A review of new software products that can make a big difference to your business Technology for Sarbanes-Oxley* By Michael Burns *This is an expanded version of a column that appeared in the December 2003 print edition of CAmagazine. Every problem for someone is an opportunity for another. Y2K seemed like a huge problem and Enterprise Resource Planning (ERP) vendors such as SAP and PeopleSoft cashed in. Their smarter customers also took the Y2K problem and turned it into an opportunity to improve their business processes. We are seeing history once again repeating itself with Sarbanes-Oxley (SOX). As you will read in this month's magazine, CEO's and CFO's are threatened with civil and criminal penalties. This time it's the vendors of Business Performance Management (BPM) systems that have the technology solution and stand to gain from Sarbanes-Oxley. As well, the smarter BPM customers will use SOX as a way to improve their processes related to BPM. According to Hyperion (http://www.hyperion.com), BPM is a category of software that enables companies to translate strategies into plans, monitor execution, and provide insight to manage and improve financial and operational performance. Hyperion's BPM Suite delivers performance score-carding, modeling, budgeting, planning and forecasting, consolidation and reporting, and business intelligence applications. More than 6,000 customers worldwide use Hyperion's BPM system, including 220 companies of the Fortune 500 using the financial consolidation and reporting modules. Headquartered in Sunnyvale, California, Hyperion generated annual revenues of $510 million in fiscal 2003 and employs more than 2,200 people. Hyperion is targeted to companies with revenues typically greater than $100 million. It will probably cost between $200K and $1M to implement Hyperion and it should take between 3-6 months. Hyperion's consolidation processor will appeal to companies with multiple ERP systems - 99% of Hyperion's clients have multiple ERP systems. SOX The CEO and CFO of publicly traded US companies must prepare a certification statement to accompany the audit report. The certification must state that the financial statements and disclosures fairly present, in all material respects, the operations and financial condition of the issuer. The law requires each annual report of an issuer to contain an "internal control report," affirming the responsibility of management for establishing and maintaining an adequate internal control structure and procedures for financial reporting. The report must contain an assessment of the effectiveness of the internal control structure and procedures. Hyperion does provide controls over completeness, accuracy and integrity. First, Hyperion is fully compliant with US GAAP, Canadian GAAP, and International Accounting Standards. Hyperion is integrated with the leading ERP systems and includes validation controls in the extraction of data from source systems. Invalid accounts and uncleared intercompany accounts are identified. The Hyperion system prevents additional processing until these errors are cleared. The consolidation process automates intercompany eliminations as well as the most complicated ownership structures. There is no need to use spreadsheets that can introduce errors that go undetected. The consolidation process will detect variances that indicate potential problems. Users are able to add comments to explain variances that are in turn visible to management. The consolidation process also includes a work flow system so that balances are certified before the consolidation process can proceed to the next level. Management can easily see the status of all the consolidation processes involved to ensure that the all processing is completed on a timely basis. (SOX has also reduced the time to file quarterly statement by 10 days.) There is an audit trail with date/time stamp for all processes that led to the consolidated financial statements. Hyperion is a web based system, which allows for access and update anywhere and anytime leading to a reduction in time to close a fiscal period. Bottom line Although Hyperion can't help eliminate internal control weaknesses in the source systems, Hyperion can make a big difference in detecting and preventing control weaknesses once the consolidation process begins. However, the real benefit to Hyperion is not in compliance but in improving financial and operational business processes so that the right information is in the right hands when it's needed to make the right decisions. Michael Burns, MBA, CA, is President of 180 Systems (http://www.180systems.com), which provides independent consulting advice in the selection and implementation of business systems. Michael can be reached at 416-963-1296 or by email at mburns@180systems.com