More Finance Automation from Oracle
April 09, 2010

Oracle’s has announced latest release of its “Enterprise Performance Management” (EPM) suite version 11.1.2 features the addition of software to automate the processes that extend from closing the books to filing public financial statements as well as a dedicated public sector/higher education planning capability and some general enhancements. Of the three, I think the first is the most important since it addresses the need to make the process of assembling financial filings faster and more efficient. While I believe public (in the US sense) companies should have done this years ago, I expect the Securities and Exchange Commission’s (SEC) XBRL reporting mandate will challenge the ability of finance departments to complete this work in a timely fashion because of the extensive tagging that will be involved. Companies required to file financial statements with regulators like the SEC need a way of automating the close-to-report cycle (Oracle refers to it as “the extended close” while other vendors use the ominous sounding “last mile” description.)

I reviewed a pre-release version of Oracle Hyperion Financial Close Management last fall. The application competes against a similar one offered by Clarity Systems and SAP Business Objects will have one available shortly. XBRL tagging is handled by Oracle Hyperion Disclosure Management, which uses UBMatrix’s tagging engine. I think companies ought to control their financial statement tagging and products such as Disclosure Management offers a way to eliminate unnecessary repetitive work that manual tagging approaches entail. Centralizing all XBRL tagging of external documents at the headquarters finance department level is the best approach because it promotes consistency and reduces risk of errors, in my opinion. Both of these applications that were announced are available as part of the Oracle EPM System Release 11.1.2.

It was also announced that the EPM suite also adds planning for organizations that use funds-based accounting such as the public sector and higher education establishments. Corporate planning is based on a common pot of money being available to finance outlays. However, governments and colleges allocate specific amounts to specific purposes so those running an initiative, program or department can only spend (and commit to spend) the budget authority for that item. Thus in planning – and more importantly in reviews – knowing how much spending authority remains is important. While it has always been possible to configure planning applications to do this, building in the capability reduces the cost and time to value for companies that operate in a funds-based accounting system.

There also are additional enhancements to the basic Oracle Hyperion Planning application, including further refinements of workflow automation. I expect that profitability management will be increasingly important in this business cycle. This latest release provides enhancements such as complex allocations to deal with the challenge of ensuring that economic costs are properly reflected in product and customer profitability calculations.

US public companies will need to confront the challenge of intensifying reporting requirements under the SEC’s “Interactive Data” (i.e., XBRL) mandate. By automating their close-to-report processes not only will they will be able to meet these requirements, I think overall they will find the time spent on these functions will not increase and may even decline. These announcements are focused on the office of finance in what I call the essential priorities for finance departments in 2010 and I hope that Oracle can extend further into the enterprise needs for performance management outside of finance.

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Robert D. Kugel CFA - SVP Research


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