Business Intelligence (BI) has promised for many years to resolve once and for all the information problems that plague organisations of all sizes. Given the investment that many companies have made in ERP systems and associated BI tools, it is surprising that this is an ongoing problem. However, it is as true today as it ever was, that many companies still derive key reports through the manipulation of spreadsheets which then require reconciliation back to the ERP system to ensure their veracity, before important business decisions can be taken, based upon them.
Despite extensive investment in tools and custom development and the wealth of data held within ERP systems, many organisations still struggle to obtain even basic financial information upon which they can 100% rely. In an era of on-going economic challenges, declining revenues and business re-structuring, Financial Directors (FDs) need better, faster, more trusted information. They need to spend time analysing financial performance and making decisions, not manually manipulating spreadsheets and reconciling data sources.
As Michael Evans, CEO of PrecisionPoint Software insists, if BI fails to meet the financial reporting needs of the business, then it will fail. This should be a prime consideration for any business contemplating a BI initiative.
How much does a bad decision cost the business? With the economy continuing to struggle, businesses cannot afford poor decision-making. The facts are stark: according to a recent Deloitte quarterly survey, nine out of ten Chief Financial Officers (CFOs) said the economic uncertainties facing their business were 'above normal' and one in five expect revenues to decline over the next year. With capital spending a lower priority for CFOs than at any other time in the last two years, while increasing cash flow, cost-cutting, and reducing leverage are stronger priorities than at any point in the last two years, the need for good, confident financial decision-making has never been more important to UK businesses.*
Yet almost two decades since the introduction of packaged business intelligence (BI) solutions, too many organisations are still struggling to understand essential financial and performance information – and making poor decisions as a result. Despite the early promise of BI, the reality for many businesses remains a disappointment.
We see finance departments which are still spending upwards of 70% of time producing management accounts and only 30% analysing the information? Why is it nearly impossible to achieve detailed profitability analysis by product or line item? To drill down from the General Ledger to the line item, rather than open a separate report and attempt to manage the resultant reconciliations issues?Or accurately forecast cash flow? And why should it require expensive and time consuming development work every time the business wants to produce a one-off company report?
The continuing challenges associated with retrieving essential information from ERP systems cannot be justified. FDs are not data analysts. Yet even the ostensibly simple to use BI tools, including many aimed at the mid-market, demand complex data integration and manipulation. Organisations struggle to attain complete integration from a raft of data sources – spending the vast majority of the investment on data cleansing and manipulation rather than valuable analysis and report creation. Even essential profitability analysis – by customer or product – is hard to achieve due to a lack of complete information or the need to combine different sources of data, a task which many FDs are not confident to undertake.
The resultant lack of data confidence sends far too many individuals back to the familiar spreadsheet – despite the proven lack of accuracy (40% of business spreadsheets contain errors according to Harvard research) and information sharing constraints.
Two decades on and the FD's daily decision-making processes are a long way from the original BI vision. Organisations need timely information; they need confidence in profitability analysis, cash flow forecasting, sales forecasting, inventory management and expansion planning; as well as streamlined compliance and regulatory reporting. This is simply not being achieved – and the business costs are significant.
One of the reasons BI has proved disappointing for the FD is that vendors have failed to recognise the need for accounting integrity. ERP systems hold vast amounts of valuable data, but that information is held in silos. Simply putting a generic BI tool on top of that ERP system will only recreate the data silos, creating the familiar problems of trying to consolidate data and reconcile apparently different values.
Not only do generic BI tools have no understanding of ERP structures, they also lack the essential understanding of the specific attributes and complexities of financial data. They do not recognise the Chart of Accounts, the balance sheet, currency conversion rules, consolidation logic or financial audit trails. And with these limitations, the only chance of gaining financial insight is to undertake expensive and time consuming custom development – and even then, project success is far from guaranteed.
With FDs working with ever smaller finance teams, the dedicated number crunching resource is diminishing. Yet the need for rapid access to financial insight has never been greater. The time has come to accept that generic BI will never work for finance and embrace a dedicated financial BI solution that delivers true Accounting Intelligence.
Accounting Intelligence is specific to ERP data; and it must be based upon a fundamental understanding of the complexities of financial data. By automatically extracting the ERP data, embedding Accounting Intelligence, and repurposing it ready for multi-dimensional analysis and reporting, the decision making process can be transformed.
With Accounting Intelligence, FDs gain immediate, unconstrained access to the detailed, line item information held within the ERP system. This transforms business insight, from tracking trends in cash flow to undertaking profitability analysis across different aspects of the business over varying time periods and, critically, producing one-off business reports without requiring custom development.
It is time to accept that generic BI is never going to realise its promise – certainly for the FD or CFO – and embrace a solution that delivers true Accounting Intelligence. And, to achieve that, organisations need to ask two key questions: Is the data fully integrated and reconciled through an understanding of the audit trail to enable complete business analysis without the need to manage data silos? And is the specific accounting functionality available within the BI to enable the Finance department to fulfil their function without resorting to spreadsheets?
It is only by moving away from generic BI and embracing ERP and finance specific analytics and reporting solutions that organisations can finally realise the vision of improved financial reporting and make fast, confident decisions today, out of the box. When the finance department uses the BI solution for reporting and analysis you know your BI initiative has succeeded. Indeed when Finance use the BI in anger, then you can stop reconciling and start analysing.