IN A NASBP Surety Bond Quarterly exclusive interview, Campbell Pryde, President and CEO of XBRL US, talked about how he envisions the standardization process will impact producers, their clients, and sureties. Historically, surety bond producers, contractors, and sureties have used their own systems for recording financial data. Moving data to another party or to a different form required manual reentry. Now NASBP is establishing uniform data standards for surety bonds using eXtensible Business Reporting Language (XBRL) to improve business reporting standards. XBRL improves how financial data is communicated by making it easier to compile and share. Tags identify each piece of financial data for use in XBRL-compatible programs so information moves between organizations rapidly, accurately, and digitally.
SBQ: What will having uniform data standards accomplish?
CP: Data standards enable automation of data collection, processing, and extraction. That automation eliminates the need for manual data entry, thereby improving efficiencies throughout the reporting supply chain. The result is greater accuracy and delivery speed so contractors get more timely access to credit with the confidence sureties are evaluating their financial health using the most current information. Sureties and bond producers benefit from increased efficiency, allowing them to process more data much faster and with greater confidence in its accuracy. Data formats based on a common underlying data language let all participants use standard tools to create, exchange, and consume surety bond information.
SBQ: How will a data standards system work from a technical standpoint?
CP: Contractors today prepare their financials and work-in-process (WIP) statements using varied methods: spreadsheets or software applications generating reports in PDF or Excel. We are working with several software providers to build XBRL generation modules into the existing tools contractors already use to ensure the contractor cost is brought down to zero. An Excel addin is now available to help contractors, or their accounting firms, convert WIP reports into XBRL.
SBQ: How hard will it be to learn this new system?
CP: There will be an initial learning curve for all supply chain members. Carriers will need to map their internal systems; contractors and their providers, including accounting firms and software providers, will have to adapt their systems to the new standards. End users in the surety bond chain, like individual producers, generally won’t have to learn anything new. After learning the system, the new process will be easier for everyone.
SBQ: How much more efficient will it be for surety bond producers to use these data standards?
CP: Once bond producers have set up their systems to accept XBRL-enabled WIP reports and financials, their operations will be significantly streamlined through the elimination of manual re-keying. The automation through standardization will let bond producers be more responsive to their contractor clients. Standards will ensure they have access to the most current data so they can make more informed decisions, helping end users and contractors alike. Because carriers will no longer need to key data into their internal systems manually, they’ll process data much faster. This will let them respond more quickly to bond requests.
SBQ: How much will data accuracy be improved?
CP: With manual data entry, it’s always possible to introduce errors inadvertently when re-keying information, requiring manual error-checking. Automation through data standards will not only reduce the need for labor- and time-intensive manual validation, but also it will enable users to create automated validation/business rules they can employ to check that they have received accurate data. Examples of such rules include ensuring data was entered with the correct sign, or falls within certain boundaries, or does not conflict with other concepts used.
SBQ: The WIP report is being used to pilot test the use of XBRL data input. Why was this report chosen? How representative is it of surety industry work? How is the test going?
CP: The WIP report was chosen because it’s considered one of the biggest data collection pain points. WIP reports are processed annually or quarterly and can contain numerous rows of data that must be keyed into the carrier’s system. The financial terms used by public companies for U.S. GAAP reporting to the U.S. Securities and Exchange Commission were the basis for the WIP Taxonomy because many WIP elements are the same as U.S. GAAP Taxonomy elements. We then added the terms unique to contractors, such as project-specific revenue and profits. In the pilot, we’ve demonstrated how to prepare a standardized WIP report using an Excel add-in tool. The pilot shows how data in the WIP can be automatically extracted into a carrier’s system. Those who need to collect or extract data must perform a one-time mapping of their financial systems to the WIP Taxonomy. The Hartford, a surety that has completed the implementation, estimated the process took around 50 hours, including mapping, testing, and training. Once implementation was complete, they could extract data automatically from individual WIP reports into their system without manual data entry. A process that previously took The Hartford 30 to 60 minutes to complete took only three seconds by extracting data from an XBRL WIP report. This time saving will occur regardless of a report’s length.
SBQ: What computer equipment and software will users need?
CP: The XBRL data standard and WIP Taxonomy can be used with any software or computer system.
SBQ: What kind of data is next for XBRL standardization?
CP: Our next goal will be standardizing full financials for contractors, which are also re-keyed downstream. The WIP collection of terms (or taxonomy) can easily be expanded to do this. Automating data collection of financials, in addition to the WIP, will improve efficiencies for all reporting supply chain members.
SBQ: How soon will data standards implementation take effect?
CP: Timing depends on how quickly the industry adopts it. To recognize full efficiencies, we need all sureties, contractors, and bond producers to adopt the standard, with contractors and their vendors producing XBRL data and data users consuming data in XBRL format. Organizations can help shape the new industry standards by becoming early adopters. Contact XBRL US at [email protected] for more information. Keep an eye out for more articles in future issues of Surety Bond Quarterly on how the establishment of data standards will impact bond producers, their clients, and other surety team members. ●