If you need to share and visualise data in specific ways, Business Intelligence (BI) tools are a box-ticker.
However, while BI tools work very well for other departments, they do not hit the mark for finance.
If a finance team needs a real-time view of ERP data to ensure they are reporting on the right things, BI won’t cut it.
Finance teams are really up against it when trying to fix the reporting gaps caused by BI implementations. It seems to be a rite of passage that causes nothing but headaches and, instead of fixing things, makes everything worse.
Financial reporting: not a fit for BI
Financial reporting needs cannot be solved by a BI implementation, mainly because transactional drill-down and real-time data demands are not supported in any reports produced by BI tools.
- When trying to reconcile accounts or identify variances, finance has to be able to drill into the data at a granular level to examine balances, journals, and subledgers. BI tools don’t let finance get down to this level of detail.
- When they post an adjustment, finance needs to see it reflected immediately in their reports. BI tools don’t provide a real-time link to the ERP, which can slow down month-end close processes.
- For internal reporting, finance needs to run comparative reports across different time periods—and over budgets and actuals—to analyse and investigate variances. BI tools weren’t designed to handle the messy financial data necessary to display a chart of accounts and show the desired sub-totals for this type of reporting. This typically requires complex formulas and workarounds, taking report building out of the realm of finance and creating a dependency on IT.
- When reporting structures change, BI tools struggle to handle these adjustments because everything has been hard-coded. So, even the slightest change to a chart of accounts will send things in a spin, requiring lengthy rework by IT.
Data warehouse? Forget about it
Often IT will invest in an expensive data warehouse to structure an organisation’s data in a way that is designed to get the most out of their BI tool.
Sounds good? Not for finance. It won’t solve the problem.
A data warehouse captures summarised data, breaking the link to the ERP’s underlying transactions. It means a finance team cannot drill down into the data to investigate, reconcile, and solve integrity issues. Since the warehouse is only uploaded periodically, this creates a time lag. Without a real-time view of data, a finance team cannot operate properly at period-end. And this is simply unacceptable.
This challenge pushes finance down a more manual route to get the information they need. Often this involve dumping data from the ERP into a spreadsheet—a (ridiculously) time-intensive task, which is extremely error-prone. If we consider the large investment made in the BI tool, it makes this even more frustrating. What’s worse is that finance is having to work with static data that is no longer connected to the ERP. As soon as any minor amendments are made to journals, everything becomes out of date in the spreadsheet. The only thing you can do at this point is re-dump more data from the ERP into the spreadsheet, which starts the whole protracted cycle again.
Stop getting stuck in a never-ending cycle
Don’t fall foul of these mistakes. To close the financial reporting gap that the BI tools create, consider the following:
- You need direct access to your ERP system so you can work with real-time data, otherwise you run the risk of reporting on stale data.
- Make sure your finance team can build their own custom reports: Any third-party software needs to understand your ERP hierarchies, account structures and segments, and the relationships between tables. With this level of financial intelligence, your users will be working with an interface that speaks their language so they can create their own reports, freeing up IT to focus on other tasks.
- Check that the tool supports drill-down from summary line items into underlying balances, journal entries, and subledger transactions to support investigations and analysis. This capability will speed up time-consuming manual reconciliations and data validation.
- Make sure a third-party reporting tool is able to automate the process so that commonly used reports can be refreshed manually or against a schedule and don’t need to be recreated from scratch every time. This helps free up finance teams from working on dull, repetitive, laborious tasks, leaving them more time to spend on the important analysis.
Finance teams need to understand these BI pitfalls early on to avoid them. It’s critical they don’t accept a generic BI implementation from their wider organisation. Recognising their very specialised reporting needs — and developing a reporting plan that meets these needs — will ensure the right business decisions are made based on the right data.
Richard Sampson is SVP of EMEA at financial reporting specialist, insightsoftware.