Consolidated transparent information about the activities of the group of companies provides not only effective management, but also timely and correct reporting under IFRS
Renova Group is the leading Russian private business group consisting of managing companies, private equity and portfolio investment funds, which hold assets in the metallurgical, oil and gas, machine building, mining, construction, energy, telecommunications, nanotechnology, housing and utilities and financial sectors in Russia and abroad. Renova Group has established a certain scheme of corporate reporting, which ceased to meet the requirements of business and shareholders over time. The existing system was not based on a single integrated platform, due to which the reports were generated in each division separately, and a BI class product was used for consolidation. Due to the lack of a single platform and a single data source, reconciliation of intra-holding operations was extremely difficult, and the use of two platforms did not provide full control over the data. Preparation of the reporting package took at least a week, and if adjustments had to be made to the accounting of the consolidated companies, the process had to be repeated.
Realizing the need to improve the accuracy of consolidated reporting and its compliance with IFRS standards, and to ensure timely delivery, the company's management decided to implement a unified ERP-system. This system should also significantly reduce labor costs for the preparation of consolidated financial statements.
"Any company strives to maximize the quality of corporate governance. Shareholders set this task before the company management; and implementation of a unified ERP-system is a part of fulfillment of these requirements. It was necessary to automate the entire cycle of preparing reports: from collecting data on the managing companies to building reports in the system", - Renova Group Microsoft Dynamics Project Manager Sergei Babenchuk comments.
The company management was interested in implementing a solution that would combine both financial accounting and consolidation reporting functionality. This system would allow to promptly receive reports of any holding and company, as well as allow analysts to use methods of checking data displayed in reports with pinpoint accuracy (drill-down).
In addition, in the future, such a system should provide a reduction in time and labor costs for the preparation of consolidated reporting. The solution based on Microsoft Dynamics AX met all the initial requirements. The proposed architecture made it possible to track the history of changes in the holding, to control every accounting entry into the consolidated statements.
"We selected the vendor based on two main criteria," says Sergey Babenchuk. - "It had to be a company with a reputation as a reliable partner, and with expertise in the implementation of business processes according to IFRS standards and in the field of consolidation. Odyssey Consulting Group certainly met these requirements. We have chosen the provider based on two main criteria: it had to be a company with the reputation of a reliable partner and expertise in the field of implementation of business processes in accordance with IFRS and consolidation. In the course of the tender, Renova specialists held numerous consultations with company experts, on the basis of which the final terms of reference were formed: the requirements to the system were documented and the list of business processes was determined. The project team included experienced Dynamics AX financial management implementation specialists and consultants with knowledge of IFRS, confirmed by ACCA certificates. Renova assigned an employee responsible for coordinating the implementation process in the Consolidated Reporting Department and the Treasury Operations Department. Thus, the project team was provided with all the necessary competencies for successful implementation.
During the implementation, the methodology proposed by Odyssey Consulting Group was used. The first stage was to define detailed requirements to the processes and the system itself, then business processes and modifications were described and coordinated, then came the construction and testing phase and, finally, the stage of commercial operation and initial support of the implemented system. The project lasted 15 months, including the initial support phase, during which the first set of consolidated statements was received. The system was launched 10 months after implementation.
"Immediately after the introduction we kept accounting in the old and new systems in parallel, which allowed us to reduce the risks at the testing stage, but since the beginning of 2007, the reports were completely formed in Dynamics AX", - says Alexander Ilyin, manager of the consolidated reporting and auditing department of Renova Group.
As a result, the following processes have been automated:
- accounting for financial instruments;
- accounting for administrative and business expenses;
- accounting for fixed assets;
- accounting for loans issued and received;
- integration of financial and management accounting;
- preparation of a complete package of IFRS statements, both for a separate company and for the holding.
Thus, the reporting consolidation mechanism was fully automated.
The next task set by the shareholders to the project team and successfully completed by Odyssey Consulting Group was to fine-tune the holding's reporting processes according to IFRS in a short time. Then a project of quantitative securities accounting implementation was launched with detailed elaboration by the shares types followed by integration with the consolidation module, which allowed to generate the consolidated statements according to the prepared and audited data on the shares of ownership without any additional labor costs on keeping the holding structure in the system. ERP-automation shortened reporting preparation time, reduced legal risks in the part of transactional accounting, and generally increased the holding's effectiveness due to availability of on-line information necessary for making managerial decisions. Consolidated transparent information about the activities of the group of companies provides not only effective management, but also timely and correct reporting under IFRS.
The solution from Odyssey Consulting Group allowed the management of Renova Holding to reach a new level of understanding its business.
