Three new approaches for the data driven chief financial officer

Intuitively, many of us recognize that the decision window for executives has been shrinking with each passing year. Information dissemination has become real-time
and on demand; however, the challenge for many finance functions is to try and keep pace with all the modern sources of insight and analysis that internal and external stakeholders are  receiving. Let’s explore how organisations are transitioning from a periodic, ad hoc reporting paradigm to real-time reporting.

New approach one: Close faster to enable real-time reporting

The faster close has long been an objective of many finance functions. A fast close is one that minimises the time to release monthly or quarterly financials after the period ending date. However, leading organisations have realised that many of the techniques used for achieving the fast close actually enable even more frequent levels of reporting.

When the databases are updated and available in real-time, reports of various sorts can be issued more frequently. Frequent reporting can take pressure off the month end financial report, as managers are able to identify problems and act earlier to find solutions. This ability to monitor and react improves performance.

New approach two: Aggregate data from disparate sources to improve analysis

Today, leading financial systems address many of the shortcomings of the traditional approach to ad hoc reporting. These systems enable operational data from outside of the financial system to be integrated with the other disparate systems where the data resides. This live connection is continuously updated and maintained in real-time. When cloud solutions are deployed, these connections can span different entities and geographic locations seamlessly.

Leading financial systems have the tools ready-built to aggregate and analyse data for user-defined periods and parameters. Using an analysis tool that is built into the system, instead of using an external spreadsheet, enables the development of real-time reports to meet the specific needs of the users without breaking that all-important connection to the underlying sources of data. These real-time templates can be saved and the analysis repeated with the passage of time without any need for redoing the set up or the need to reconcile information between different sources.

New approach three: Implement dashboard reporting to monitor the financial pulse

Executive dashboards are to businesses what cockpit control panels are to pilots. It’s the business equivalent of dials and metres, all designed to provide a user with a snapshot of the status of the business using KPIs. The KPIs should be a mix of financial and non-financial indicators, which means that data from outside of the financial system is leveraged with financial data to provide a more insightful perspective of performance. This would include information about volumes, pricing, shipments, utilisation, etc. Most organisations find they are able to identify 8 to 10 key performance indicators that really drive performance and these become the metrics that populate the dashboard.

Modern dashboards are interactive for the user and add more value than a static printed report. The true insight comes from a user’s ability to drill into the various metrics on their screen and interact with the underlying data. This data can be sorted, spliced, and drilled further, all the way back to the transactional level, to give users a deeper and richer understanding of the underlying cause and effect of what has happened.

Dashboards should drive management action and decision making. When indicators fall outside an acceptable tolerance range, dashboard indicators should make these deviations obvious to the user.

Changing the role of finance staff

The role of finance is to ensure that the data included on a dashboard has integrity and that the right metrics are presented. The adoption of enabling technologies enhances reporting integrity by maintaining the live connection to the underlying sources of data alleviating finance people of this time consuming activity. As a result, these types of technology change the role of how finance people are deployed.

Conclusion

As an executive, you have a decision to make about how you choose to deploy your human resources and the extent to which technology enables your finance department to add more value across the enterprise.

A fast close mindset helps because it heightens the need to maintain data integrity throughout the period instead of just once a month. Once this real-time mindset is adopted, opportunities for more frequent weekly, daily, or even on-demand reports and analysis emerge.

Real-time reporting is greatly enhanced when the middleman, a spreadsheet, is eliminated from the equation. Disparate sources of data are seamlessly aggregated within a strong analytical tool.

A tool that can sort, slice, and dice data to answer the sorts of everyday business questions that often arise. Well-designed and implemented dashboards give you the best possible control over financial processes. Dashboards are user defined, easily tailored, drill-down enabled, and visually direct attention to the important KPIs of the business.

Are your IT and finance resources buried in ad hoc analysis? Is it a challenge to have strong, decision-relevant information at your fingertips to manage the business with confidence? Then, evaluating your own reporting systems is your next step. We at Akuna Solutions can explore with you how to leverage the most modern technology available today to improve your private equity firm’s reporting.

Photo by Joshua Woroniecki on Unsplash