3 Approaches to Gain Deeper Financial Insight

If the old ways are now less effective, then what ideas and technologies are replacing them? Industry leading finance teams are using the following three approaches for achieving a timelier, higher quality analysis and reporting paradigm. Let’s explore each of the three new approaches.

#1 Close Faster to Enable Real-Time Reporting

The faster close has long been an objective of many finance functions. A fast close is one that minimizes the time to release monthly or quarterly financials after the period ending date. However, leading organizations have realized that many of the techniques used for achieving the fast close actually enable even more frequent levels of reporting.

Achieving the fast close requires a change in mindset as a first step. Instead of waiting for the calendar to turn over to begin closing the books, those executing the fast close are proactively reconciling and reviewing key accounts on a more frequent basis. This approach identifies errors earlier and alleviates the amount of work required at month end. The added benefit is the organization has reliable data of the transactional activity that can be accessed to create timely reports.

A second enabler of real-time reporting and analysis arises with the deployment of a cloud-based solution that can pull in data from different entities and sources. This eliminates the time wasting hand-offs of information that slow down all forms of financial reporting. When the databases are updated and available in real-time, reports of various sorts can be issued more frequently.

#2 Aggregate Data from Disparate Sources to Improve Analysis

Today, leading financial systems address many of the shortcomings of the traditional approach to ad hoc reporting. These systems enable operational data from outside of the financial system to be integrated with the other disparate systems where the data resides. This live connection is continuously updated and maintained in real-time. When cloud solutions are deployed, these connections can span different entities and geographic locations seamlessly.

Leading financial systems have the tools built to aggregate and analyze data for user-defined periods and parameters. Using an analysis tool that is built into the system, instead of using an external spreadsheet, enables the development of real-time reports to meet the specific needs of the users without breaking that all-important connection to the underlying sources of data. These real-time templates can be saved and the analysis repeated with the passage of time without any need for redoing the set up or the need to reconcile information between different sources.

#3 Implement Dashboard Reporting to Monitor Financials

Executive dashboards are to businesses what cockpit control panels are to pilots. It’s the business equivalent of dials and meters, all designed to provide a user with a snapshot of the status of the business using KPIs.

The KPIs should be a mix of financial and non-financial indicators, which means that data from outside of the financial system is leveraged with financial data to provide a more insightful perspective of performance. This would include information about volumes, pricing, shipments, utilization, etc. Most organizations find they are able to identify 8-10 key performance indicators that really drive performance and these become the metrics that populate the dashboard.

Modern dashboards are interactive for the user and add more value than a static printed report. The true insight comes from a user’s ability to drill into the various metrics on their screen and interact with the underlying data. This data can be sorted, spliced, and drilled further, all the way back to the transactional level, to give users a deeper and richer understanding of the underlying cause and effect of what has happened.

Dashboards should drive management action and decision-making. When indicators fall outside an acceptable tolerance range, dashboard indicators should make these deviations obvious to the user. Dashboards that incorporate color scaling, trend indicators, conditional highlighting, and sparklines help focus attention on areas for a user to drill deeper and develop insight. When the reports are converted from a static state to a dynamic state, users have a tool at their fingertips to ask and answer their own questions.
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