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Financial Intelligence 101: What It Is (And Why Your Organization Needs It)

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insightsoftware is a global provider of reporting, analytics, and performance management solutions, empowering organizations to unlock business data and transform the way finance and data teams operate.

Blog Financial Intelligence 101

In our technology-driven world, financial intelligence is the organizational concept that fuels how best-in-class finance teams operate.

While financial intelligence is driven by having the right sets of processes and tools in place to empower the finance team to access the information it needs, financial intelligence is itself a higher-order thinking. It’s data analysis instead of just collection and reporting. It’s insight that creates and enables value, not just reporting on business performance. It’s a culture of empowerment, proactivity, and expertise.

What Makes Finance Different

Financial intelligence starts by recognizing something fundamental about financial data. Financial data is different from all other sets of data that the organizations report on. It’s messy. It’s multi-dimensional. Reporting structures don’t roll up into nice neat hierarchies, and they change. In addition, many finance processes are time critical. This means finance needs a completely different set of reporting and analysis capabilities to other parts of the business. For example:

  1. Finance needs to be able to drill into data at a granular level when it comes to reconciling accounts or resolving variances to examine balances, journal entries, and subledger transactions.
  2. When an adjustment is posted, finance needs to be able to see it reflected immediately in their reports.
  3. Finance must be able to run comparative reports across different time periods, over budgets and actuals, and be able to analyze and investigate variances.
  4. Finance needs the ability conduct complex searches on multiple entities, such as where it makes sense to focus collections efforts for account receivables.

Many finance teams are held back by their current tools, which often leave them dependent on IT or working with stale data, which create delays and breeds frustration. So financial intelligence is about giving finance purpose built tools to meet their unique reporting needs.

Empowering the Narrative Beyond the Numbers

But, financial intelligence is about more than just having access to the right numbers in a timely manner. It also requires a narrative that tells the story behind those numbers. When you can share a clear, consistent story, you participate in raising the level of financial intelligence of the entire organization.

With narrative and context, it is easier for managers and leaders outside of finance and accounting to practice financial intelligence, by asking questions about numbers that may not line up. Financial intelligence also empowers non-finance members of the business to accurately assess financial reports and use that information to make decisions about both their specific area of expertise and the business as a whole.

This is especially important for those outside the finance function, as often even their job performance is measured by the financial impact they are driving. Clarifying each non-finance role’s financial priorities, proactively understanding the financial results that role delivers, and using that knowledge to make appropriate adjustments to plans is all part of being financially intelligent.

Real-Time Data Feeds the Intelligence and Narrative

If financial intelligence is driven by a deeper understanding of a company’s finance and accounting numbers, then it’s important to make sure those numbers are driven by accurate data. Compromised accuracy will in turn result in compromised financial intelligence, with understanding based on erroneous results and decisions based on bad data.

Data and information are the basis for financial intelligence, sound decision making, and optimal action. ERPs, for example, perform an essential role of gathering and organizing data. The issue, however, has been accessibility and usability of that data. Native ERP reporting solutions have tended to be IT reliant and overly complex. So getting data back out of the ERP in a usable fashion for finance has been an ongoing challenge.

Even the shift toward role- and task-specific applications provides challenges: While these tools may help put information in the hands of those who need and use it, users need to remain vigilant that this does not end up causing a data silo. The increase in data availability must be accompanied by end user tools that support real-time access to all relevant data across the organization to build financial intelligence.

As you’re building your financial intelligence, keep these questions top of mind:

  • Is your company leveraging the right data in decision making?
  • How do you acquire data to fill in metrics, KPIs, or data visuals?
  • What would easier data access for decision making look like?
  • Are you using financial storytelling to inform the company about current state and future plans?

Roadblocks to Financial Intelligence

Business intelligence tools have become software staples for many companies as they hone their financial reporting to build financial intelligence. The ability to explore, visualize, and share business data has given organizations a foundation for better and faster decisions.

Yet while business intelligence serves most departments well, it falls short of the finance department’s very different data needs. For example, digging into a variance issue on a BI dashboard is impossible, because it requires drilling from summary data right into the transactional detail, to examine journal entries or subledger transactions. That data is spread across multiple tables in the ERP system, and is at too low a level to be loaded into the data warehouse that your BI tool is pulling from. Business intelligence tools provide beautiful dashboards, but they’re simply not equipped to cope with finance’s very different needs.

Companies that have mastered financial reporting will tell you that business intelligence and financial intelligence are not the same thing. If you’re hitting any of these roadblocks with your BI tool, it’s possible you’ll need a different solution to realize true financial intelligence.

  1. Data is not real-time. Real-time data is a “holy grail” in financial reporting. It’s critical that a reporting solution offer direct connections to your ERP and other systems so that users can work with live data. This gives finance teams the productivity they need to quickly investigate issues with a trial balance or to validate that an adjusting entry was posted correctly during the close process. Without that access, finance is working with static, stale data that is often exported to a spreadsheet for manual manipulation. This introduces the risk of human error resulting in other business users basing their decisions on inaccurate data.
  1. Reporting is highly manual instead of automated. Reporting tools that have been optimized for finance should simplify even the most complex reporting tasks, allowing a wide range of reports to be instantly generated. This helps finance rely less on IT and developers, empowering them to run at the speed of business. With repeatable and refreshable reports available at the click of a button, finance can spend less time creating reports and more time analyzing them for valuable insights.
  1. Data from multiple sources cannot be combined without a lot of work. Your ERP isn’t the only system that will generate data to feed financial intelligence. Data from other business critical systems—such as other ERPs, CRM, HRM, etc.—may also need to be integrated. Combining disparate data and reports manually in Excel only compounds the issues, which ends up draining more of your valuable time and further increasing the risk of errors.
  1. Reports aren’t self-service. Most native ERP reporting structures are outside of the knowledge base of the average finance user, resulting in finance teams that are reliant on developers and IT for reporting. Financial reporting tools that have a deep understanding of ERP systems and their data structures empower finance teams to create their own custom reports and ad hoc inquiries at any moment to provide data for increased financial intelligence.

Unleashing a powerful narrative to tell your company’s even more powerful story can only happen with the right kind of data access and financial intelligence. Build confidence in the numbers behind your financial smarts with reporting solutions from insightsoftware. Leverage real-time data in dynamic spreadsheets for those who love numbers, or through easy-to-navigate dashboards and visual analytics for everyone else.

With reliable numbers and a team that has the financial smarts to accurately interpret the narrative, your business can drive performance transformation and achieve greater success.

Learn more about how financial storytelling can take financial intelligence to a whole new level of strategic insight. Contact us today for a free demo.