Financial Reporting

When you were a kid, did anyone ever try to get you to rub your stomach in a circle while rubbing your head at the same time? Usually this results in a burst of laughter, because for some reason, doing two things at once is harder than it sounds. Don’t expect that kind of laughter in many IT departments, though. In fact, one of the reasons CFOs and CIOs have had an occasionally strained relationship is due to technology teams feeling stretched in too many directions at once. That’s why it may have raised some eyebrows a few years ago when Gartner Inc., one of the major tech research firms, suggested CIOs respond with something they call “bi-modal IT.” This post on ITBusinessEdge manages to get the idea across in a single sentence.  “The idea is that traditional infrastructure is best at supporting traditional applications like CRM and ERP while hybrid, software-defined infrastructure will house new mobile- and cloud-facing functions such as Big Data analytics and the Internet of Things (IoT),” the author writes, adding that another way to think of it is spending part of the time on traditional technology functions while working in parallel on more exploratory things. The Move To Self-Serve Business Intelligence  Stress levels among CIOs aren’t the only things leading Gartner to suggest bi-model IT, however. As Information Week recently reported, it’s also being driven by a demand for more self-service type of applications within business departments. The magazine covered Gartner’s most recent ranking of key business intelligence (BI) software providers, and suggested that second mode of being more agile is particularly helpful to those needing BI. “In this scenario, BI and analytics tools become an underpinning to the entire infrastructure and all its tools, easily accessed by users who need the intelligence, rather than a discrete tool provisioned and allocated by central IT,” the story said, although there was recognition that the changes will be gradual. “Basically, don’t rip out your current investments. Rather, as you implement new projects, look for ones that offer Mode 2 delivery models.” The interesting question now, is, who will emerge as the BI user group that demonstrates the power of bi-modal IT? Will it be sales, which has an urgency around revenue generation, marketing departments that want to prove their value, or finance departments that need to offer a holistic perspective around business performance? Whoever it is, the main thing is not to necessarily describe what you’re doing as a bi-modal IT strategy. It’s about being strategic in how you put together the needs and the delivery model to make BI more effective for every department in the enterprise.

No one is saying P&L information isn’t important, but for finance department leaders, it may just be the tip of the iceberg. At least that’s the only interpretation you can really make when you look at the recent results of a survey of CFOs that was published on CFO Practice Advisor. Conducted by cloud ERP provider Intacct, it showed an overwhelming majority (80%) see reporting and analytics as their top priority. “These results show that the CFO role is evolving beyond functional aspects—such as closing the books and mitigating risk—to become a more holistic strategic advisor, empowered by insights and able to pinpoint and advise on strategic efficiencies and opportunities across the company,” the article said. None of this will be too surprising to CFOs who for years have been looking at playing a more transformative role in the enterprise. In fact, it may confirm how important it is to make better use of information and use this kind of data as a benchmark for how they spend their time. The Machines Take Over? The one question the research raises, of course, is how finance departments can turn reporting and analysis into something more meaningful to their organizations. An interesting and speculative look at the possibilities recently ran on the Financial Executives International site, which identified reporting among the top five CFO priorities. It sounded like something out of a science-fiction movie: “With machine learning, CFOs can automate financial reporting tasks that were previously extremely time-consuming and gain deep insights into the large volumes of data they are collecting. The true power of the latest generation of these tools lies in the ability to anticipate business needs, staying ahead of costly incidents like unexpected maintenance and business downtime for customers. It is changing the way that finance professionals do their job while driving the transition from controllership to stewardship. As a result, CFOs and their teams can leverage machine learning to free themselves up from manual data crunching to focus on analyzing the insights the data provides them.” Realistically, though, it may take a while before that kind of artificial intelligence permeates the finance department of the average enterprise. In the meantime, there’s still a lot of technology available on the market today to make reporting faster, easier and more valuable. CFOs clearly know this is where they need to double down. And as they already know, in today’s fast-paced businesses environment financial reporting and analysis tools are a must. Perhaps by the time a similar survey is conducted next year we’ll be able to see some amazing examples of the results.

It’s one of those quotes that’s been attributed to many different people, but whoever said it was onto something: “When everything is a priority, then nothing is a priority.” In fact, you could say the same thing about key performance indicators. Everyone knows key performance indicators (KPIs) are important, but that doesn’t mean organizations always achieve agreement about what those KPIs should be. Even in finance departments, this can still be an issue. A case in point: Computer Business Review recently published some interesting stats from the Chartered Global Management Accountant (CGMA) organization that suggested CFOs need to find KPIs that will not only look at profit and loss but intangible assets as well: “Around 76% of the respondents believe the top value drivers for their businesses is customer satisfaction, while 64% gave priority to business processes . . . However, only 15% of the respondents reported that they have dedicated finance (expertise) in their organization to fully engage with regards to ‘providing non-financial measures of progress towards strategic intent’.” A post on Innovation Enterprise does a good job of summing up the more traditional finance department KPIs. These include overhead rate, cash flow, and profit-to-earnings ratio, among others. Because of the disparity of this data, tracking these metrics in Excel has been a standard practice for years, and advancements in cloud-based corporate performance management (CPM) tools only make it easier and more powerful to centralize and report on. And there are even more metrics outside of finance where a reconsideration of KPIs could be transformative for businesses. But the flip side here is the risk of information overload by not being selective enough in the KPIs you need to track most. Put another way, if every metric is a KPI, then none are KPIs. Here are a few ways to get the best of both worlds: 1. Think Like a Boss In Top 10 KPIs You’ll See on A CEO’s Dashboard, a blogger on DZone walks through some interesting possibilities that should be applied not only by the top dog but almost any business unit leader. “Revenue per employee,” for example, might make sense in some professional service firms, while “employee engagement” could make a big difference in consumer-facing companies. 2. Choose With Care “Limit your strategic goals to about 5 or 6 really important ones to allow a clear understanding without too many options. Then the data should correlate with that strategy,” suggests an article about KPIs and big data on Information Management. “If the performance indicator is truly key, a poor result will trigger remedial action.” Lots more great advice in this piece. 3. Keep Technological Change in Mind You could argue that a growing number of organizations are becoming service providers of one kind or another, particularly if they offer any product or service online. That’s why it’s worth reading Three KPIs For the New Digital Age in Pipeline magazine, which recommends measuring the impact of cloud computing, the ability to drive innovation and evolving from quality of service (QoS) to “quality of experience” as a metric. The process of defining and tracking KPIs will probably vary greatly for those running Sales, Marketing, Human Resources or other non-financial business units, but the use of Excel is likely to be the one thing that’s common across the organization. As a tool that’s flexible, aligns with existing skill sets and has the capability of solving enterprise-grade business problems, it meets all the KPIs and its analysis that matter. Regardless of the technology you use, you would be wise to keep these guidelines in mind when considering which metrics are true KPIs, which ones to manage actively, how to track them and, most importantly, how to translate them into smarter, faster decision-making for your business.

A few months ago, a single e-mail message from someone at Reuters was mistakenly sent to more than 33,000 unintended inboxes. Even worse, it generated days’ worth of responses in what became known on social media as #ReutersReplyAllGate. Among other descriptions, this misstep is a textbook example of a poorly executed feedback loop. Here’s a more typical scenario: sending Excel templates for financial reporting and analysis to LOB managers across an organization. They review it, verify back to the sender that they have done so, and offer value-added insights into the numbers – but they do it one email and spreadsheet at a time. For many finance departments, this may sound like business as usual, or a logistical nightmare of version control and data consolidation issues. Don’t give up hope, though: more effective, automated and auditable feedback loops are both attainable and worth the effort involved. Know Your Loops Josh Kaufman, author of The Personal MBA, offers a great breakdown of different feedback loops, which he defines as something that exists “when the output of a system becomes one of the inputs in the next cycle. Feedback is how systems learn — if the system is capable of perceiving its environment, that feedback helps the system understand whether it’s under control and satisfying the required selection tests.” Finance departments today might suffer from what Kaufman calls “balancing loops” — where hundreds of pages are distributed in the reporting process, offering great insights and variance analysis, but executives fail to carefully understand their results, assess the impact, and make faster, smarter decisions as a result. That’s when change becomes difficult, if not impossible. A better variation – for Finance in particular – is what Kaufman calls “reinforcing loops,” which amplify the system’s output. In other words, the reporting process becomes something that continuously pushes everyone involved to improve their contribution and the overall result. When Feedback Gets Formalized No one likes introducing more structure, of course, but a formal process for offering and tracking feedback make sense on every level, according to a post on EffectiveManager.com, whether it’s manager-to-manager, manager-to-subordinate and so on. Just make sure to treat it as a living, breathing process rather than something you try once and then abandon: “To be effective, they need to be regular and ongoing in terms of keeping in touch with subordinates, but also ‘just in time,’ to help managers have the appropriate conversations when necessary,” the post said. “As a means to collaborate, to stay informed and to communicate, feedback loops are an essential part of effective management.” The whole point of the reporting process, in part, is to help business leaders accelerate the identification of threats and opportunities while ensuring everyone is on the same page. A recent article in Entrepreneur magazine suggests it will also create a healthier corporate culture: “People are driven by extrinsic motivators like recognition and compensation or the intrinsic achievement of mastery,” the article said. “All these share the common theme of positive transformation. When leaders vocalize that, they empower their employees to do their best work and step into expertise or leadership roles.” The reporting process isn’t just about “keeping people in the loop,” in other words. It’s about creating a feedback loop that keeps companies cohesive, strong and focused on the same strategy and goals.

More than 70% of global executives use spreadsheets to track and manage financial reporting data on a daily basis, according to a survey by Accenture and their partners. The survey also revealed that while finance executives often use a dedicated application to consolidate data, they still rely on spreadsheets to extract specific information or collect data across disparate systems.The enduring popularity of spreadsheets is a testament to the fact that many executives prefer to remain in the familiar environment rather than invest vast amounts time and money into procuring and being trained on a new system. However, using spreadsheets in combination with disparate applications represents an inefficient approach to financial reporting that does not give executives access to accurate, up-to-date data or the ability to make meaningful decisions. Why today’s approach to financial reporting is not ideal On their own, spreadsheets are static and do not contain security features that prevent contributors from making unauthorized changes to cells or formulas. As a result, spreadsheets alone do not give executives a clear, comprehensive or accurate view of all numbers generated by their financial reporting processes. In fact, almost half of C- and VP- level respondents to the survey said that the lack of visibility into financial reporting data affected their ability to explain why their quarter ended the way it did. According to Scott Brennan, Executive Director of Accenture’s Finance and Enterprise Performance Consulting Group, these respondents “don’t have all the dimensional analytics they need to be able to go on the earnings call and say, yes, margins were up here, and here are the product lines or customer segments or geographies that drove that.” Since executives are not likely to move away from spreadsheets any time soon, companies need to find a way to bring current financial, management and performance data together without leaving spreadsheets behind. The most effective solution would be one that connects companies’ spreadsheets to their core financial system, so that up-to-date data is automatically fed into spreadsheets for further use. This kind of solution eliminates the manual transfer of data and its associated risks. It also gives finance teams a comprehensive overview of crucial data, facilitates easy root cause analyses of quarterly outcomes, and allows executives to ask the right questions and get the meaningful answers that drive business growth. The Take-Away  The majority of executives worldwide continue to rely on spreadsheets when it comes to financial reporting. However, on their own, spreadsheets are static and cannot ensure data integrity or provide real-time insight into a company’s financial, management and performance data. As a result, executives have difficulty making connections between their financial, management, and performance data and are typically unable to make well-informed decisions about the future. Since executives continue to rely on spreadsheets, companies must adopt a solution that connects with their core financial system and automatically feeds data into spreadsheets, so executives can analyze final numbers with having to go through multiple request layers. The solution should also be flexible enough to accommodate a range of business processes, so separate applications do not need to be maintained at a high cost.

No one particularly enjoys tax season, whether they’re mere individuals filing their financial paperwork for the year or CFOs at large corporations overseeing billion-dollar budgets. No one particularly enjoys tax season, whether they’re individuals filing their financial paperwork for the year or CFOs at large corporations overseeing billion-dollar budgets. For all of the above, paying taxes can be painful – it’s expensive, it’s logistically messy and it requires having a great deal of information at your fingertips. For a large enterprise, there’s no better time than tax season to revamp your approach to financial accounting and make sure you have a good handle on all tax-related matters. This can be quite the challenge, as it requires understanding all of your financials including your projected revenue and annual expenses. It’s also a matter of looking to the future and forecasting how your needs might change. According to The Corporate Treasurer, cloud computing is a godsend for meeting all these needs and more. Financial data can be complex, but managing it all in the cloud makes it easy to find the information you need and act upon it in a timely fashion. Channing Flynn, a tax partner at Ernst and Young, says cloud-based finance has changed the way the entire business world operates. “Cloud computing offers borderless commercial transactions on a virtual network where users can get goods and services anywhere in the world,” Flynn explained. “In this way the digital economy has created opportunities for taxpayers to relocate their business.” Whether you’re running a small shop that’s contained in one office building, or a multi-national corporation that faces numerous logistical challenges, it’s important to have the right financial software that can help you grasp the complete picture. You want to get all your information right and have a holistic understanding of your surrounding financial climate. Ideally, you’d also like to project how your tax needs might change in the years to come. The more information you have, the better off your business will be. Click here to read the full article.