Business intelligence (BI) tools are part of the furniture in many organisations, especially when it comes to sharing and visualising data.
While BI tools serve many lines of business well and have their obvious merits, they often don’t hit the mark in finance. Finance teams’ reporting needs are too specialised for modern BI tools, so finance needs something different.
After a BI implementation, finance teams often learn the hard way – as if they’re in a bizarre, never-ending spiral. Teams realise there are critical capabilities that their BI software is unable to support, which eventually leads them down an endless path of dumping static data from their enterprise resource planning (ERP) into spreadsheets for manual manipulation.
If this sounds like a familiar situation, you’d better read on…
What’s So Special about Financial Reporting?
We can take a look at multiple scenarios where BI software falls down, leaving finance teams pulling their hair out in frustration. Here are some examples:
- When trying to reconcile accounts or identify variances, finance has to be able to drill into the data at a granular level to examine balances, journals, and subledgers – BI tools don’t let finance get down to this level of detail.
- When they post an adjustment, they need to see it reflected immediately in their reports – BI tools don’t provide a real-time link to the ERP, which can slow down month-end close processes.
- For internal reporting, they need to run comparative reports across different time periods, and over budgets and actuals, to analyse and investigate variances. BI tools weren’t designed to handle the messy financial data necessary to display a chart of accounts and show the desired sub-totals for this type of reporting. This typically requires complex formulae and workarounds, taking report-building out of the realm of finance and creating a dependency on IT.
- When reporting structures change, BI tools struggle to handle these adjustments because everything has been hard-coded. So, even the slightest change to a chart of accounts will send things into a spin – requiring lengthy rework by IT.
Data Warehouses Don’t Solve the Problem
To get the best out of their BI tools, businesses often call in the IT team to set up a data warehouse to transform their data into a structure more suited to reporting.
But this does not solve the problem for finance, either.
A data warehouse typically holds summarised data, which breaks the link to the underlying ERP transactions. This means there is no way for finance to drill into detailed transactional data to investigate and resolve reconciliation or integrity issues.
As the data warehouse is updated only periodically, it introduces a time lag between data entering the ERP and the same data flowing into the warehouse. This lack of real-time visibility hits finance hard at period-end – a time when the team relies on the most current data to handle reconciliations and consolidations, validate adjustments, and produce financial statements. For finance, delays like this are unacceptable.
Finance teams then begin to lose patience and resort to pulling data manually from their ERP, dumping it into Excel and manipulating it into the format they need. This is a long, arduous, and error-prone process, which is compounded considering the investment made in the BI tool. And, even worse, finance teams find themselves working with static data that is no longer connected to the ERP. As new journals are posted or adjustment entries are made, the data in the report rapidly becomes out of date. So, it’s back to dumping data from the ERP and repeating the whole process – a seemingly never-ending cycle.
No More Spiraling
To avoid this spiral cycle, you need to close the financial reporting gap that the BI tools create. Here are some key things to consider:
- First of all, you need direct access to your ERP system so you can work with real-time data, otherwise you run the risk of reporting on stale data.
- Make sure your finance team can build their own custom reports: Any third-party software needs to understand your ERP hierarchies, account structures and segments, and the relationships between tables. With this level of financial intelligence, your users will be working with an interface that speaks their language so they can create their own reports, freeing up IT to focus on other tasks.
- Check that the tool supports drill-down from summary line items into underlying balances, journal entries, and subledger transactions to support investigations and analysis. This capability will speed up time-consuming manual reconciliations and data validation.
- Make sure a third-party reporting tool is able to automate the process so that commonly used reports can be refreshed manually or against a schedule, and don’t need to be recreated from scratch every time. This helps release finance teams from working on dull, repetitive, laborious tasks, leaving them more time to spend on the important analysis.
Finance teams need to break free from this reporting spiral – a never-ending cycle living in the shadow of BI tools foisted on finance just because they work well for other departments. It’s time to recognise the unique reporting needs of the finance team and create a reporting strategy that’s fit-for-purpose for a modern business to make quick decisions.
This post originally appeared in Treasury Management International on January 2, 2020.