Attending the Teradata Partners Conference in Washington DC this week I was reminded of one of the more vexing but unseen issues facing finance departments – the difficulty of pulling together data from disparate sources for management analysis and reporting, external reporting and tax. Too many corporations seem to ignore (or under employ) the techniques developed over the past fifteen years to assemble and make accurate, consistent and timely data available without forcing analysts and others to jump through hoops getting the numbers together. One piece of this solution is the enterprise data warehouse for finance (EDWF). There are three main applications for this sort of “EDWF:” management reporting and analytics, external reporting and tax.
One thing our benchmark research consistently finds is that systems complexity is an issue for a majority of larger companies (those with 1,000 or more employees), making it difficult for them to perform a wide range of tasks that require the fusion of multiple data sources for alerting, analysis or performance assessment. A majority of very large corporations (5,000 or more employees) have general ledgers from multiple vendors and even when they use a single vendor’s product, they have multiple disparate instances (different general ledger structures). Some have advocated “best practice” as having a single instance running on a single vendor’s system. For many types of businesses this may be impractical because it’s not cost effective to uproot existing software to implement a single system, or because the company is in businesses that demand fundamentally different account structures. Those structures are meaningful at the business unit level and are appropriate for that portion of the business’s alerting, analysis and reporting. Although some companies have accounting as a centralized shared service across multiple business units, others are decentralized. All of this concerns just the accounting data. Increasingly, management reports (and even some statutory reporting) increasingly require operating data from sales force automation/customer relationship management systems, maintenance repair and overhaul, real estate management, warehouse management, supply chain management systems and so on. (See “Do You Have Integrated Business Reporting Yet?") Data also can reside in multiple repositories such as Hyperion “cubes” that are not readily accessible by a finance department’s other analytical systems creating a financial information management dilemma (See: Information Management for Finance Benchmark).
Rather than having a single source to pull data from so that data and analysis can be assembled quickly and consistently, companies typically lash together management reports from multiple systems and waste considerable time doing so. An EDWF would provide these organizations with a solution that can free up considerable amount of time to do more strategic analyses or free up resources for other purposes.
Ideally, companies would do their management and external reporting as parallel activities rather than trying to get a system to do them in an interlaced fashion. What a company needs to show executives and managers to enable them to run the business effectively is only accidently related to how it reports its results to shareholders. Trying to execute these two different processes in anything other than a parallel process wastes time and needlessly delays getting information to managers. Moreover, in the United States, the requirement to provide information in an interactive form (tagging financial tables and footnotes with XBRL) will place time burdens on them in the close-to-report phase of the accounting cycle. In order to do the tagging and meet deadlines comfortably, company should eliminate the factors that drive unnecessary time and effort into the process. The transition to International Financial Reporting Standards (IFRS) from US-GAAP is another area where a finance data warehouse will be useful in being able to bridge from one treatment to another.
Finally, tax accounting exists in a parallel universe from management and statutory accounting. (See “Taking Tax Out of the Closet”) However, data are collected by finance systems like ERP software in a way that does not always sync with the tax view of the corporation. Most tax departments waste uncounted expensive hours manually repurposing data from accounting systems to suit their needs and waste more cycles proving that their work is accurate. In larger companies, tax departments may not have access to data that could produce considerable savings. One anecdote we heard involved a bank that was able to accelerate the tax benefits of its loan write-offs because the tax department had a data warehouse that enabled it to track loans at a far more granular level than ever.
An enterprise data warehouse for finance is an idea that is long overdue for some companies and for others could be improved, ones that could see a positive return and much enhanced effectiveness from having a single source of accurate, consistent and timely data for a range of analytics and reporting to support corer finance activities such as the close process to budgeting and planning.
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Robert D. Kugel - SVP Research