CFOs are under increasing pressure to act as strategic advisors for the organization. Taking on this role requires them to produce and analyze in-depth insights, not only around finance but the entire business operation. Until now, gathering and understanding this data has not always been an easy task. CFOs are increasingly seeing the value of evolutionary finance business intelligence solutions which effectively combine standard data discovery and visualization features with planning & control and closing & consolidation capabilities.
Why traditional business intelligence software falls down in finance: 5 key challenges
Traditional Business Intelligence (BI) software has been used to present and analyze financial data for years, with dashboards and reports being used by management around the world. But these visualizations only provide a historical picture, lacking the ability to effectively model data, create scenario analyses, accomplish simulation duties, and support closing & consolidation activities. As a result, CFOs are not provided with the proper insights they require to guide the strategic direction of the business.
Some of the key challenges of using traditional BI software in finance include:
- Lack of integration with the planning & control process – making it difficult to analyze, plan, and simulate effectively to provide a forward-looking perspective and accomplish complex gap analysis between actual and planned data
- Lack of ability to properly manage consolidation and driver-based allocation – creating difficulty in determining and analyzing profitability across corporate dimensions, and adapting the solution to the opening of new sales channels or entry into new markets (for example, new product introductions)
- Lack of ability to drill down to transactional level – making it hard to understand where data originated from and the underlying cause of results or anomalies
- Lack of a global view in data visualizations – showing how most BI tools don’t effectively integrate multiple general ledgers, different legal entities, and cross-company data into one single view
- Lack of ability to effectively organize, and reorganize, financial data – demonstrating that, with many BI tools, it is difficult to create P&L schemas (such as IFRS, GAAP, or managerial) with different timelines while ensuring the ability to examine data by different dimensions
The result of these challenges is a reliance on finance’s faithful companion, the spreadsheet, to manage tasks such as driver-based simulation, profit-and-loss and balance sheet schemes, reporting, planning, reconciliation, closing, and consolidation. As a result, the siloed spreadsheets used to perform these activities:
- Lack accuracy – spreadsheets are static views of data which soon become outdated, making it harder to make meaningful decisions based on accurate figures
- Are difficult to update and share – keeping everyone in the loop with the latest information is challenging when new versions are produced regularly
- Are unsuited to the combination of data from different sources – merging data from multiple sources, and formats, is extremely time-consuming and can lead to mistakes
What CFOs need in a finance business intelligence solution
To overcome these challenges, modern CFOs need financial business intelligence solutions which are combined with planning & control and closing & consolidation capabilities to go beyond simple reporting. These solutions must mirror the organization’s business model, simulate the impact of specific actions, and support a strong connection between the operations and finance functions of the company in a more integrated approach.
The benefits of BI tools that seamlessly connect to financial planning and reporting
- Advanced data realization tools give the CFO and the finance office more
time to focus on strategy. CFOs, with these advanced tools, are spending less time on gathering and normalizing data from their colleagues in operations
- Business intelligence capabilities of the CFO and the finance office are
increasingly positioning finance as a key driver of enterprise
performance management initiatives throughout the company.
- Increased accuracy. advanced BI applications — those that are seamlessly connected to planning, reporting, and other finance functions — have proved that their predictions are more accurate than human predictions.
The capabilities CFOs need in a modern finance business intelligence solution
- The CFO and the finance team need tools that mirror the organization’s business model and simulate the impact of specific actions.
- It’s important that the CFO works with applications that can extract data from multiple sources and automatically normalize that data.
- With the right technology, finance and reporting functions can connect seamlessly into the simulation and modeling processes, and BI can connect seamlessly into planning.
Find out more in our complimentary eBook – Business Intelligence for the Office of Finance