Achieving finance nirvanaRebecca Dagostino
Mark Cracknell, Marketing & Sales Director talks ‘Finance Nirvana’ and what it means to him.
It took a few years working in industry to get to grips with the hands-on world of finance following my “education” at KPMG. As the years’ and decades went past, I have seen many organisations across various sectors and have formed a vision of what a best practice finance process looks like. This, I have termed my ‘Finance Nirvana’ – Nirvana is a place of perfect peace and happiness, like heaven. I delve into what this means to me, in this article.
In recent years I have concentrated in the processes beyond the accounting system/ ERP close. Let’s put the accounting system/ ERP to one side for the time being as this is another story completely. My “Finance Nirvana” starts at ERP close and encompasses the core processes that follow, including (but not limited to):
- Financial Consolidation
- Budgeting, Forecasting, Planning
- Reporting, Analysis
- Disclosure (both to internal and external consumers)
This for me is the exciting bit, the processes that takes the data collected in the ERP and turning this transactional detail into information that adds insight and value. This is the part that elevates accountants from bookkeepers to thought leaders and enables them to play a pivotal role in their organisation.
When I started to understand and dissect the individual processes I was firmly of the opinion that financial consolidation and budgeting/planning were separate functions with different needs. Financial consolidation is ERP-like in that it is “transaction” driven with a high level of detail – an example of this being journals that are overlaid for Group consolidation purposes (intercompany and investment eliminations, GAAP adjustments etc.) – thus enabling a complete audit trail from ERP to reported numbers. Meanwhile budgeting/planning requires a different approach, multi-dimensionality to enable driver based processes at a more granular level.
For me the two processes appeared to be unhappy bed fellows with different disciplines and therefore different requirements. Many organisations still operate with this mentality, having separate statutory reporting and FP&A teams. In many cases they use different systems that are not directly connected with some poor person being tasked with reconciling the two at key times of the year!
If we think about this for a second we can only conclude this is madness. The two processes are inextricably linked, both requiring actuals data and often with budgets being pushed back through financial consolidation. The question is whether technology has driven this silo’d approach or has the process driven technology? Whichever way it is, legacy technology solutions tended to deal with one or other of the processes although purporting to do both. Perhaps this was a limitation of the technology capability available at the time. A classic example of this is the current IBM software suite, including IBM Cognos Controller and IBM Planning Analytics (TM1). Prior to IBM purchasing both, Cognos Controller competed with (Applix) TM1 in the same space both purporting to do financial consolidation and budgeting/forecasting. The reality is that IBM Cognos Controller is a financial consolidation tool that can be used to collect actuals and budgets. It is NOT a budgeting/planning tool with all the functionality that I would attribute to the process. TM1’s strength is enterprise planning although it can do financial consolidation (at a push and with a lot of scripting). Hyperion and SAP follow the same profile, good at one or other of the processes or utilising multiple modules that are linked together.
Solutions can of course be integrated or linked to overcome the silo’s created although this can create an overhead in terms of master data management and ongoing maintenance and also the movement of data (and potential reconciliation). This in turn introduces risk and inefficiency.
Our friends at Gartner spent many years advocating a version of “Finance Nirvana” by promoting the concept of CPM (Corporate Performance Management – a complete solution) and promoting a magic quadrant around this. For some inexplicable reason, this year they have split financial consolidation and budgeting/planning into two magic quadrants. One can only question their motives for doing this (and I will give you my two penneth should you be interested) but, in my opinion, this is a retrograde step from a market influencer in this space.
So back to the question of “Finance Nirvana”, can it really be achieved? If yes, this would require (at a minimum):
- One platform and user interface
- With shared masterdata
- Complete auditability
- Financial consolidation functionality
- Budgeting/planning functionality
- Reporting/analysis/disclosure functionality
Is it possible and does such a solution exist?
If you want to delve more into this and figure out what YOUR Finance Nirvana is then join us at HAYNE Spotlight 2018 in London (its complimentary) or join our ‘Making the Finance Teams Dream a Reality’ webinar.