Fresenius Medical Care optimizes external financial reporting

Published on 03-Oct-2012

"We are very satisfied with the results of IBM Cognos FSR. The reporting process has become more efficient and can now be controlled much more effectively. Version control, change histories and current-status reports, which are available at any time, provide us with the necessary compliance and security." - Head of the Consolidation and Financial Statements department, Fresenius Medical Care

Customer:
Fresenius Medical Care

Industry:
Healthcare

Deployment country:
Germany

Solution:
BA - Business Analytics, Business Integration, Business Performance Transformation, BA - Risk Analytics, BA - Performance Management

Overview

With annual sales of about US $13 billion in the 2011 fiscal year, Fresenius Medical Care is the world’s largest integrated provider of products and services for individuals undergoing dialysis because of chronic kidney failure. It has approximately 80,000 employees. Fresenius Medical Care is also the world's leading provider of dialysis products such as hemodialysis machines, dialyzers and related disposable products. The group is headquartered in Bad Homburg, Germany, and is listed on the Frankfurt Stock Exchange and the New York Stock Exchange.

Business need:
Fresenius Medical Care wanted to optimize its reporting process, particularly in light of the increased demands made by regulatory authorities on external financial reporting.

Solution:
Fresenius Medical Care implemented IBM® Cognos® FSR, a complete solution for collaborative financial reporting. This software system enables the creation of quarterly, annual and other financial reports with textual, numerical and graphical elements. It has a multi-language user interface and supports full separation of responsibilities, version control and a range of automation features as well as standardized submission to external bodies via XBRL.

Benefits:
Accelerates and streamlines the reporting process through consistent use of variables and standardized workflows with the help of automation, and allows multiple employees to work on drafting and editing a document simultaneously. Complies with all legal and regulatory requirements by maintaining a complete history of all changes.

Case Study

To read a German version of this case study, click here.

With annual sales of about US $13 billion in the 2011 fiscal year, Fresenius Medical Care is the world’s largest integrated provider of products and services for individuals undergoing dialysis because of chronic kidney failure. Through its network of more than 3,100 dialysis clinics in North America, Europe, Latin America, Asia and Africa, the company provides dialysis treatment to more than 250,000 patients around the globe. It has approximately 80,000 employees. Fresenius Medical Care is also the world’s leading provider of dialysis products such as hemodialysis machines, dialyzers and related disposable products. The group is headquartered in Bad Homburg, Germany, and is listed on the Frankfurt Stock Exchange and the New York Stock Exchange.

High demands require flexible financial reporting
The preparation of financial reports in accordance with international accounting standards as well as in different currencies (Euro and US dollars) is a very complex and expensive process. The legal importance and reputational value of these standardized quarterly and annual reports for listed companies require the financial reports to be of a consistently high quality. However, the requirements for the structure and content of these reports are constantly increasing, while the submission deadlines get tighter.

In the past, Fresenius Medical Care used Microsoft Word and Microsoft Excel to create the required reports. Since a team of employees from different departments is involved in the development of quarterly and annual reports, the manual effort for data input, fixes, checks, distribution by email and approval was very high due to both the huge number of documents, spreadsheets and stakeholders involved in the process, and the fact that the reports had to be created in German and English. On average, even the quarterly reports had to go through many iterations before the final version could be submitted. Even minor details such as the differences in date, number or currency formats caused substantial additional expense. Last-minute changes were particularly problematic, because it was always necessary to ensure that corrections were made consistently throughout the reports, since the same data is often used in many different parts of the document.

IBM Cognos FSR meets requirements
In order to ease this pressure in the future, Fresenius Medical Care was looking for a new software solution for enterprise-wide financial reporting. The Head of the Consolidation and Financial Statements department explains what the company’s needs were: “We wanted to take the permanent stress out of the reporting process and to reduce the risk of errors. In addition, it became apparent that, in the medium term, all reports would need to be tagged with XBRL [eXtensible Business Reporting Language], which is a new worldwide standard for the creation and publishing of financial information. This wasn’t easy to do with our traditional methods.”

After the subsequent market analysis, Fresenius Medical Care chose IBM Cognos Financial Statement Reporting. The company began a testing phase of roughly one year, during which it tested the product from top to bottom (especially the XBRL functions required for SEC reporting), and trained the employees involved.

The first real deployment of IBM Cognos FSR was for the creation of the US GAAP (Generally Accepted Accounting Principles) report for the second quarter of 2009. The transition to IBM Cognos FSR as a solution for collaborative reporting and submission to the supervising authorities via XBRL took place in the second quarter of 2010. As of 2013 FSR is now referred to as Cognos Disclosure Management.

Complete solution for compliance and security in financial reporting
Today, 23 employees in the Bad Homburg headquarters use the new solution. From their desktops, the users access a central server where the draft reports are stored and work on revisions until the final version is complete. Depending on their native language, the employees can work via either a German or an English user interface.

With IBM Cognos FSR, specific areas of responsibility can be assigned to individual employees. This makes it easy to work on different parts of the same report simultaneously. The system saves each change together with the exact time it was made and the identity of the author who made it. As a result, all the development stages and the complete change history – especially changes in Excel tables – can be traced very easily. At any time, a recent report of the current status can be produced and sent to senior management, other important internal decision makers, or accountants.
The quarterly and annual reports on the company’s financial situation, which must be created regularly, usually comprise between 60 and 300 printed pages. They are written either in German or English or both, and currencies are denominated either in US Dollars or in Euros or both. The reports are submitted to the German stock exchange, the German company register or the US SEC (Securities and Exchange Commission).

After the report is before the report
A process known as “roll forward” makes it easy to produce the first version of a new report by linking new data sources to an existing report template. All the basic data for each quarterly report is stored in about 30 spreadsheets, while each annual report draws data from approximately 60 spreadsheets. Sections of these spreadsheets are regularly fed with the latest figures from the company’s SAP system. In the future, a special interface will automate the supply of financial reporting data from SAP.

Within its reports, Fresenius Medical Care currently uses about 600 variables. These variables automatically replace sections of text or data that would previously have been updated manually by the document’s author. The use of variables ensures that when a figure (for example, the quarterly sales figure) is changed, the result is an automatic update of its value throughout the report. The solution even updates the results of any calculations that are based on the value of the figure. Even last-minute changes are no longer a cause for concern, because the new report will automatically show the right numbers throughout the whole document. Furthermore, the company also uses variables to create “modules” of text that can be reused easily, which reduces the total cost of writing the reports.

Targets achieved, prepared for the future
With IBM Cognos FSR, the company is able to meet all its legal requirements and to satisfy the demands of the stock market with a premium solution for financial reporting. A particular strength of IBM Cognos FSR is the full integration of the new XBRL standard, which is required for the transmission of financial data to the supervising authorities by the SEC. Thanks to the integrated XBRL solution, XBRL tags can be inserted and tested at each point in the process. This avoids the needs for a flurry of last-minute activity just before the deadline. Because XBRL is integrated directly into the external reporting process, the tagging, checking and creation of XBRL documents are much more efficient and less prone to errors. The solution also eliminates the tedious work of XBRL tagging individual reports that have been prepared by conventional methods.

The Head of the Consolidation and Financial Statements department explains the key benefits of the solution for Fresenius Medical Care: “The use of IBM Cognos FSR has reduced the workload of the employees involved in the financial reporting process. Reporting still requires considerable effort, but the process has been significantly streamlined. That means a bit more normality for the participants, even during the ‘crunch time’ shortly before the report submission deadline. The ability to share work more easily has reduced the number of iterations. And the use of variables in the reports provides consistency, even when changes arrive at very short notice.”

New opportunities on the horizon
Fresenius Medical Care is currently using IBM Cognos FSR primarily for external financial reporting, enabling the company to submit multi-language text reports and XBRL transmission to the authorities. But due to its success, the company is also considering expanding the solution to help with internal reporting. Further use cases are also conceivable, such as cross-departmental reports, or reports for other business units beyond the central financial departments.

At the moment, the process of sending the report to external design agencies and printing houses takes place outside of the Cognos FSR solution, which means that the content has to be reformatted manually, incurring time delays and considerable costs. As a result, there have been discussions about using the export interface which is built into IBM Cognos FSR to export files in the right format for the layout software used by the external design agencies and printing houses. This way the process will become even more secure, manual reformatting will be avoided, and time and money will be saved.

The Head of the Consolidation and Financial Statements department summarizes her experiences with the new solution for financial reporting as follows: “Today, we are very satisfied with the results of IBM Cognos FSR and we would also like to contribute to wider adoption of this solution in Europe. We have been convinced by the solution’s ability to minimize errors, increase the speed of XBRL tagging, automate many aspects of the process and assign specific responsibilities to different individuals. The reporting process has become more efficient and can now be controlled much more effectively. Version control, change histories and current-status reports, which are available at any time, provide us with the necessary compliance and security. With this solution, we feel extremely well equipped to face upcoming challenges in financial reporting.”

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Products and services used

IBM products and services that were used in this case study.

Software:
Cognos Financial Statement Reporting, Cognos Disclosure Management

Legal Information

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