A few years ago, disclosure management was the latest and greatest in corporate performance management software....
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Now that most CPM software comes with disclosure management as a standard feature, the newest set of tools to emerge is designed to address "last-mile-of-finance" functions, according to one expert.
These functions, which encompass additional close, reconciliation and disclosure management tools, can shorten the external disclosure process, among other benefits, said Christopher Iervolino, research director at Gartner Inc., which is based in Stamford, Conn.
"In the past, vendors started to come out with close process management functionality, and on the heels of that came disclosure management," Iervolino said. "Now, customers that are using traditional CPM tools feel that they have gleaned as much efficiency as they possibly can at this point. They've gone as far as they can with shortening their internal close, but they still have a long process of disclosing the numbers externally."
While these enhanced functions are currently offered primarily by small specialty vendors, Iervolino said he thinks it won't be that way for long. Corporate performance management (CPM) heavyweights are aware of customer interest in these functions and are working on incorporating them into their products, he said.
Last-mile-of-finance tools extend CPM benefits
Last-mile-of-finance functions lie on the fringe of traditional CPM software, according to Iervolino. They extend and improve upon features currently included in close management, further refining and optimizing the financial close process.
In the Gartner research paper CPM Applications Are Evolving to Meet Changing Business Needs, Iervolino defines the last-mile-of-finance functions to include improved financial close processes; reconciliation, disclosure, and intercompany transaction management; journal entry control; financial control testing and tax provisioning.
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"In the same way CPM solutions have added efficiency to the close process, these specialized solutions are becoming popular for the same reasons -- they compress processes and reduce cost," Iervolino said.
In addition to saving time and money, Iervolino elaborated that certain functions can provide other valuable advantages to address companies' specific needs. For instance, businesses that experience a long process between close of books and being able to produce published financials could benefit from enhanced disclosure management. For companies that have large numbers of journals that need to be created or managed, improved journal-entry functionality guarantees the submission and approval process is regulated, Iervolino said.
"Reconciliation management ensures that reconciliation across systems, locations and accounts variances happens in a controlled fashion," Iervolino explained. "A lot of CPM products handle reconciliation, but these specialty products are built past what exists in current suites in order to control that process further."
Compliance is a benefit of expanded financial statement process and control testing functions. In addition to being able to satisfy current reporting requirements like IFRS (international financial reporting standards), these functions can also help companies to adapt to and comply with other standards that may arise in the future, Iervolino said.
Last-mile-of-finance functions can also help minimize financial restatement risk, according to Iervolino. "Risk is difficult to quantify, but very detrimental. Being able to control more is attractive."
Major CPM vendors plan to include last-mile-of-finance functions
Because these optimized functions are not currently included in offerings from major vendors, companies are choosing software from specialty vendors to supplement their CPM software or to solve specific problems. In the report, Iervolino named BlackLine, Rivet Software and WebFilings as specialty vendors that have experienced growth surges from increased interest in their tools.
As for the CPM market leaders, Iervolino said the major vendors, such as IBM, SAP and Oracle, are working to build last-mile-of-finance functions into their products. He said he thinks some major vendors may be interested in acquiring the specialty vendors, although there have been no acquisitions yet. "Some of the larger vendors aren't there yet as far as last-mile-of-finance functions, so specialized vendors have an opportunity for merger and acquisition," he said.
Iervolino pointed to the relationship between SAP and BlackLine as an indicator of the current state of the CPM market with regard to last mile of finance. SAP recommends BlackLine, a specialty Software as a Service (SaaS) vendor, for last-mile-of finance functions, but has not yet acquired the company.
Iervolino recommended companies add last-mile-of-finance functions to the list of features to evaluate when choosing CPM software. "CPM purchases should be strategic and complement other aspects of overall performance management and business intelligence (BI) frameworks; however, point solutions that support last-mile-of-finance activities should also be considered, either as part of a CPM suite or as an entry point to address specific CPM pain points," he wrote in the report.