For 30 years, CFOs have been trying to become the business partner that other functional areas have been screaming out for. But in spite of ploughing big money into advice from management consulting firms, there’s been little movement.
So, heavyweight consultants have been allowed to set the agenda for transforming finance, mainly focusing on:
- optimising finance processes
- developing individual solutions for regulatory reporting
- defining roles and responsibilities within the finance department.
Cast adrift on a data silo
All this has achieved, however, is huge investment in ERP platforms. Plus, reporting islands have had to be built on top of the ERP platforms to ensure that statutory reporting requirements can be met.
These reporting islands have become a massive challenge for the finance department because the data quality (both input and output) is very poor. Not only that, but the reporting solutions only work with a subset of available data, and preparing and extracting the data is very time consuming.
The root of the problem is that whenever application-driven finance departments like these receive a new reporting request – whether from internal or external stakeholders – they develop a specific solution for it based on its individual data, data definitions, and business rules.
We have to change
Now, a new generation of CFOs realise that the traditional way of preparing and delivering analytics has to change.
Therefore, data has shot to the top of the corporate agenda. The previous way of doing things evangelised by management consultant companies is still valid but now, granular data access and data management play a significant, and more central role.
Data management is key to moving away from the application-driven approach – widening the focus from simple output, to establishing a data foundation. In other words, becoming a data-driven organisation.
A data-driven finance department has the following objectives:
- improving decision making across finance and other functional areas
- managing the ever-increasing regulatory reporting requirements
- enhancing the controlling capabilities
- improving cost efficiency and lowering the cost-to-serve.
The principal’s new principles
None of these objectives are new, but becoming a data-driven CFO requires a fundamental change to design principles. Fortunately, data-driven design is practical and remarkably straightforward:
- access to all data (in one place)
- all data means ERP and non-ERP data
- data at the most granular level
- common definitions, metadata, and business rules have to be defined
- develop and implement activity-based costing rules to enable multi-dimensional profitability.
Following these design principles can create one large data foundation to be used for all analytical and reporting activities – both within, and outside the finance department. And full traceability and reconciliation of any output (reports, dashboards, etc.) from the data foundation have to tally with the aggregated financial data in the general ledger in the ERP platform.
Because, as John Donne himself might have said, ‘if they don’t match-up, then this manner of data management is just another reporting island. It will never be able to meet the increasing analytical requirements from internal or external stakeholders in a cost-efficient manner’.
And the bell will keep on tolling for CFOs and their finance departments.
This post first appeared on Forbes TeradataVoice on 10/02/2015.