A quest for efficiency: How Kempinski redefined the month-end close

WITH THE ARRIVAL of Colin Lubbe in 2009, as Kempinski’s chief financial officer, a new outlook for the corporate finance department was initiated. As a rapidly growing luxury hotel management company, it was important to maximize the efficiency and effectiveness of all our company resources, which commenced with the corporate finance team.

Kempinski Hotels is Europe’s oldest independent luxury hotel group, with a history spanning more than 110 years. Today, Kempinski operates a total of 79 five-star hotels in 30 countries throughout Europe, the Middle East, Africa and Asia, and we plan to nearly double the number of properties under operation by the end of 2015. This rapid expansion in both numbers and geographical reach has brought many complexities into daily operations, including differing time zones, languages and standard operating practices.

With this in mind, our aim was to use technology to streamline business processes with the end goal of reducing the time taken for the month-end close, while improving the quality of information. We started to assess which areas could benefit from the use of technology to improve visibility and control, and to support the finance team and the company overall. One such area was the time-consuming month-end reconciliation process.

We understood that we needed to replace the existing Excel-based reconciliation process, hence eliminating almost all spreadsheets and fully or partially automating many manual activities. Today, reconciliations can be conducted on a daily basis using the same standards across all corporate companies. Ultimately the process is significantly more efficient, enhanced further by the ability to save supporting documentation and provide a detailed commentary on an account by account basis.

By using a cloud-based application, there was therefore no need to maintain hard copies or indeed for the associated storage. Likewise, the application can be remotely accessed providing full mobility of services, for say, the review and approval process.

The set-up phase was completed in three months, commencing in June 2010. Tasks and roles were assigned for all finance personnel, each balance sheet account assigned a risk/priority factor and reconciliation frequency, and templates were defined to align group standards. Most importantly, online training was provided in a series of comprehensive modules ranging from beginner to advanced user. This was mandatory for every team member and culminated in an exam where the pass mark of 70% or above needed to be attained in order to progress. For more advanced users there are options to receive Continuing Professional Education (CPE) credits and attend live webcasts in different time zones.

The first upload of data to the system was in September 2010. The principal obstacle during this period was to ensure that the upload file was in an appropriate format, however, once the template was established, it became a routine procedure. We have now taken this a stage further and are currently near the end of a project to automate this process working together with BlackLine Systems, our accounting software provider. It is intended that uploads will be performed daily, overnight.

2010 was also the first year the company auditors used this system. The auditors were provided with tailored access to all companies within BlackLine, removing the need for vast numbers of files. Moreover, the audit could continue off-site as the system could be accessed remotely.

Previously, month-end checklists were maintained in Excel with few Group standards established with regard to language used, content or review process. Automation of this area has significantly improved workflow visibility, control and monitoring of tasks assigned across all Group companies, not only with regard to the month-end close but with the overall structure of work within the department. We are continually trying to improve and can see further benefits not yet exploited within this module.

These changes enabled us to complete the month-end close in five days rather than the eight or ten taken previously, an almost 100% increase in operating effectiveness. Our audits are simplified allowing for a substantial decrease in audit fees.

Communication is faster, clearer and more concise and the knowledge database is ever expanding providing Kempinski with the ability to offer tailored coaching and guidance for new team members. The bottom line: we have improved the quality and productivity of the department.

Nina Eckerle is director of corporate finance at Kempinski Hotels