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Private equity reporting - ready for open waters - Organize the private equity reporting process - EY - United States

Private equity reporting - ready for open waters?

Organize the private equity
reporting process

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Firms can keep operations from overflowing by identifying and managing bottlenecks as part of their calendar.

Private equity firms need to organize all parts of the reporting process to work as one highly effective, cohesive unit.

Imagine the pilot of an outboard motorboat assuming that he can also singlehandedly run a large cruiser. He will run back and forth between the engine room and navigation room, while at the same time manning the pumps. Running a crew, whose members are each assigned distinct duties, and an inevitable separation of the different functions of the process into separate chambers, require coordination, communication and scheduling.

Successful firms:

  • Define and establish a formal reporting process and calendar. The calendar must be anchored with key milestones, such as closing the general ledger, presenting a management or board package, and submitting the reporting forms to the relevant authorities. Handoffs that support these milestones, such as valuations, topside postings and committee approvals, need to be highlighted with due dates.
  • Identify and address the bottlenecks. Firms can keep the operation from overflowing by identifying and managing these bottlenecks as part of their calendar. This would enable top management to identify critical issues earlier — manage more of them in parallel, allow them to depend on fewer people, maintain a regimented protocol for escalating issues and, ultimately, reduce the time needed for decision-making.
  • Separate subjective tasks from routine tasks. Separating the production work from the analytical work creates opportunities for automation and overall speed. We believe firms that centralize the routine tasks can generate time and cost benefits from scale, as reporting continues to expand.
  • Give the process its due — and expect to patch it from time to time. Despite the best planning, problems do find their way in. Private equity firms are continuously investing in new deal structures and investment products that may be unfamiliar to the finance group and can cause a conflict in the chart of accounts in the financial statement close.

Some of our more experienced clients have found that by assigning a formal or an informal captain for the financial close, there is a way for the group as a whole to change its course in challenging moments or to track and make systemic repairs when everyone pulls back into port.

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