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Cartesis, Inc.

Streamlining the Financial Business Performance Process in Today’s Multinational Corporation

I Meeting the Challenge: Performance

Under Pressure Not a week goes by without a reminder from the news media that CFOs are exposed today to more job-related risk than ever before. In the United States, the Sarbanes-Oxley Act now holds CFOs personally accountable for the truthfulness of their companies’ financial statements. In Europe, corporate governance movements are sweeping across many countries. In Japan, changes to the country’s century-old Commercial Code aim to make management more accountable to shareholders by requiring better disclosure of financial information and separation of management roles. For CFOs of multinational companies, risk lies at every turn.

But with this increased risk comes the potential for increased reward. As the financial impact of business decisions is scrutinized more than ever, CFOs are wielding unprecedented influence. In a recent survey of over 500 senior executive and board members by BusinessWeek magazine, 32 percent of CEOs said they view CFOs – as opposed to themselves – as leading reform, while 45 percent of the surveyed CEOs perceive the CFO’s main role to be a strategist, not just a financial steward.¹ Evolving opinions like these show how CFOs are rising in the corporate power structure, poised to stand as equals with their chief executive counterparts. In this era of intense scrutiny, CFOs who can perform under pressure – demonstrated by their speed, agility and clarity in telling “the story behind the numbers” – are critical to their organization’s success.

“The story behind the numbers,” defined

Triggered by corporate accounting scandals such as Enron, WorldCom and Tyco, corporate governance fever has swept around the world, forcing companies to more transparently represent their financial information than ever before to establish and restore confidence. The challenge is further magnified by intense time pressures, as the finance organization is now expected to churn out financial reports in hours, not days. Under proposed Sarbanes-Oxley legislation, for example, U.S. companies will soon have between 60-75 days after their fiscal year ends to publish their annual reports, compared to the previous 90 days.

But with this additional pressure, CFOs’ confidence in the raw data they receive – basic figures for cash flow, actuals and product profitability – is alarmingly low. In a recent survey conducted by Coleman Parkes of 150 CFOs at international companies, only 33 percent rated the quality of their actuals information as “very good,” while only 29 percent rated their budget forecasts’ data equally highly. Furthermore, 59 percent of those surveyed said that “speeding information flows” is a major challenge for CFOs; 67 percent also ranked “converting data into useful information” as another significant hurdle.²

For complex multinational companies, the parallel underlying requirement is to provide a better understanding of a global business and deliver a detailed view of their financial numbers. Equally important, they must communicate the story in an audience-specific way, from a multiplicity of perspectives.

In order to tell “the story behind the numbers” with confidence, CFOs need to:

• Understand the financial impact of decisions made by executives assured that all information is correct and timely
• Institute effective controls and optimize processes using a wide variety of data, thus confirming that standard financial data adheres to all global reporting requirements
• Anticipate accurately in order to proactively adapt plans and inform stakeholders.

II Streamlining the Financial Process with Visibility and Control

In light of the intensified pressures that CFOs and their organizations now face, Cartesis, an international software company, provides multinational companies with a comprehensive framework for managing the financial process. The Cartesis Suite unifies the strategic plan, budget, actuals, compliance & reporting, performance metrics, rolling forecasts and annual reports into an integrated solution. By unifying previously disparate processes, Cartesis facilitates alignment and transparency of financial information, enabling the “story behind the numbers” to be told with speed, accuracy and confidence.

Laying the foundation with the strategic plan

The strategic plan is at the core of the financial process, providing a high-level, long-term blueprint to model and plan the future performance of the company based on factors such as seasonality, inflation, price/volume changes and other variables. Many scenarios are modeled to evaluate the impact of potential business decisions such as acquisitions, divestitures and adding or removing lines of business. With the Cartesis Suite, t he latest rolling forecast, key performance indicators (KPIs) and actual data reside in the same application, allowing multiple strategic plan scenarios to be designed. Once a final scenario is selected, drivers create detailed targets from the strategic plan within the application.

The Cartesis Suite helps senior management generate a strategic plan that meets financial requirements (revenues, profit, earnings per share, etc.) and sets targets for the rest of the organization by providing:

• What-if analysis capability with the flexibility necessary for simulating reorganizations, additions and deletions of product lines and currency fluctuations
• A unique data source with the strategic plan, actuals, budget, forecasts and KPIs all in the same application, eliminating the need for complex integration between several systems
• Target-setting linked to the strategic plan and quickly available to users because all data resides in the same system.

Building a budget that’s precise, flexible and under control

As a detailed monthly plan for the fiscal year, the budget usually goes through many iterations before being finalized, with several approval levels throughout the organization. The result should be a detailed plan of how the organization as a whole plans to meet the targets set via the strategic plan.

The Cartesis Suite facilitates effective budget development through:

• An easy-to-use, Web-based interface, reducing planning cycle time and allowing non-finance users to generate budgets with minimal training or IT support
• Instantaneous comparison to actual performance with variance reporting at the monthly close
• Rapid access to data in a central repository including strategic targets, actual performance data, past plans and forecasts used in the development of budgets.

Simplifying the monthly actuals process

In multinational companies, the actuals process can be highly complex. It typically involves collecting current financial data from company reporting units, performing currency translations and intercompany eliminations at either a balance or at a peer-to-peer reconciliation level. This process must adhere to both internal rules and global accounting standards such as IAS and US GAAP.

Development of actuals requires access to many external systems as well as operational controls to ensure that geographically dispersed people follow the same rules and procedures. The Cartesis Suite provides the controls and automation to ensure fast, accurate and validated financial communication to both senior management and global regulatory agencies – to measure, and ultimately optimize, business performance. The Cartesis Suite provides:

• Breadth of access through “anytime, anywhere” Web-based data collection
• Operational process control to ensure that all data collected and calculated follows the same rules and procedures – to withstand any scrutiny by senior management and global regulatory agencies.

Coordinating global reporting and compliance

The reporting aspect of the reporting and compliance function comprises a continuous process of reporting, auditing and submitting key figures in financial statements used to internally and externally report actual business performance. Typically occurring quarterly for external purposes and at least monthly internally, these reports are used by senior managers to measure operational performance from both historical and current perspectives. Additionally, as changes occur following decisions at the annual meeting or during the board and committee meetings, corporate records need to be updated and remain accessible.

Compliance requires global organizations to report audited and validated financial statements monthly to regulatory agencies around the world. This complex process may entail financial and non-financial information and require the interaction of many departments across the globe. Cartesis helps multinational companies achieve a goal of fast, accurate and validated financial communication, while establishing the information necessary for these companies to effectively measure and evaluate business performance.

The Cartesis Suite coordinates and speeds global reporting and compliance by providing:

• A single solution for internal, external and compliance reporting which adheres to glo bal and country specific rules using a common repository for all quantitative and qualitative data
• Automated delivery of a complete set of financial statements, thereby meeting regulatory demands for faster, accurate, corporate communication
• Flexible reporting and analytical capabilities to address different frequencies and audiences.

Measuring corporate performance

Accurate performance metrics are imperative in determining how a company is performing against actuals, budgets, strategic plans and other key business goals. These metrics, or key performance indicators, are typically set annually and calculated monthly. Based on analysis done against the targets and actual performance values, rolling forecasts can be re -evaluated and adjusted if necessary. The Cartesis Suite ensures that KPIs can be calculated rapidly to provide valuable insight through:

• A unique comparative data source with historical data, actuals and plans for effective performance management
• Common rules ensuring all performance data is calculated the same way
• Global visibility with comprehensive reporting and analysis capabilities to monitor and optimize corporate performance.

Fine-tuning rolling forecasts

As time passes, more actual performance information is available and conditions change. The budget often becomes obsolete and is replaced by rolling forecasts which are generally updated monthly or quarterly. If necessary, rolling forecasts may drive changes to the strategic plan to ensure that it reflects the current business environment.

The Cartesis Suite offers the following features to facilitate fine-tuning of rolling forecasts:

• An easy-to-use Web-based interface requiring little end-user training and offering worldwide access
• Immediate access to accurate actual data because the Cartesis Suite is the source of the monthly close
• Modeling capability combining actual and plan data into a forecast, using KPIs to project future performance.

Ensuring speed and accuracy in compiling compliance and annual reports

In order to comply with securities regulations, global corporations must prepare and file registration statements and reports, including compliance and annual reports, with local authorities, the U.S. Securities and Exchange Commission and it s European counterparts. In the current legal environment, where changes occur frequently, multinational organizations must continuously adapt to new rules and produce greater amounts of information.

The Cartesis Suite helps facilitate the development of the annual report and other statements by providing:

• Integrated financial and non-financial data, thus eliminating the old legal and tax information silos as well as greatly reducing the chance for errors
• Multinational compliance by accommodating local legal reports and rules as well as numerous working languages, with an emphasis on the complex needs of Europe and the United States.

III Cartesis Success Snapshot: Sartorius AG

Headquartered in Germany, Sartorius AG is a leading global biotech supp lier and mechatronics manufacturer. Since 1996 the company has made a number of strategic acquisitions, doubling in size. This expansion delivered impressive revenue growth, product and service diversification, and shareholder value.

However, in order for Sartorius to realize its full potential as a global operation focused on growth and emerging markets, the executive team recognized that it had to channel the company’s large number of disparate entities in the right direction. CFO Thomas Hartwig explains how success brings its own challenges: ”Traditionally we used Excel as our default financial reporting tool, combined with email to expedite distribution, consolidation and reconciliation. However, it became clear that this was fast becoming an inefficient and expensive series of processes. Added to this, there were regulatory changes, including IAS, as well as internal and external reporting requirements which needed addressing.

”In short,” he continued, “as we changed and grew, we needed a tool which was more in line with our business – one which would reflect the organization as it is now, rather than how it was five years ago. This meant centralizing information and overall control while giving individual managers responsibility for P&L.”

In the Cartesis Suite, Sartorius found a financial management solution that provides a full view across and into the organization, featuring comprehensive audit trail capability. This facilitates financial consolidation and enables much greater transparency and clarity for auditors, thus providing reassurance for management and investors.

”We’ve had a dramatic improvement in data quality—which not only helps us to remain credible in the current financial environment, but also allows us to have ultimate faith in the figures we base important decisions on,” say Rainer Lehmann, project leader and vice president of treasury, investor relations and management accounting group at Sartorius. ”There’s also no ambiguity across the group. All managers are judged on one set of figures, on a single, global basis. This makes management much easier and allows us to see clearly where investment or efficiencies should be made.”

In terms of quantifiable benefits, the Cartesis Suite has had a significant impact on Sartorius’ business. Lehmann explains, ”Cartesis has cut the reporting process by up to 14 days. Not only does this help us to make management decisions faster, but also allows our finance team to spend more time working strategically for the business. ”Multi-dimensionality is the key phrase,” Hartwig concludes. ”We have a single, consistent, global system which we can interrogate in a large number of different ways. This means we can examine the business on a regional basis, and then take a look at how each legal entity is performing. The ability to examine performance in real-time, on a macro and micro level, means we can be both agile and highly informed.”

IV Summary

Now under more pressure to perform than ever before, CFOs at multinational corporations need to tell the “story behind the numbers” with speed, clarity and insight. The finance function must produce greater quantities of information more quickly and accurately in an audience specific way, from a multiplicity of perspectives. The Carte sis Suite provides such a method, giving CFOs a unique business performance management solution designed to meet the needs of multinational companies operating in a complex global regulatory environment.

The Cartesis Suite’s focus on key financial management areas such as planning, budgeting, statutory consolidation, management reporting, performance management, forecasting and shareholding management ensures that CFOs and their organizations will have ready access to the most comprehensive, accurate data possible. In sum, the Cartesis Suite provides CFOs with a strategic platform for achieving critical business goals by helping them communicate the complete corporate story, clearly articulate value propositions and make decisions in real-time.

About Cartesis

Cartesis provides CFOs with a unique business performance management solution to “deliver the whole story behind the numbers" with unparalleled clarity and insight. Leading multinational companies around the globe rely on Cartesis software applications to get the full picture and offer timely and relevant information to their stakeholders.

The company maintains offices in Brussels, Frankfurt, London, Madrid, Norwalk, CT, Paris, Tokyo and Utrecht. Cartesis products give global companies the analytic capacity and the flexibility they need to assess the rapid changes in their market places. One in five of the Fortune Global 100 and more than 30% of the Financial Times European 100 use Cartesis solutions to obtain unprecedented command over their financial information and processes. For more information, visit www.cartesis.com.

¹ “CFOs on the Hot Seat,” Joseph Weber, et. al., BusinessWeek, March 17, 2003.

² Statistics are from independent research commissioned by Cartesis and conducted by Coleman Parkes in April/May 2003. Executives were surveyed at 150 multinational companies with turnover of 500 million EUR or more in the United States, the United Kingdom, France, the Netherlands and Germany.