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New Accounting Rules Affect $3 Trillion In Leases

Alicia Rudolph

If you haven’t been paying attention to complying with IFRS 16 and FASB ASC 842, there really is no time to delay.

In early 2016, the Financial Accounting Standards Board (FASB) and the International Accounting Standards Board (IASB) issued new reporting standards for leases. Their IASB IFRS 16 and FASB ASC 842 regulations enact significant changes in how businesses disclose their equipment lease liabilities.

These regulations are designed to satisfy the investment community, which wants corporate debt to be made more transparent. The new rules should enhance visibility in this asset class and create more consistency between different global accounting standards.

Imran Mia, accounting manager for Nakisa, a provider of human capital management and finance solutions, cautions that companies may be underestimating the challenge they face in meeting the requirements. For example, IFRS 16 and ASC 842 classify leases differently, he notes. IFRS 16 includes an exclusion for low-value assets, while ASC 842 does not. Sorting out these differences will be particularly difficult for multinational companies that must follow both standards when reporting assets and liabilities.

Making the transition typically requires 18 months

While companies have until January 1, 2019 to become compliant, a reasonable timeframe for updating accounting-related processes and systems is 18 months, says Pete Graham, director of Finance Solutions and Mobility at SAP.

“Accounting rules in this area have not changed in a long time,” Graham says. “To ensure that they have the information ready and organized to comply, organizations need to start considering how to prepare now.”

Companies will have to review existing policies, processes, controls, and accounting software systems, says Richard Cebula, director, PricewaterhouseCoopers (PwC). Organizations that are heavily invested in leases will need a lot time and resources to implement these changes and meet the deadline.

Capturing two years of look-back data is equally important

Cebula also notes companies must provide comparative reporting for the previous two years when the new regulations go into effect in 2019. Comparative reporting is being required so that third parties such as investors and regulators can easily compare an organization’s old and new accounting practices.

This look-back requirement is one of the reasons why decision-makers already should be working on adopting means of complying with the new regulations. “We are in the window of time where we need to start showing and aggregating that information,” Cebula says.

Compliance will be easier with purpose-built technology

In response to the new regulations, technology providers are delivering new applications to validate leases, ensure compliance, optimize assets, and manage portfolios. These solutions help customers collect equipment lease contract information from various sources and consolidate it into a single system. They also enable corporate compliance with global accounting standards and improve decision-making for equipment lease portfolios.

Solutions typically cover the requirements for IASB IFRS 16 and FASB ASC 842. SAP Lease Administration by Nakisa, for example, is one such purpose-built technology that leading companies are already adopting to comply with both regulatory changes.

Want to learn more? Listen to the SAP Radio show Your Balance Sheet 01/01/19: $3 Trillion Worth of Leases, and follow @SAPPartnerBuild on Twitter.

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Alicia Rudolph

About Alicia Rudolph

Alicia Rudolph is presently part of the Strategic Ecosystem Marketing at SAP. She is passionate about leveraging Social Media as a way to drive business for partners and customers alike.

The CFO Role In 2020

Estelle Lagorce

African American businessman looking out office window --- Image by © Mark Edward Atkinson/Blend Images/CorbisThe role of the CFO is undergoing a serious transformation, and CFOs can expect their role to continue to evolve, according to a recent CFO.com article by Deloitte COO and CFO Frank Friedman.

In the futurist article, Friedman says one of the biggest factors that will contribute to the CFO’s significant change over the next five years is technology.

Digital technology is obviously expected to drive change in high-tech companies, but Friedman says it’s industries outside of the tech sectors that are of particular interest, as they struggle to understand how to grasp and harness the digital capabilities available to them.

Working with high tech in low-tech industries

Five years from now, a finance team may be defined by how well it uses technology and innovative business tools, regardless of what industry it’s in. The article outlines some examples of ways that digital technology will increasingly be used by CFOs in “non-tech” sectors:

  • Predictive analytics: CFOs in manufacturing companies can forecast results and produce revenue predictions based on customer-experience profiles and current demand, instead of comparing to previous years as most companies still do today.
  • Social media and crowdsourcing: You may not think CFOs spend a lot of time on social media or crowdsourcing sites, but these methods can actually expedite finance processes, such as month-end responsibilities of the finance organization.
  • Big Data: CFOs already have a lot of data at their fingertips, but in 2020 they will have even more. CFOs in both tech and non-tech sectors who understand how to use that data to make valuable, informed decisions, can strategically guide their company and industry in a more digitally oriented world.

To do this, Friedman says CFOs can lead the way by addressing some critical areas:

  1. Know the issues: Gather the key questions that leaders expect Big Data analytics to answer.
  1. Make data easily accessible: Collect data that is manageable and easy to access.
  1. Broaden skills: The finance team needs people with the skills to understand and strategically interpret the data available to them.

The tech-savvy CFO

The role of today’s CFO has already expanded to include strategic corporate growth advice as well as managing the bottom line. In 2020, Friedman says expectations placed on the CFO are presumed to be even greater, and CFOs will likely need a much more diverse, multidisciplinary skill set to meet those demands.

The article details several traits and skills that CFOs will need in order to keep up with the pace of digital change in their role.

  1. Digital knowledge: CFOs must be tech-savvy in order to capitalize on technical innovations that will benefit their company and their industry as a whole.
  1. Data-driven execution: CFOs will need the ability to execute company strategy and operations decisions based on data-driven insights.
  1. Regulatory compliance: Regulations continue to be more stringent globally, so CFOs will need to be proficient at working closely with regulators and compliance systems.
  1. Risk management: With the growing global economy comes increased cyber and geopolitical risks worldwide. The CFOs of 2020, especially those in large multinational organizations, will need to have the expertise to monitor and manage risk in areas that may be unforeseen today.

The future CFO’s well-rounded resume

By 2020, the CFO role will require much more than just an accounting background. According to Deloitte’s Frank Friedman, “CFOs may need to bring a much more multidisciplinary skill set to the job as well as broader career experiences, from working overseas to holding positions in sales and marketing, and even running a business unit.”

So if you’re a current or aspiring CFO, you have five years to round out your resume with the necessary skills to be ready for the digitally driven role of the CFO in 2020.

The above information is based on the CFO.com article What Will the CFO Role Look Like In 2020?” by Deloitte COO & CFO, Frank Friedman – Copyright © 2015 CFO.com.

Want to learn more about best practices for transforming your finance organization? View the SAP/Deloitte Webinar, “Reshaping the Finance Function”.

For an in-depth look at digital technology’s role in business transformation, download the SAP eBook, The Digital Economy: Reinventing the Business World.

To learn more about the business and technology factors driving digital disruption, download the SAP eBook, Digital Disruption: How Digital Technology is Transforming Our World.

To read more CFO insights from a tech industry perspective, read the Wall Street Journal article with SAP CFO Luka Mucic: Driving Insight with In-memory Technology.

Discover 7 Questions CFOs Should Ask Themselves About Cyber Security.

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Estelle Lagorce

About Estelle Lagorce

Estelle Lagorce is the Director, Global Partner Marketing, at SAP. She leads the global planning, successful implementation and business impact of integrated marketing programs with top global Strategic Partner across priority regions and countries (demand generation, thought leadership).

Get Your Payables House In Order

Chris Rauen

First of 8 blogs in the series

Too many organizations ignore the business potential from streamlining accounts payable operations. In a digital economy, however, this may represent one of the best opportunities to improve financial performance and boost the bottom line.

In its recent report, ePayables 2015: Higher Ground, the research and advisory firm Ardent Partners made a strong case for accounts payable transformation. “In 2015, more AP groups are accelerating their plans to transform their operations and scale to new heights,” states the report.

The digital makeover

From a payables perspective, how you go about fixing outdated procure-to-pay (P2P) practices is much like the decision to improve an aging home. Do you tear your house down and build a new one, or leverage as much of the existing structure as you can and begin a major home improvement project?

There is, of course, a third option. Take no action and make calls to plumbers, electricians, roofers, and other specialists as needed before the house falls apart altogether. While few organizations would consider a “triage” strategy the best option to address deficiencies in P2P operations, many still do. (Just don’t share that with your CFO.)

This blog post is the first in a series that will examine options for upgrading procure-to-pay processes from outclassed to best-in-class. Continuing to focus time and effort on managing transactions just doesn’t make sense. With today’s business networks, organizations have new ways to collaborate with suppliers and other partners to buy, sell, and manage cash.

Automation handles low-value activities, eliminating data entry, exception management, and payment status phone calls. That leaves more time for benchmarking operations, monitoring supplier performance, expanding early payment discounts, and improving management of working capital – the kinds of things that can dramatically improve business performance.

Where do you start?

To begin, you have to recognize that getting your payables house in order is much more than a process efficiency initiative. While cost savings from e-invoicing can be 60% to 80% lower than paper invoicing, there’s much more to the business case.

Improving contract compliance and expanding early payment discounts are other components of a business case for P2P transformation. According to various procure-to-pay research studies and Ariba customer results, the cost savings from getting your payables house in order are conservatively estimated to be $10 million per billion collars of spend. We’ll break down these ROI components in greater detail in future posts on this topic.

The value of alignment

Another important first step, validated by the Ardent Partners report, is getting procurement and finance-accounts payables in alignment. As this is a holistic process, you’ll need to make sure that both organizations are in sync, and you have support from upper management to make it happen.

Now, back to the question: Do you approach a payables makeover to support P2P transformation as a tear-down or a fixer-upper? If your procurement-accounts payable teams are out of alignment, your P2P processes are predominantly paper, and decentralized buying leaves little control over spend, you’re looking at a tear-down to lay the foundation for best practices payables. We’ll share a blueprint with you in the next post in this series.

Chris Rauen is a solution marketer for Ariba, an SAP company. He regularly contributes to topics including e-invoicing and dynamic discounting as well as the value of collaborating in a digital economy. 

Learn more about how to take your payables to the next level of performance in Ardent Partners’ research report “ ePayables 2015: Higher Ground.”

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Chris Rauen

About Chris Rauen

In his role at SAP Ariba, Chris Rauen educates procurement, finance, and shared services professionals on the business value of accounts payable automation, procure-to-pay transformation, and collaboration via business networks. Chris has addressed these topics at finance and shared services conferences, in articles for trade and business publications, and in blogs for online communities. Chris has more than 15 years of experience in e-payables, and holds a B.A. in Economics from the University of California, Santa Barbara.

Taking Learning Back to School

Dan Wellers

 

Denmark spends most GDP on labor market programs at 3.3%.
The U.S. spends only 0.1% of it’s GDP on adult education and workforce retraining.
The number of post-secondary vocational and training institutions in China more than doubled from 2000 to 2014.
47% of U.S. jobs are at risk for automation.

Our overarching approach to education is top down, inflexible, and front loaded in life, and does not encourage collaboration.

Smartphone apps that gamify learning or deliver lessons in small bits of free time can be effective tools for teaching. However, they don’t address the more pressing issue that the future is digital and those whose skills are outmoded will be left behind.

Many companies have a history of effective partnerships with local schools to expand their talent pool, but these efforts are not designed to change overall systems of learning.


The Question We Must Answer

What will we do when digitization, automation, and artificial intelligence eject vast numbers of people from their current jobs, and they lack the skills needed to find new ones?

Solutions could include:

  • National and multinational adult education programs
  • Greater investment in technical and vocational schools
  • Increased emphasis on apprenticeships
  • Tax incentives for initiatives proven to close skills gaps

We need a broad, systemic approach that breaks businesses, schools, governments, and other organizations that target adult learners out of their silos so they can work together. Chief learning officers (CLOs) can spearhead this approach by working together to create goals, benchmarks, and strategy.

Advancing the field of learning will help every business compete in an increasingly global economy with a tight market for skills. More than this, it will mitigate the workplace risks and challenges inherent in the digital economy, thus positively influencing the future of business itself.


Download the executive brief Taking Learning Back to School.


Read the full article The Future of Learning – Keeping up With The Digital Economy

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Dan Wellers

About Dan Wellers

Dan Wellers is the Global Lead of Digital Futures at SAP, which explores how organizations can anticipate the future impact of exponential technologies. Dan has extensive experience in technology marketing and business strategy, plus management, consulting, and sales.

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Why Millennials Quit: Understanding A New Workforce

Shelly Kramer

Millennials are like mobile devices: they’re everywhere. You can’t visit a coffee shop without encountering both in large numbers. But after all, who doesn’t like a little caffeine with their connectivity? The point is that you should be paying attention to millennials now more than ever because they have surpassed Boomers and Gen-Xers as the largest generation.

Unfortunately for the workforce, they’re also the generation most likely to quit. Let’s examine a new report that sheds some light on exactly why that is—and what you can do to keep millennial employees working for you longer.

New workforce, new values

Deloitte found that two out of three millennials are expected to leave their current jobs by 2020. The survey also found that a staggering one in four would probably move on in the next year alone.

If you’re a business owner, consider putting four of your millennial employees in a room. Take a look around—one of them will be gone next year. Besides their skills and contributions, you’ve also lost time and resources spent by onboarding and training those employees—a very costly process. According to a new report from XYZ University, turnover costs U.S. companies a whopping $30.5 billion annually.

Let’s take a step back and look at this new workforce with new priorities and values.

Everything about millennials is different, from how to market to them as consumers to how you treat them as employees. The catalyst for this shift is the difference in what they value most. Millennials grew up with technology at their fingertips and are the most highly educated generation to date. Many have delayed marriage and/or parenthood in favor of pursuing their careers, which aren’t always about having a great paycheck (although that helps). Instead, it may be more that the core values of your business (like sustainability, for example) or its mission are the reasons that millennials stick around at the same job or look for opportunities elsewhere. Consider this: How invested are they in their work? Are they bored? What does their work/life balance look like? Do they have advancement opportunities?

Ping-pong tables and bringing your dog to work might be trendy, but they aren’t the solution to retaining a millennial workforce. So why exactly are they quitting? Let’s take a look at the data.

Millennials’ common reasons for quitting

In order to gain more insight into the problem of millennial turnover, XYZ University surveyed more than 500 respondents between the ages of 21 and 34 years old. There was a good mix of men and women, college grads versus high school grads, and entry-level employees versus managers. We’re all dying to know: Why did they quit? Here are the most popular reasons, some in their own words:

  • Millennials are risk-takers. XYZ University attributes this affection for risk taking with the fact that millennials essentially came of age during the recession. Surveyed millennials reported this experience made them wary of spending decades working at one company only to be potentially laid off.
  • They are focused on education. More than one-third of millennials hold college degrees. Those seeking advanced degrees can find themselves struggling to finish school while holding down a job, necessitating odd hours or more than one part-time gig. As a whole, this generation is entering the job market later, with higher degrees and higher debt.
  • They don’t want just any job—they want one that fits. In an age where both startups and seasoned companies are enjoying success, there is no shortage of job opportunities. As such, they’re often looking for one that suits their identity and their goals, not just the one that comes up first in an online search. Interestingly, job fit is often prioritized over job pay for millennials. Don’t forget, if they have to start their own company, they will—the average age for millennial entrepreneurs is 27.
  • They want skills that make them competitive. Many millennials enjoy the challenge that accompanies competition, so wearing many hats at a position is actually a good thing. One millennial journalist who used to work at Forbes reported that millennials want to learn by “being in the trenches, and doing it alongside the people who do it best.”
  • They want to do something that matters. Millennials have grown up with change, both good and bad, so they’re unafraid of making changes in their own lives to pursue careers that align with their desire to make a difference.
  • They prefer flexibility. Technology today means it’s possible to work from essentially anywhere that has an Internet connection, so many millennials expect at least some level of flexibility when it comes to their employer. Working remotely all of the time isn’t feasible for every situation, of course, but millennials expect companies to be flexible enough to allow them to occasionally dictate their own schedules. If they have no say in their workday, that’s a red flag.
  • They’ve got skills—and they want to use them. In the words of a 24-year-old designer, millennials “don’t need to print copies all day.” Many have paid (or are in the midst of paying) for their own education, and they’re ready and willing to put it to work. Most would prefer you leave the smaller tasks to the interns.
  • They got a better offer. Thirty-five percent of respondents to XYZ’s survey said they quit a previous job because they received a better opportunity. That makes sense, especially as recruiting is made simpler by technology. (Hello, LinkedIn.)
  • They seek mentors. Millennials are used to being supervised, as many were raised by what have been dubbed as “helicopter parents.” Receiving support from those in charge is the norm, not the anomaly, for this generation, and they expect that in the workplace, too.

Note that it’s not just XYZ University making this final point about the importance of mentoring. Consider Figures 1 and 2 from Deloitte, proving that millennials with worthwhile mentors report high satisfaction rates in other areas, such as personal development. As you can see, this can trickle down into employee satisfaction and ultimately result in higher retention numbers.

Millennials and Mentors
Figure 1. Source: Deloitte


Figure 2. Source: Deloitte

Failure to . . .

No, not communicate—I would say “engage.” On second thought, communication plays a role in that, too. (Who would have thought “Cool Hand Luke” would be applicable to this conversation?)

Data from a recent Gallup poll reiterates that millennials are “job-hoppers,” also pointing out that most of them—71 percent, to be exact—are either not engaged in or are actively disengaged from the workplace. That’s a striking number, but businesses aren’t without hope. That same Gallup poll found that millennials who reported they are engaged at work were 26 percent less likely than their disengaged counterparts to consider switching jobs, even with a raise of up to 20 percent. That’s huge. Furthermore, if the market improves in the next year, those engaged millennial employees are 64 percent less likely to job-hop than those who report feeling actively disengaged.

What’s next?

I’ve covered a lot in this discussion, but here’s what I hope you will take away: Millennials comprise a majority of the workforce, but they’re changing how you should look at hiring, recruiting, and retention as a whole. What matters to millennials matters to your other generations of employees, too. Mentoring, compensation, flexibility, and engagement have always been important, but thanks to the vocal millennial generation, we’re just now learning exactly how much.

What has been your experience with millennials and turnover? Are you a millennial who has recently left a job or are currently looking for a new position? If so, what are you missing from your current employer, and what are you looking for in a prospective one? Alternatively, if you’re reading this from a company perspective, how do you think your organization stacks up in the hearts and minds of your millennial employees? Do you have plans to do anything differently? I’d love to hear your thoughts.

For more insight on millennials and the workforce, see Multigenerational Workforce? Collaboration Tech Is The Key To Success.

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