Fast close financial reporting – insights from Novartis
Interview with Paul Penepent, by Kristin Köhler, Reporting Times
Novartis is the first Swiss company to publish its full financial and annual report – and keeps up the momentum by maintaining the fast close in all other internal and external financial reporting. In an exclusive interview with the Reporting Times Paul Penepent, Head of Group Financial Reporting and Accounting, Novartis, describes the numerous challenges and benefits.
Congratulations on your reporting process. When did Novartis transform its reporting process and why did you decide on the fast close?
We have been doing the fast close for the past 15 years. It was implemented under the leadership of my predecessor, Malcolm Cheetham. It required at the time an innovative approach to drive the standardisation and automation required in all the steps in our financial report publication process, given our then fragmented systems landscape. Novartis is committed to pioneering – not only in our core business, but also in our financial processes. It is not only a one-time decision, but a journey over time and we have set ourselves the ambitious goal of further streamlining and automating our financial reporting process to ensure we can continue to deliver high quality, timely and relevant financial information to our stakeholders in internal management and external reporting.
Did the fast close deliver added value to Novartis?
Fast close made transparent where we needed to improve our processes. This led to a drive towards automation, streamlining and standardisation, which reduces the manual efforts of the closing, improves quality and allows finance associates to focus more on business performance, increasing value added to the business. In addition, the standardised closing process enables development moves for associates across the businesses, enhancing their careers, and shortens the time needed for the onboarding of associates to their new position. Those responsible for reporting have now become more versatile and have broader experiences and career opportunities.
Standardisation, efficiency gains and transparency – in your opinion, are there any other benefits from the fast close?
Fast close in external financial reporting necessitates a fast close for all management reporting. At Novartis all financial reports are sent to Management on the 5th working day of the month. This stipulation becomes the beacon for all those responsible for reporting to Management, so the fast close as a process innovation drives the entire reporting culture in our organisation. This naturally brings definite advantages to corporate and our divisional management. When Management has transparency in the development of the company at the beginning of the following month, it can switch gears into a forward-looking mode. This way Novartis has a real competitive advantage compared with internal monthly reporting available only at mid-month, or later. In terms of external annual reporting there is a clear advantage in facing the opportunities and challenges of the next fiscal year. Prior to the introduction of the fast close we were basically focusing on the preparation and presentation of the previous year’s annual report well into the next fiscal year. Fast close frees up resources and at the same time is in sync with the forward-looking financial and business analysis for the Company and Management at Novartis.
You just mentioned that the fast close frees up resources. But it certainly must have required a level of resources to implement the process and maintain continuous improvements. What are the main challenges when you have such an aspiration?
You definitely need the commitment of Senior Management, including Finance and IT. It requires a focus on the change management process as well. Starting with a strong tone and drive from the “top” that also provides the required financial and people resources to ensure there is a full engagement and commitment by all involved in closing process. The fast close at Novartis has also been driven bottom-up. In the beginning, we leveraged a common financial consolidation system and interfaced this into our various ERP systems, reducing the up-front cost of implementation. From there, we began a multi-year standardisation and harmonisation programme to align the transaction systems and processes across our businesses. This ongoing multi-year journey reduced the annual investment needed to deliver this process improvement. One of the main challenges was first to gain alignment and agree on the process, systems and master data blueprints. As it is a multi-year programme the change management process is essential. Despite all the challenges we feel there is no alternative to the fast close as it is an important process innovation to which we at Novartis are fully committed.
Paul joined Novartis in September 2005 and his current position is Head of Group Financial Reporting and Accounting for the Novartis Group. Prior joining Novartis, Paul worked for Ciba Specialty Chemicals, joining as their Chief Accountant and later assumed the position of Head Business Support Center, Central and Eastern Europe, Middle East and Africa. He started his career at Arthur Andersen, where he worked for twelve years in their business and accounting advisory services, in both the US and Germany.