Unifying Operational Accounting and Compliance Accounting in the Office of the CFO

The role of enterprise level CFOs has changed radically over the past decade with both a widening scope of influence and greater responsibilities for helping guide corporate transformation programs and technology choices. Instead of the historic backward-looking role focused primarily on gathering and reporting data, the Office of the CFO is now much more involved in proactively analyzing trends and formulating forward-looking strategies to drive future company results. 

Sweeping changes in the enterprise technology landscape have also been a key driver in expanding the role of CFOs. For example, trends toward digital transformation, artificial intelligence, predictive accounting, sustainability, remote workforces, and new compliance regulations have thrust CFOs to the forefront as key advisors to help CEOs and Boards of Directors to understand the proliferation of choices and to make the right decisions on where and how to invest in technology.

According to McKinsey & Co, "CFOs shouldn’t just go digital because they’ve heard it’s the right thing to do. Instead, the most efficient CFOs take a sharp, critical look at the costs and benefits of digital use cases. Instead of making decisions based on what digital tools or systems are available, they should look specifically at what their organization or function will need in the short and long term, and then examine the costs and benefits of adopting digital technologies to serve those needs."

However, amidst the ever-expanding role of the Office of the CFO, accounting still is a major responsibility and this arena also is radically changing with the availability of new tools, technologies and challenges.

Operational Accounting vs Compliance Accounting

One useful way to sort out the accounting landscape is to consider the differences between "operational" and "compliance" accounting responsibilities.

• Operational Accounting is concerned primarily with the processes for areas like sales, revenue, treasury, cash flow, margins, KPIs,  etc.  For example, the shift toward subscription-based, recuring revenue offerings in the Digital Solutions Economy (DSE) is requiring significant process changes in order to unify billing, invoicing, delivery, collections, etc.
• Compliance Accounting is more focused on areas such as revenue recognition, closing processes, disclosure reporting, ESG compliance, etc. Similarly, the changes in strategic focus that impact operations also require changes in compliance accounting, such as the need for more advanced revenue recognition systems to properly account for and report on complex bundles of subscriptions combined with products or services.

Integrated Technologies for Unifying Operational and Compliance Accounting

Over nearly three decades as a leading SAP partner, Bramasol has focused specifically on delivering solutions for the Office of the CFO that both optimize specific areas and provide smooth integration between operational accounting and compliance accounting processes. This has involved  close co-innovation with SAP product teams and targeted collaboration with other partners with complementary capabilities. The following sections provide brief overviews of several examples.

• Quote-to-Cash (QTC): With the rise of subscription-based DSE offerings, adaptable QTC processes have become a critical element for success. The portfolio of applications formerly called Billing and Revenue Innovation Management (BRIM) provides a powerful set of applications that can be used as a whole or individually. These include Configure Price Quote (CPQ), Subscription Order Management (SOM), Subscription Billing,  Convergent Invoicing, Entitlement Management and more.  Combining pre-integrated applications from within the QTC/BRIM portfolio enables quick integration with legacy systems and/or other SAP applications to optimize subscriber self-management of their billing, service-tier levels, bundling of services, etc. These capabilities address key operational accounting issues as companies transform their business offerings.
  
  
• Revenue Recognition: SAP and Bramasol have closely partnered on delivering advanced RevRec solutions, including SAP Revenue Accounting and Reporting (RAR) over the past ten years - first in response to new ASC 606 and IFRS 15 regulatory mandates and then as an ongoing evolution to Automated Revenue Accounting and with an anticipated path forward to Universal Revenue Recognition. We have pioneered solutions for integrating cost accounting using RAR's Event Based RevRec (EBRR) in the SAP Public Cloud and have created RevRec Ready Rapid Compliance solutions to streamline disclosure reporting. These types of integrations smoothly unify operational accounting and compliance accounting functions across a wide range of scenarios.
  
  
• Lease Accounting: The Bramasol team has deployed SAP solutions such as Contract Lease Management (CLM) to optimize both operational and compliance accounting processes across diverse application requirements, including equipment leases, real estate leases and even bundling subscriptions with leased equipment. This has enabled clients to smoothly comply with ASC 842 and IFRS 16. We also work closely with SAP partner Planon to mesh their industry-leading real estate and facilities management capabilities with SAP solutions to unify operational accounting and compliance accounting.
  
  
• Treasury Management: Treasury is one of the most important aspects within the Office of the CFO and is a critical factor for success in every company. However, treasury functions are not always unified and integrated. With a long history of addressing companies' treasury management requirements, the Bramasol team can provide fully integrated SAP Cash Management and/or Treasury and Risk Management Solutions, either together or separately.  This helps CFOs and their staff achieve a broader and deeper level of end-to-end visibility into all areas that impact the organization’s financial health and provides a key element underlying operational and compliance accounting.
  
  
• .Optimized Closing Processes: This is a key area where the unification of both operational and compliance accounting plays a critical role for achieving timely and accurate closing to support quarterly and annual reporting requirements.  As too many CFOs have learned the hard way, trying to close the books without accurate data from underlying operations, or resorting to offline manual spreadsheets for reconciliation is a recipe for major problems. In every implementation project, the Bramasol team considers impacts on the closing process as a key criteria when designing and deploying operational accounting applications.  In addition, we have implemented parallel accounting processes for global companies with multiple reporting requirements. We also work with experts such as Blackline to assure that our SAP solutions mesh smoothly with overall company closing processes.
  
  
• Financial Planning and Analysis (FP&A): In addition to capturing and reporting what has happened, CFOs and their staff also need tools for looking ahead to assure improved success in the future. That's where FP&A plays a key role. Gartner defines FP&A as "a set of four activities that support an organization's financial health: 1) planning and budgeting, 2) integrated financial planning, 3) management and performance reporting, and 4) forecasting and modeling." Within the SAP ecosystem, SAP Analytics Cloud (SAC) has become an important unifying capability for pulling together disparate information from both SAP and non-SAP applications, giving users the ability to analyze, plan, predict and report all in one place. FP&A can be thought of as a key tool for keeping operational accounting and compliance accounting aligned together in the future.

Summary