Managing Information for Financial Processes

Finance organizations perform many repetitive functions. When introduced, ERP and
business intelligence (BI) software enabled them to make major improvements in the
efficiency with which they execute those
tasks. During the 1990s the average cost of
operating a finance department, measured
as a percentage of company revenue, was
cut in half – largely, in our view, by these IT
investments. However, over the past five
years, companies have made little further
progress. There are likely several factors at
work, but we think the main one is that a
majority of companies have extracted most
of the readily available efficiencies from
these systems. We recommend that they
now take steps that will make processes
more effective.For example, accelerating the accounting close has received increasing attention in
finance organizations. Our research finds that most companies that take more than a
business week to complete their monthly or quarterly close view shortening it as
desirable and important. In part, this is because doing so enables companies to
provide executives and managers with more timely information for making decisions
and planning. Our research shows that shortening the closing and post-closing
activities requires solving a combination of process and data issues.
We asked research participants to select all of the factors that make the close take
longer than it should (see Figure 4). Processes that are not optimized to speed the
close are the most common culprit, cited by half of the participants. In this and other
research we have done on the closing process, we find that not one significant
process issue but a myriad of little ones, with steps performed by various people in
an often intricate process, is what ultimately delays the close.
Not far behind as a source of delays were IT systems and data elements: The three
issues participants noted next-most often were the need to gather information from
too many systems (selected by 42 percent), too much time required to validate data
(39 percent) and the related problem of using too many spreadsheets in the closing
process (37 percent). Errors are rife when companies use desktop spreadsheets in
recurring enterprise processes such as the accounting close. In other benchmark
research, we have found that companies that use desktop spreadsheets heavily in
the accounting close experience more issues regarding data quality in preparing their
financial statements and take longer to complete the close than those that limit the
use of spreadsheets. Some use is unavoidable, but centralizing the collection of
corporate financial information into a single data store and automating more of the
process can reduce the need for spreadsheets.
Implementing changes to the closing process and the IT systems that support it can
have profound results: One-third of participants estimated that if the factors
mentioned above were addressed, they could save two days in their close, and
another one-third said they could save more than three days. Finance departments
could use this time to provide accurate information sooner.
Revenue forecasting is another business process in which Finance plays an important
role in most companies. When it comes to their forecasts, a majority of participants
said they are satisfied with them; half called them accurate or very accurate. (People
with finance titles were generally happier with forecast accuracy than those outside
the department.)
Figure 5
Factors That Would Improve Accuracy of Revenue
Forecast
55%
40%
33%
32%
Better
understanding
of market
trends
Better
software to
support the
process
Better
understanding
of competitors'
offerings
Better
understanding
of competitors'
strategy
Source: Ventana Research
When asked to choose the factors that
would make forecasts more accurate,
three of the four most important factors
cited echoed the need – also evident in
responses to the question about
information adequacy – to provide people
with more information about the world
outside the company (see Figure 5). By
far the most often cited requirement was
to understand market trends better, which
more than half of participants selected.
Better software to manage the process
was the second-most important factor (40
percent mentioned it), followed by better understanding of competitors’ offerings and
of competitors’ strategies (each selected by one-third). This type of information is
especially important when the market environment shifts because of moves by key
competitors.