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Summary
Finance organizations have benefited from automating many repetitive functions. Enterprise resource planning (ERP), accounting and business intelligence (BI) software helped cut the average cost of operating a finance department (measured as a percentage of company revenue) in half during the 1990s. However, since then most companies have made little further progress in increasing the value of these systems, probably because they have extracted the readily available efficiency benefits. It's time for CFOs and controllers to look elsewhere to move to the next level of delivering value through their information systems and the processes they support. Organizations need to make better use of the information that is available, which means they (and their IT departments) also must deal with the systems complexity characteristic of most companies with more than 5,000 employees.

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Finance organizations today rely on a complex array of enterprise applications to manage and record transactions as well as create reports. Our research shows, for example, that most larger companies use ERP and accounting systems from three or more vendors. Today's ERP systems collect a much more comprehensive set of information about a company's activities than did those of a decade ago. Corporations could use this information to, for example, support better decision-making or improve coordination between functional departments and business units, but the complexity of these systems makes this difficult. Each product has specific functionality and handles data in its own way, typically stores it in a separate data store and may be unable to exchange the data readily with other systems. Moreover, different parts of the business may use different charts of accounts, often as a result of mergers and fundamental differences in the natures of the business units. Both the lack of connections between applications and inconsistencies among financial and operational data can have costly impacts on a company. As merely one example, the monthly management reports may take weeks to create - an unacceptable delay given today's accelerated pace of business.

Companies typically have based reporting and analysis on traditional accounting measures as well as some high-level operating data (units produced, utilization rates or number of employees, for example). However, relying on accounting information as the basis for management reports limits companies to producing information mostly about the past. Fortuitously, as organizations have added customer relationship management, supply chain management and other externally facing and operating functions, they have begun to collect a much wider range of data that can be used to monitor and measure current performance.

Our research reveals, however, that many organizations do not do well at amalgamating and utilizing either detailed operational information or information about markets and competitors. Additionally, they typically do not compare their performance to that of others in their industry - an unfortunate consequence of the old habit that the budgeting, forecasting and review process in most companies occurs in an "us-vs.-us" context. It is increasingly practical today to collect operational information centrally and disseminate it to managers in contexts that enable them to evaluate their business performance. But many companies still assess their performance and their options too narrowly, within their conventional frame of reference. Ventana Research believes that they should search for new tools more broadly, as part of an undertaking to make financial processes more effective by establishing a modern foundation for information.

An emerging approach to the establishment of this foundation is financial information management (FIM), which encompasses both processes and technologies to manage data about finances, internal operations and external market and competitive indicators. FIM offers a path to regular availability of significantly more current and complete financial information that also is consistent and reliable. Applying it, organizations should be able to unify all the data used in their financial processes, statements and reports. FIM increasingly should encompass data integration, data quality and master data management (MDM) technologies, since these provide a consistent and comprehensive single view of all data without forcing every department and business unit to use the same application or format to work with it.

Assessment
To improve their company's compete successfully, finance executives must improve their abilities to execute and manage to corporate strategy. More than ever, they need to focus on improving the effectiveness of the finance organization rather than trying to eke out small improvements in efficiency. To be able to do this as well as improve performance and align actions to strategy, our benchmark research shows, they must manage financial information better. Inadequate information and poorly designed processes together limit how well Finance- and, indeed, all departments - can do their jobs. Addressing these shortfalls should not be a single big-bang effort, but rather a disciplined series of steps, each building on the previous, that address the dimensions of people, processes, information and technology.