Quick Manual for Building a Practical Performance Comparison Model Across Multiple Countries
Posted by Sjoerd-Jaap Westra
Complete, detailed and accurate financial statements are a non-negotiable requirement of doing business in the global economy. However, organizations with a worldwide presence run into a series of challenges when it comes to comparing performance across the company. Stakeholders expect comprehensive statements that both quantify the company's increase or decrease in value, as well as set expectations for long-term financial health and the potential for future appreciation in value. Gathering information on performance against comparable metrics across time zones and compiling it into a reasonably precise presentation is a complex and multifaceted task.
Issues With Performance Comparison Across Multiple Countries
First, gathering performance data that measures equivalent figures can be complicated. In many businesses, identifying similar performance measures presents an obstacle, as does pulling records together in a usable format. Often, this work is manual and time consuming, and the accuracy of entries is questionable.
Second, despite efforts to standardize international accounting methods, there is significant local variation. Recommendations for International Financial Reporting Standards (IFRS) have not been universally adopted, and where they have been adopted, they have not necessarily been interpreted consistently. Accurate performance comparison must take these differences into consideration, which requires in-depth knowledge of all relevant regulations -- a difficult task in today's constantly changing regulatory environment.
Third, records are often entered into simple spreadsheets or database software that lacks the capability of performing any true analysis. While skilled users can make straightforward comparisons of performance measures, deep dives into the information are next to impossible.
Finally, the traditional tools used for measuring performance across multiple countries do not offer features for presenting findings. Users must create their own visual representations of information if they wish to clearly communicate with stakeholders.
Tools for Performance Comparison Across Multiple Countries
Advances in technology now offer international organizations better tools for building reliable performance comparison solutions that work. Smart organizations choose platforms that offer full customization, taking into consideration unique needs based on company size, industry and locations.
According to a report by international audit, tax and advisory firm KPMG, Chief Financial Officers, Group Controllers and Financial Directors in search of streamlined solutions look for the following features in consolidation and reporting software:
- Functionality -- Platforms that communicate with financial management systems remove the need for duplication of effort and manual data entry. As finance professionals across the organization enter information related to their individual areas of responsibility, the best tools sort and process the figures according to local accounting regulations. Smart software has a procedure in place for mapping data from multiple sets of GAAPs to a common standard, and results are made available in a clear, consolidated format for use in strategic planning.
- Analysis, Modeling and Reporting -- Strategic planning requires deep analysis of financial data to determine where risks and opportunities can be found. In addition, the ability to accurately model a variety of scenarios is critical in determining which will be most effective. High-quality tools offer innovative solutions for both of these activities, simplifying the process of determining the company's future. Of course, presenting results is an important step in ensuring that figures and proposals are clearly understood. The best platforms have a variety of user-friendly reporting functions to choose from.
- Helpdesk and Support -- System users require strong technical support to ensure that problems are quickly and correctly addressed. Issues with retrieving performance information can have dire consequences for impacted organizations.
Ultimately, users are looking for tools that can be continuously upgraded as improvements are made in the speed and quality of consolidating data and producing effective reporting. Performance measurement platforms must be flexible and adaptable to ensure they keep up with internal changes in business strategies, as well as external changes in the regulatory environment. Without these features, organizations are at a disadvantage in making informed strategic decisions. Building a practical performance comparison model across multiple countries begins with the adoption of world-class performance measurement tools.
Building a Practical Performance Comparison Model Across Multiple Countries
After selecting an appropriate tool that meets company-specific needs for functionality, analysis, modeling and reporting, the next step is customizing the platform to ensure measurement of the performance metrics critical to the organization. Standardizing performance metrics comes with its own set of challenges.
The IFRS offer an excellent foundation from which to develop a comprehensive set of company-wide performance metrics. However, deep data analysis requires more detailed information. Consider the core functions of the business, and add metrics specific to measuring operational performance against expectations in these areas.
Move on to defining intangible assets and liabilities and setting consistent practices in place for reporting their values across the company. Finally, consider less common performance metrics that offer new perspectives on company performance. For example, some organizations are considering earnings per employee to better understand which areas of the organization have highest-value talent.
While all companies experience challenges in comparing performance across sites, international organizations run into special challenges. In fact, until recently, many experts said accurate performance comparison across multiple countries was simply not possible. Today, thanks to advances in technology, building a comprehensive performance comparison model is possible, giving business leaders more insight into company performance than ever before.