly defined controls for maintenance. If there is a business or system need to maintain multiple COAs within legacy processes and systems, a translation to the global COA must be well-defined and maintained. This is critical to ensure that manual reconciliations and adjustments are limited during the financial close.

The increased regulatory landscape in financial services has required various reports (FR Y-9C, Call Report, FOCUS, CCAR Y-14s, 10K, 10Q, etc.) to be created and published on a periodic basis to regulatory agencies (Fed, FINRA, SEC, CFTC, etc.). Management reporting, including controller dashboards and financial analytics, increases the need to have a single source of information for all data consumption needs. More firms are investing in a financial data warehouse that exists post-GL. This acts as a centralized repository for information, including financial reference data (COA), GL data, transactional data, risk management data, accounting rules, aggregate financial marts and reporting templates/meta data. A fully functional financial data warehouse will ensure a consolidated information hub that can provide traceability from a trade in a front office system to its corresponding accounting rule to a specific journal entry within the GL.

Realizing Financial Success

In conclusion, finance transformation within the financial services industry is exactly what the term suggests – a full-fledged transformation to a new, more streamlined, more data-driven and more regulated environment. A program to achieve this transformation is an enterprise-wide initiative that touches all departments within a corporation. It requires a systematic plan that understands the current state of people, processes and technology and provides a defined sequence of events to get to a global general ledger, global accounting rules engine and a consolidated financial data warehouse to ensure accurate financial, regulatory and management reporting.

For more information on the topic, download an on-demand recording discussing the strategic vision and components of finance transformation that will help your enterprise to identify gains in operational efficiency, improve forecasting and reporting, reduce risk, and optimize the strategic functions of the corporate finance organization.

Sanjay Balan, Financial Services Practice Director, Perficient, 917-445-0437

Sanjay Balan has more than 20 years of experience in the financial services industry advising a large cross-section of clients across capital markets, banking, asset and wealth management. He is a director in Perficient’s Financial Services practice and the industry partner for the finance transformation competency that provides consulting services covering the full lifecycle of the accounting process that includes the transactional systems, sub-ledger accounting, reconciliations, consolidations and the entire financial reporting landscape (management and regulatory).

About Perficient

Perficient is a leading management and technology consulting firm specializing in creating client value through solutions focused on the key drivers of global finance – revenue growth opportunities, new operating models, operational efficiency, compliance and cost control.


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