Why Accurate and Granular or Detailed Financial Reporting is Imperative During Times of Volatility
Business moves at a fast clip, whether during times of economic expansion or times of uncertainty like we are experiencing today. Often, CFOs and executive teams put together a plan that represents a snapshot of what they believe will happen, based on the best data they have available at the time. But what happens when actuals differ from plan, either positively or negatively, as they most certainly will? Every company wants to know about variances as soon as they occur so they can either exploit unexpected opportunities or take steps to mitigate losses. Which is why today it's more important than ever to have a strong, accurate financial reporting process so you can make key decisions for your business in the days, weeks and months ahead.
To start, course correction requires more than just spotting monthly variances. Managers need the ability to drill down into the sources to understand why variances occur. In many cases, it’s the business managers who need to do the investigating, not the finance team. That means a company’s functional heads – VP of Sales, Customer Care, Operations – also need the ability to run reports that monitor how their departments are performing.
But before anyone can examine the data, finance teams must close their books each month. This can be time consuming because generating the reports required to validate and explain the results is difficult. For example, ERP systems are great at collecting data, but weak at pushing the information to business users for analysis because these systems simply can’t generate the necessary reports. Therefore, many users turn to spreadsheets to help understand what happened.
The Trouble with Using Spreadsheets
Relying on spreadsheets to report variance data is a risky proposition. To begin, it takes too much time and effort to manually pull together the necessary data, enter it into the spreadsheet, create pivot tables and so on. More than that, one data source alone is unlikely to provide enough insight to explain a variance. And the complex formulas users apply to understand what happened often break.
To keep up with the pace of business today and the challenges of constant change, finance teams need the ability to dynamically generate a variety of visual reports during the close cycle and beyond. They need visual representations of multiple datasets layered on top of one another so that business managers can drill down to understand the results behind the numbers. This is why the most savvy companies have modernized their budgeting, forecasting and financial reporting processes by implementing a modern FP&A solution.
Enter Modern Financial Reporting
As part of a modern FP&A process, financial reporting tools deliver timely and robust data in visually meaningful reports and dashboards, which enables business managers to make better decisions, faster.
Such tools act as a data warehouse, pulling in data from various systems, including CRM, payroll, ERP, GL and so on. All data is normalized so that it can be layered, offering nuanced views of the business and all its moving parts. These tools are also fully automated, eliminating the time-consuming and error-prone process of entering data.
The Benefits of Modernizing Your Process
Beyond Static Reports
Traditional financial reporting primarily looks at information that has happened in the past – the last month, the last quarter or the previous year. It’s often used to compare actuals to plan in order to inform forecasts. At their heart, reports answer the question: what happened? While important (and required by the executive team, the Board, investors and lenders) they don’t explain why events occurred as they did. Which is where powerful business analytics dashboards come in.
As part of a modern financial reporting process, dashboards allow you to organize and display data in multiple ways so that issues are immediately apparent. They are fueled by an analytics engine that allows users to drilldown to the data set to understand why things happen as they do. For example, a dashboard might clearly show at-a-glance that the Chicago sales office is 20% behind plan. By drilling down, you may discover the drivers behind the variances – say a result of a specific promo, or loss of a client, or a region or product line is not meeting expectations. You can also look for subtleties such as too much deferred revenue via discounts.
Because dashboards incorporate more than just financial data, they are very useful for operational reporting. For instance, by pulling CRM data, you can easily display revenue by product, sales reports by product, by region, salesperson, customer type or other metrics important to the organization. In other words, they allow you to identify which customers are buying which products so that you can target and interact with those customers better.
On a higher level, dashboards allow the individual user to choose which KPIs they wish to monitor.
Because dashboards are visual representations of your data, they offer a level of data layering and drilldown that exceeds the capabilities of spreadsheets.
For instance, there are many ways to forecast. Let’s say you want to see a combination of your actuals and plan data to assess performance to date. Let’s assume you’re in period 4 (April), meaning you have four months of actuals to compare to eight months of plan (i.e. a 4 + 8 comparison). Plotting that trend line in a graph allows you to see at-a-glance whether your actuals are in line with your plan, or if a reforecast is required. There is no easier way to understand why those actuals differ from plan.
What to Look for in a Modern FP&A Solution to Uplevel Your Financial Reporting
Recognizing that organizations with access to and insights into the most data have the best chance of weathering the current downturn, business owners are taking steps to improve their financial reporting by adopting a modern FP&A solution. These solutions provide the financial visibility and control needed to lead organizations to growth and profitability. Having fast, accurate and automated financial reporting are critical characteristics of any modern budgeting and forecasting solution:
- Data integration. As we noted earlier, a modern financial reporting solution pulls in data from multiple data sources - a company’s CRM, ERP, payroll, GL and many other systems. Without data integration capabilities to automate data retrieval and population into the reporting and dashboard modules, the ability to perform analytics is often at the mercy of the IT team’s availability.
- Automation. Business users need to be able to layer data from various sources on top of one another, which means disparate data sources must be normalized and automated. Select a data source that eliminates manual intervention.
- Access to real-time data. Business owners need access to results as quickly as possible in order to course correct. This requires real-time data ingestion from all source systems.
- Business oriented. Data is owned by the businesspeople and they should have the ability to create and run the reports and use dashboards at will.
- Flexibility. Users have their own styles and preferences for report layouts. The financial reporting solution should allow users to quickly and easily build the reports they need with the information they want to see in the format they want to see it.
The Path to Business Success
Keeping close tabs on your business allows you to see and prepare for what lies ahead and make adjustments along the way as the economic outlook still seems uncertain. Better insights allow everyone in your company, from the CEO to the manager of customer care, to make better, more confident decisions. That level of decisioning requires a robust financial reporting and analytics platform that pulls real-time data from disparate systems and allows business users to manipulate the data in ways that are meaningful to them.
Sophisticated FP&A tools like Centage’s Planning Maestro, do just that. With seamless integration to financial data systems, automated financial reports, and dynamic web-based dashboards, Planning Maestro provides the robust financial reporting capabilities today’s businesses need to navigate what’s to come.
Centage provides modern FP&A software solutions that empower Finance teams to lead the way to a stronger, more agile business. Our cloud platform, Planning Maestro, makes sophisticated budgeting, planning, and forecasting easy and accessible. Intuitive automation accelerates workflows and improves accuracy, enabling Finance leaders to deliver reliable information and meaningful insights at the speed of today’s business. For more information on how to modernize your FP&A process, view our product demonstration video, or call 800-366-5111.