As a fund manager, your company undoubtedly generates numerous financial statements. You file monthly, quarterly, annually — and you have to comply with all manner of regulatory requirements. The work is manual, time-consuming and can often pull your peoples’ attention away from areas of key business focus.
There’s a better way. End-user automation has moved far beyond macros. It’s now possible to set up routines that transform data from disparate sources into a single, consistent format, giving you a tool to make smart decisions about investments.
The sheer volume of forms, footnotes and regulations makes financial reporting for asset managers even more complicated than many other businesses. And no matter how skilled they are, if your accountants are just focused on copying, moving, normalizing, pasting and charting they aren’t adding value to your organization. Here are some of the issues that asset managers generally struggle with.
"The sheer volume of forms, footnotes and regulations makes financial reporting for asset managers even more complicated than many other businesses."
Whether you manage large or small portfolios, you probably take manual data management as an unfortunate given. If you’re a top-tier manager with a customized platform to handle data, you may still have fund accountants manually transferring records between systems. If you run a boutique firm and outsource recordkeeping, you could be on your own when it comes to normalizing data. Either way, disparate data is the common denominator and fund accountants spend an inordinate amount of time wrestling it into the right formats.
When business changes, financial statements should also change. If you’re adding something for the first time, you may need to add disclosures and/or push the line through all your schedules. If you add derivatives, for instance, you’ll need the gain/loss as a separate line item on the statement of operations — and you’ll need to make sure that the new entry is consistent across all statements, including footnotes. Accountants spend lots of time tracing changes through the paper trail.
Fund managers also find themselves struggling with more and more regulation. This not only adds complexity, it can also make the entire process prone to error. Suppose you operate a fund that invests in privately held companies. For tax reasons, your deal team has set up a vehicle in Europe to manage positions taken there and uses a local accounting office to maintain records. That local team transmits a spreadsheet — prepared according to local regulations — to be incorporated into the main fund. Now your accountant has to convert the spreadsheet to US GAAP, connect it to a valuation prepared in a separate spreadsheet and make sure that the entire transaction has a placeholder in your general ledger system. This happens over and over again for this one investment, which might be one of tens or even hundreds of investments in your fund. Calculations are hard to trace through and mistakes are hard to find.
Because data comes from disparate sources, fund managers often find it difficult to use it to extract deep insights. For smaller firms, we almost always see general ledger records kept in off-the-shelf systems that can only track basic cash inflows and outflows for each fund. Since they need to record other information as well, they often relegate more complex activities to what amounts to a sophisticated spreadsheet, separate from the core general ledger. This is a logical approach — and yet, inevitably, it mushrooms. We’ve seen instances of funds with four, five or even more separate data sources feeding their books and records data. Many of the larger funds are starting to invest in cloud platforms to house, organize and validate this data. By leveraging a cloud platform, you can attach applications to automate the related compliance activities (financial statement preparation or tax) and also have the ability to use this data to derive insights across your portfolio that is useful to management in making decisions.
You have a number of options to get started:
Once you’ve started down the path to data structuring and standardization, you will empower automation and multiply the value. These new tools help make it possible to complete workflows in minutes rather than weeks while helping you analyze information across your entire fund complex and drive synergies with ancillary processes such as tax, an ability that may have been impossible to achieve before.
|Maturity level||Typical days spent||Description|
|Manual copy and paste||42-56||Completely manual process with financial statements built by copy and pasting into word|
|Linking from records to word document (current state)||40||Macros that take data from Excel spreadsheets and create tables in Microsoft Word|
|Working off an ERP system||35||ERP system that creates an initial set of financials which will need heavy editing without footnotes|
|Automated FS process||28||Automated statement creation using AI and bots to compile data from disparate sources into one set of final financials|
Leader, Automated Managed Services, PwC US