Business Intelligence Systems Failing to Meet Reporting and Financial-Analysis Needs
Business intelligence systems are still - even after twenty years of operation - failing to meet reporting and financial-analysis needs. At the heart of every poor decision lies an absence of quality data and the repercussions usually translate into costs.
The Banking Crisis has Changed the Priorities of CFO's
Since the banking crisis and the subsequent knock-on economic effects, the priorities of CFOs have changed from capital spending to an improvement in cash flow, a reduction in costs and a lessening of leverage. These strategic imperatives require confident and accurate decision-making. And although it is nearly twenty years since the first business intelligence systems started to emerge, there are still too many businesses attempting to understand the essentials of financial data and performance management information. They are making correspondingly bad decisions as a direct result of this.
Finance Departments Still Spend 70pc of their Time in the Production of Management Accounts
It is also interesting to note that the average finance department will still spend over 70pc of their working time in the production of management accounts and just 30pc analysing the detail contained within them. It seems still to be almost impossible to get a detailed analysis of profitability by line item or product, to accurately forecast cash flow or to drill down to line items via the nominal ledger.
The fact remains that FDs are not data analysts and organisations are struggling to integrate their data from a variety of business sources.
FDs are not confident in making accurate decisions on the basis of poor data and this means that many are reverting back to spreadsheets, despite a standard 40pc error rate (according to researchers at Harvard). Businesses need more timely and customisable reporting, the ability to forecast cash flow and carry out profitability analysis, manage inventories, forecast sales and plan for expansions or contractions.
Disappointing Market Offers
Business intelligence systems seem largely to have been disappointing so far because vendors haven't yet been able to understand the need for accountancy integrity. ERP systems hold vast reserves of high-value data, but in silos. Simply adding a BI layer onto such a system replicates data silos and makes reconciliation too difficult. Most generic BI tools also lack the understanding of complex financial data sets. They simply do not recognise balance sheets, currency conversion rules, accounts, consolidation logic routes or financial audits.Businesses aspiring towards genuine accounting intelligence will need to ask whether the system can be fully reconciled and integrated with audit capabilities and whether it will avoid data silos and have specific functionalities for complex accounting without needing spreadsheets. The answer will come from ERP systems and a move away from generic business information systems.
Written by Adam Tachauer of Circle Square Talent
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