4 Reasons Why Finance Should Care About Data Management
Finance data lives in many places within the company and goes by many names—chart of account, cost center, product code, business units, projects, legal entities, as well as core reference data such as billing codes, taxonomies, geocodes, and product classifications. And the finance functions of most organizations typically have a process for managing and changing this data. Unfortunately, having a process isn’t enough: many organizations struggle with their visibility into financial data management processes. Business users rely on emails, phone calls, and spreadsheets to help facilitate the process. And if the tools themselves aren’t confusing enough, the process for reviews and approvals can be just as frustrating. This is particularly true in large organizations with complex operations with multiple business units spanning different geographies, where—to put it politely—managing finance data can be extremely challenging.
In this blog, I discuss 4 reasons why finance leaders should care about data management. Let’s dive right in.
Reason #1: Ensure Accurate Internal and External Reporting
Financial Planning and Analysis (FP&A) teams play a crucial role in companies by performing budgeting, forecasting, and analysis to support the CFO, CEO, and the Board of Directors’ major corporate decisions. Finance users utilize both quantitative and qualitative analysis of all operational aspects of a company to evaluate the company’s progress toward achieving its goals and map out future plans. While generating internal reports for executive decision making is a priority, FP&A teams also spend a lot of time on month-end, quarter-end, and year-end reporting that needs to be sent in specific formats and in a timely fashion to meet external compliance requirements. Depending on the industry, these compliance requirements can vary from simple to complex reporting that have both financial and reputational risks associated with them. As a result, many finance teams find it increasingly challenging to produce meaningful and timely responses, especially in analyzing results and preparing forecasts across various business lines in a volatile environment.
Automated reconciliation and validation of finance data across regional and global systems can help improve the record to report process. You can consolidate, cleanse, and harmonize finance data to improve both internal and external reporting requirements. By creating an enterprise view of the financial chart of accounts, cost centers and legal entities, and by creating a consistent definition of financial and reporting structures across general ledger systems, financial consolidation, and planning and budgeting systems, you can not only automate the creation of reports but also ensure they are accurate.
Reason #2: Implement Successful Business Transformation Initiatives
According to PwC, even in top quartile companies, analysts spend 40 percent of their time gathering data, instead of working with it. That’s largely due to how typical organizations have hundreds of applications and systems where data is scattered. Data used by finance spans across ERP systems such as SAP, Oracle, Workday, Lawson, and others. What makes it even more challenging is that companies often go through mergers, acquisitions, and restructuring initiatives that bring more complexity to the data landscape.
By managing finance data centrally, finance teams can easily compare acquired entities’ account structures with established corporate account structures. By aligning the account information between merged entities, finance can redesign and build a new global chart of accounts as part of M&A activity. They can model what-if scenarios when creating new corporate structures and visualize those reorganizations. This leads to a flexible and agile approach to assimilating transformation initiatives and ensures the decisions are based on data.
Reason #3: Enable Self-Service for Finance Users and Reduce Dependency on IT
One of the most prominent challenges organizations face is the fragmented nature of the systems and processes that simply do not allow business users to get the data they need on time. Finance users responsible for analysis, forecast, planning, and reporting activities rely heavily on IT for access to the data they needed. Finance users also depend heavily on conventional tools. According to one Deloitte study, 75 percent of the finance users say they use spreadsheets to prepare budgets. Finance users who rely heavily on spreadsheets that get sent over email and saved in internal SharePoint folders adds to the chaos, making it significantly harder to accomplish day-to-day tasks.
An easy-to-use finance data management solution, built on a cloud architecture with built-in intelligence to serve the data finance needs for analysis in a timely fashion, can help reduce the dependency on IT. Finance users need to connect to the source of data across enterprise applications and understand the variations and dependencies in a visual interface. They also need the ability to carry out routine changes to finance data such as cost-center roll-ups, account hierarchy changes, and adding new profit centers. Adding a workflow-based approval process and capturing the audit trail of changes can significantly reduce dependency on resource-intensive IT release management cycle and improve finance activities.
Reason #4: Centralize Governance and Streamline Finance Operations
Finance serves as an integral part of the management team to support value creation by identifying opportunities and providing critical information and analysis to make superior operating and strategic decisions. Finance needs to define, manage, and secure data to ensure accurate reporting to comply with regulations.
Organizations need to remove finance and reference data inconsistencies in enterprise applications and the operational overhead involved in managing their data. Compliance with regulations like Sarbanes-Oxley requires companies to have processes and tools that support data traceability, separation of duties, history, and lineage. Additionally, all data changes, approvals, and tasks have a date and time stamp. These capabilities can be leveraged during an audit to address any data discrepancies.
The Bottom Line
Finance needs to play a critical role in ensuring organizations continue to thrive. This requires investment in new practices and technologies that increase the effectiveness of the function. The advancements in technology and the availability of artificial intelligence and machine learning make it easier to automate finance data management. I am excited to discuss more about this in our upcoming Finance 360 Summit that features expert speakers from Ventana Research, KPMG, and Informatica. You will also see a demo of the Finance 360 solution in action. I look forward to seeing you there.