With the advancement of the construction of China's multi-level capital market system and the implementation of the registration system, more and more enterprises have the opportunity to enter the capital market to obtain richer development resources and broader development space. However, whether it is a listed company or a pre-IPO company on the road to IPO, continuous compliance operation and continuous improvement of operational efficiency and effectiveness are always two urgent and important issues facing managers. Both of these issues are complex systems and are affected by multiple factors, such as the former including the legal compliance of the business itself, internal control compliance, financial reporting compliance, and data complianceThe latter is not only affected by external factors such as market environment and industry policies, but also by internal factors such as management models, processes, and digitalization.
This article only explains how the financial department of an enterprise can achieve the construction of internal control and financial reporting compliance through the combination of "integration of business and finance" and "IT system" from a financial perspective, and promote the continuous improvement of enterprise growth and operational efficiency and effectiveness.
Difficulties and challenges in balancing compliance and efficiency
1. Difficulties and challenges in the construction of internal control and reporting compliance
Internal control and reporting compliance is the most basic requirement of social and regulatory agencies for listed companies or public companies, in order to protect the legitimate operation and internal governance norms of enterprises, prevent corporate risks and improper interests, and protect the interests of investors. Internal control compliance is mainly to follow various internal control guidelines, and reporting compliance is mainly to follow accounting standards. The former requires enterprises to formulate internal control systems and implement them effectively, while the latter requires standardized accounting methods for various businesses. The compliance operation of an enterprise consists of three stages: first, the identification of non-compliance matters;The second is to formulate a compliance plan and rectify it;The third is continuous compliance operation. Among them, formulating a compliance plan and rectifying it is the most challenging and difficult part, and the difficulties are:
Appropriateness of compliance standards and consensus with the business side
Internal control guidelines are usually principles and guiding norms, which stipulate which internal control systems and control points need to be established by the enterprise, but they are not limited in the length of the control process, the number of control nodes, the scope and scale of authorization, the parallel or serial approval of approvals, and online or offline, Therefore, how to grasp the scale and appropriateness of compliance standards, not formalize and excessive, not only meet the compliance requirements but also do not affect the efficiency of business activities, truly give full play to the risk prevention value of internal control, and balance the relationship between compliance requirements and process efficiency, is a task that requires both strong professional judgment and high management art.
At the same time, the implementation of the internal control system and accounting standards covers all business activities of the enterprise, which requires the cooperation and cooperation of the business side, so it is necessary to form an understanding and consensus on the compliance standards and the business side, realize the combination of rigid requirements and independent implementation, and avoid strong pressure, which has a great effect on the effectiveness and sustainability of the implementation of internal control.
Information support for the implementation of compliance plans
A compliance program is usually a combination of processes and working methods, and its implementation requires the establishment of institutional safeguardsSecond, it needs the strong support of IT systems. With the popularization of the concept of digital transformation of enterprises, IT systems have been widely used, and internal control is generally integrated into the process, and the process is embedded in the IT system and fixed. However, scenarios such as revenue recognition, contract asset recognition, project cost accounting and allocation, and R&D expense collection still lack the support of mature market-oriented IT systems. These scenarios seem to be financial transactions, but in fact, they are all based on the process of calculating the accounting data of each period based on the business system and then transmitting it to the accounting system to generate vouchers. In some industries, the computational complexity is very high, but the current CRM, ERP, or other systems basically do not have mature functions that can be used, and can only be solved by self-development or commissioned development, which has become an obstacle on the road to compliance.
Compliance rectification of historical business
The compliance rectification of historical business is a common problem encountered by IPO enterprises, and a large number of businesses need to be traced back during the reporting period, especially the audit and verification of the sales and collection cycle such as "contract-order-invoice-revenue-collection", which requires the inspection and verification of a large amount of data and files. For enterprises with weak standardized management and informatization, it is necessary to sign various internal control documents and records, and even need the assistance of external units such as customers and merchants, which is difficult to imagine. The reason why this situation is common is that few enterprises can take precautions, and all departments can form a consensus and make up their minds on the requirements of internal control and compliance, and the debts owed by weak management in the early stage will eventually be repaid.
2. Difficulties and challenges in the process of promoting the continuous improvement of operational efficiency of the financial department
With the development of the concept of financial value, the financial function has shifted from traditional accounting and supervision to strategic promotion, value integration and risk control, with the aim of promoting enterprises to continuously improve operation and management, reduce costs and increase efficiency, and improve operational efficiency, which is more important for listed companies and companies to be listed. However, in the current enterprise practice, most of the value transformation of the financial department is still in the exploratory stage, which is affected by multiple factors such as professional ability, influence, and corporate culture. Taking financial analysis as an example, the finance department usually outputs a large number of data and analysis reports to point out the problems existing in the enterprise, but many of these problems will not be solved quickly because of these analysis reports. On the one hand, the value of the financial department is self-appreciating;On the other hand, the business side thinks that finger-pointing and fist-embroidering legs.
Towards the integration of industry and finance: with BP as the path and IT system as the support
How to break through the above problems and challenges is a test for every financial manager. Whether it is to achieve internal control and reporting compliance or to promote the efficiency and effectiveness of enterprise operations, in addition to improving the professional ability of financial organizations, it is a very effective way to combine "business and finance integration" with "IT system".
First, the three levels of integration of industry and finance
Integration of business and finance
The integration of business and finance is the most basic integration of business and finance, that is, to realize the comprehensive integration and integration of business IT system and financial IT system in terms of process and data. In the early stage, the business integration was the connection between the purchase, sale and inventory system and the financial system, and the later stage gradually realized the connection between the production system, the human resources system, the office system and the financial system, which is also the basic concept and framework of ERP. Later, with the development and popularization of CRM, CRM has become a more professional digital platform for marketing, sales and service, and the integration with the financial system has further expanded the scope and depth of the integration of business and finance.
Whether it is ERP, CRM, SCM, OA or other professional information systems, internal control and process control are the basic design concepts, which can ensure the internal control requirements of the major business cycles of the enterprise.
Taking CRM as an example, the core of CRM solves the comprehensive digitization of the LTC (Leads to Cash) process, and realizes the process control and integration of each business link of "Lead-Business Opportunity-Contract-Order-Invoice-Collection", and the documents of each link are interdependent and traceable, and the integration with the accounting system can effectively ensure the integrity, existence, accuracy and traceability of accounting data, and can support **, contract, The electronic archiving of original documents such as invoices not only improves the quality of internal control and reporting compliance in the sales and collection cycle, but also provides a reliable basis for professional institutions to conduct internal control testing and audit verification.
However, with the stricter requirements for the implementation of internal control and accounting standards, the strengthening of enterprises' own refined management, and the emergence of new industries and new businesses, even the most mature ERP, CRM and other information systems on the market will have blind spots in management coverage.
Taking the revenue recognition mentioned above as an example, due to the implementation of the new revenue standard, it is necessary to further judge the recognition of revenue at a certain point in time or a certain period of time on the basis of identifying contracts and performance obligations, determining and apportioning transactions**, some industries need to recognize revenue according to the progress of project input, and some industries need to apportion and recognize revenue for advance receipts within the service cycle, which undoubtedly puts forward more complex requirements for the accounting of income, contract assets, contract liabilities, accounts receivable and other related businesses, relying entirely on electronic ** It is difficult to ensure the accuracy and trustworthiness of data by manual processing, and the intervention and support of information system are more needed, but there are almost no standard functions of various existing information systems to meet the requirements of these complex accounting, and most of them solve this kind of problem by entrusting development or self-development system, and the disadvantage is that once the business changes or adjusts, it needs to be developed again, and the flexibility and scalability are not good.
In response to these problems, large ERP and CRM vendors have launched PaaS development platforms, which can quickly develop personalized applications in a visual way, reduce the threshold for self-development, improve development efficiency, and can be closely integrated with their own ERP, CRM and other systems, which has become a key way to solve the blind spot of internal control and reporting compliance informatization.
Operationalization of finance
Business Financial Value Target >
On the basis of rich professional knowledge, the financial department understands the industry and business to which it belongs, identifies business risks and abnormalities through professional analysis and judgment of business activities, promotes the improvement of operation and management, and improves operational efficiency and effectiveness. However, as mentioned earlier, most enterprises are in the stage of exploration and construction, and the outstanding problems are still manifested in the identification and suggestion level of the financial side, that is, problems can be found and suggestions, but it is very difficult to truly correct and improve the problems. The core reason is the lack of "financial promotion", which is related to the concept of financial work, many financial workers will position the work boundary of business finance to provide data, find problems and provide suggestions, and believe that problem solving is the responsibility of business managers.
But in reality, the goals and boundaries of business finance should not stop at providing data, identifying problems and making recommendations, but promote the real solution of business problems. Indeed, the solution of business problems depends on the cognition, consensus and action of the business side, and promoting the business side to form an understanding, consensus and action on the business side is precisely the higher realm and ultimate goal of business finance, which requires the financial department to complete the key link of "financial driving force". Based on this, we take a fresh look at business finances and further analyze the financial drivers. As shown in the figure below:
Financial Analysis System Framework >
We take a typical financial analysis as an example, the starting point of financial analysis is data, but the output of financial analysis reports, finding problems and putting forward management suggestions is not the end of financial analysis, the real end point is to promote the implementation of financial propositions and management suggestions, and truly promote the achievement of business objectives and the improvement of operational efficiency and effectiveness. From data to value realization, it has gone through five levels: process layer, monitoring layer, insight layer, promotion layer, and target layer. The real difficulty and value force lies in the driving layer, that is, after the financial department discovers problems and puts forward views or management propositions through professional analysis and insight, it is necessary to further promote the business side to be aware of these problems through the "financial driving force", and promote the consensus goal, promote the formulation of measures, promote the implementation of measures, and continuously follow up the improvement effect. Only through this series of processes can we truly give full play to the true value of financial analysis and realize the substantive contribution from "talking on paper" to "battlefield victory".
Let's take a closer look at the all-important financial enablers, as shown in the figure below
When we identify and identify risks or anomalies through the monitoring layer, we usually need to go through the following processes:
1) Sync Info:If you find any business problems or anomalies that are discovered at the same time as the business side, you may find errors in your financial understanding or judgment in the process.
2) Cause for concern:Attract the attention or attention of the business side for related problems or anomalies.
3) Take your own actions:For problems that can be solved by taking measures on the financial side itself, the financial side takes timely actions to correct the problems.
4) Reach a management consensus:For problems that cannot be solved independently on the financial side, fully communicate with the business side to promote the business side to understand the problems and form a consensus on the management objectives.
5) Make management suggestions:Make management suggestions or management propositions to the business side on related issues.
6) Promote the establishment of a management mechanismDiscuss solutions with the business side on the management objectives or management suggestions after consensus, and promote the formation of a management mechanism.
7) Promote the follow-up of the effectTrack the implementation of the solution and continuously follow up on the implementation results.
8) Management Communication:For matters that cannot be agreed with the business side but are necessary, conduct higher-level communication and high-level decision-making.
In addition to having solid professional knowledge, financial personnel also need to have good communication and coordination skills and promotion capabilities, and even strong mental strength, the core of which is not to formulate simple and crude financial regulations, but to build with the full consensus of the business department, which is the most challenging part of business finance, but also the key link of business finance to play the real value.
By extension, the logic of many financial tasks such as comprehensive budgeting, cost management, project management, and receivables management is also the same, which includes five levels: process layer, monitoring layer, insight layer, promotion layer, and target layer, which constitute a new financial management system. However, no matter which field of financial management, it is the focus of the value of each financial management field to give full play to the financial driving force, implement the financial management suggestions and propositions, and give full play to the real value. As shown in the figure below:
Financialization of the business
Business financialization means that business managers should have certain financial knowledge and financial thinking, and achieve rational decision-making and scientific operation. This is the highest level of integration of industry and finance, and it is a two-way rush between the financial side and the business side on the road of scientific management.
Business managers, especially front-line business managers, usually have a strong marketing or technical background, rich marketing experience and market acumen, but due to professional background and business target pressure, in the daily business interaction, there are often certain challenges to achieve rational decision-making and scientific management. Based on this, allowing business managers to have certain financial knowledge and financial thinking can help business managers understand operation more comprehensively and rationally, gain insight into the essence and logic of management, and achieve rational decision-making and scientific management.
Kazuo Inamori has repeatedly mentioned the need for managers to be financially minded, and he has proposed:
A business operator must understand accounting, and if he cannot fully understand the meaning of the numbers on the dashboard, he cannot be said to be a real business operator. ”
If law is the language of politics, finance is the language of business. Only by understanding finance can you thoroughly understand the basic logic of many businesses. ”
Finance is like an X-ray of a perspective strategy, and managers and entrepreneurs who understand finance can see the development strategy and growth of a company from the financial statements. ”
Huawei's financial system and financial value are recognized as leading in both theory and practice, and have formed a very mature and effective concept and approach to the integration of business and finance. Ren Zhengfei once proposed that cadres at all levels should know each other, financial cadres should know some business, and business cadres should know financial management. Only by forming a concrete structure of the combat organization can we seize the opportunity point efficiently, timely and steadily, and achieve the goal of sound operation in the active offensive, so that the LTC and IFS implemented by the company can really play a role. This is on the basis of financial personnel to understand business, but also emphasizes that business personnel should understand finance, two-way running, only in this way can make up for the shortcomings of managers in different roles, better insight into the logic and shortcomings of enterprise management, and form a joint force and efficient co-construction, so that decision-making is more reasonable and operation is more scientific.
The core of business financialization is to equip business managers with certain financial knowledge and financial thinking, and financial thinking is an ideological activity that uses financial theory and knowledge to carry out scientific thinking. There are many financial thinking, and here are a few points that are highly relevant to business managers for your reference. As shown in the figure below
It should be noted that the core of business financialization is to let business managers have certain financial knowledge and financial thinking blessings, so that they can see the business phenomenon more comprehensively and rationally, make reasonable decisions and operate scientifically, rather than let business managers operate in full accordance with financial thinking, which will hinder the sensitivity, sense of opportunity and decisiveness of business managers, so it is very important to grasp the degree and discuss and make decisions collectively. In the same way, the same is true for financial business, financial personnel should have business awareness, service awareness, understand business, analysis and judgment, communication and coordination, and risk control are still the core, rather than unprincipled accommodation and follow business.
Business financialization is the highest level of business and finance integration, which is more conducive to the implementation and value play of business and finance integration. However, due to the differences in roles, local positions, and cognitive differences among managers, it is the most challenging to achieve, and it is more necessary to rely on an open and collaborative corporate culture. However, the concept guidance and unremitting knowledge sharing and empowerment of financial managers for business financialization are still effective strategies and paths. As shown in the figure below
Construction of financial BP system
The financial BP system is the key path for the integration of industry and finance, especially the implementation of the two dimensions of "financial business" and "business financialization".
The core of the financial BP system is to establish the financial BP organization, clarify the positioning and work objectives, formulate the work content, design the performance evaluation, and establish the working party. Among them, it is very important to clarify the positioning and goals of the financial BP organization, which is also the premise of the work content, performance evaluation, and work party, and it is also a top-level design that needs to be highly agreed with the business side, otherwise it will form an inconsistency between the financial requirements and business expectations in the financial BP work, resulting in an embarrassing situation of "twisting".
The positioning and work objectives of the BP organization are determined by the focus of business management, but in general, there are three aspects:
First,Helping bp's operating organisation achieve its business goals;
Second,Implement various financial management systems in the operating organization;
Third,Promote the improvement of the operating ability and efficiency of the operating organization. The following is the working framework of the author's company's annual financial BP system for your reference
Construction of IT systems
Through the above explanation, it is not difficult to see that the IT system plays a significant supporting role in the process of internal control and reporting compliance, and the integration of industry and finance, and even related to the feasibility of compliance and business integration. With the development of professional IT system design concepts such as ERP and CRM and IT technologies such as cloud computing, big data, and AI, IT systems are no longer tools for process execution and business informatization, but have evolved into a support for the implementation of management ideas and even strategies and business models.
Taking the accounts receivable management IT system as an example, the traditional accounts receivable management is only the accounting and aging analysis of accounts receivable, that is, a process-oriented and accounting-based system. The current accounts receivable system should be based on the process and receivables accounting, form an information platform for sales, operation and financial collaborative management, provide management interfaces and workbenches for each role, and support core scenarios such as overdue penetration, collection, classification promotion, and creditor's rights protection of accounts receivable, so that the system has the ability to operate and manage, not only covering data management, but also behavior management, so that the accounts receivable management system can be supported by the IT system and truly play the value of improving the efficiency of collection.
As shown in the figure below:
By extension, the new generation of IT system is not only a system for process and internal control execution and business data, but also should be guided by a systematic management mechanism, so that the IT system not only has the ability of process, internal control and data, but also supports the behavior management such as support, penetration and promotion, and becomes a workbench to support operation management and collaborative management, and even a platform to support the implementation of strategy and business model. As shown in the figure below:
Conclusion
With the support of the IT system, the establishment of an industry-finance integration system and the full play of financial professional insight and driving force are important ways to achieve the above goals and give full play to the professional value of enterprise development. This article is intended to provide some reference ideas for financial managers from relevant aspects, and it is inevitable that there will be deficiencies due to the limitation of the level, and the majority of peers are welcome to exchange and correct.
About the Author:Mr. Guo BaobinHe was previously employed in a traditional manufacturing company and Ruihua Certified Public Accountants, and joined Kingdee International (00268.) in 2015He has served as the chief financial officer of the provincial company and the East China region, and has rich experience and in-depth understanding of financial system construction, integration of industry and finance, and IT system construction. This article is excerpted from the latest special issue of Fanxiang Sales, "How Listed Companies Can Fight a Win-Win Battle for Compliance and Growth".
If you want to know more about the content, please pay attention to the blockbuster live broadcast "CFO x CIO Compliance x Growth: The "Looking Ahead" of Listed Enterprises' Digitalization at 15:00 on December 21 to see how Deloitte, Sohu and Fanxiang executives interpret the integration of business and finance.