In this post, we go into more depth to explore the time periods in a financial year when a software project can be progressed. We illustrate this with an infographic to bring some focus and urgency to the task in hand.
We additionally illustrate the risk options open to Finance managers and provide our insight, based on extensive customer input, as a guide to the best practise journey to ensure ESMA compliance.
The diagram is a snapshot timeline of the FY20/FY21 financial calendar.
It is for you to identify where your company is on this timescale and plan the risk level and timetable you are comfortable with.
The key take away to consider is the time available to scope, implement and test new software along with the development and introduction of new processes. Project delivery time frames are limited for the Financial teams due to regular commitments that exist within the financial year.
As my previous blog refers, a software project will often take many months to work through with dedicated resources and a team. Working with a specialist vendor such as Certent can greatly reduce the timescale, however, time needs to be allowed for testing during quiet periods in the finance calendar, before the system is used for live reporting.
We will talk through the various risk options which might be adopted as the Finance leader and illustrate with an example of a large PLC which has already opted for the best practise approach, with a very successful outcome.
For best practise, we recommend one-quarter of test running software and processes against last year's audited accounts.
The reasons behind this recommendation are brief but compelling:
- There will be no change to the numbers.
- No deadline pressure for accounts to be published.
- If the software allows reports to be rolled-forward to subsequent accounting periods, a fully tagged report with data will be ready for the first live reporting period.
- Although the software chosen should be easy to use and Office centric, users gain confidence and are able to test workflow.
The key consideration when planning your ESMA project is the minimisation of risk. There is no benefit from testing new software and processes with a reporting deadline looming. Our infographic timescale illustrates two risk options
- Medium risk
- High risk
Medium risk option
The ESMA compliance project starts in Q2 FY20
Q2 is used to plan the project, determine requirements, select vendor, negotiate and agree install date (software vendors will have widely differing install lead times)
The company has the opportunity to test software and processes across the end of Q3 and Q4, in preparation for the reporting period of Q1 2021.
This option provides comfort as the new software and processes are tested well in advance of the pressure of the reporting deadline.
In this scenario, the ESMA compliance journey is not started until Q4 2020. This option provides a huge challenge to the Finance team as the whole process is compressed into just one quarter with no opportunity to test the processes on last year’s audited accounts.
The implication is that the new processes and software are only tested during the high-pressure Q1 period with the reporting deadline looming at the end of the quarter.
If this option is chosen, it is highly unlikely that the account filing will be compliant by Q1 FY2021.
Just one quarter can be allocated for the entire process including installation and testing.
We strongly recommend that this is not considered a realistic option to achieve compliance. In fact, the advice from ESMA themselves is to Do It Now!
We have worked with a large PLC who are risk-averse and driven by best practice.
The customer started their ESMA journey in June 2019 to ensure full confidence with the statutory filing. The company’s filing requirement will be Q1 2021.
By September 2019, the project had been implemented, software installed with initial testing completed against last year’s audited accounts.
Several issues were identified which will be resolved and tested again during the Phase 2 testing period to be held later in the year.
The Financial team was extremely pleased with the outcome and are confident that the next phase of testing will resolve the outstanding issues.
For more insight into the ESMA solutions offered by Certent, take a look at our ESMA insight page