Data Analytics for CFOs: Why new-age Business Intelligence systems are better than traditional MIS

Data Analytics for CFOs: Why new-age Business Intelligence systems are better than traditional MIS

Data Analytics for CFOs: Why new-age Business Intelligence systems are better than traditional MIS

The role of today’s CFO extends way beyond the mandate of traditional financial management into more strategic areas of business. The new responsibilities make it crucial for CFOs to have meaningful data at their fingertips to support and develop strategic business initiatives.

However, the problem is with getting the right data, in the right format and at the right time. Traditional MIS systems especially those used for revenue and expense reporting, are saddled with inaccuracy, inconsistency, and unmanageable complexity.

For department heads and finance teams, data management is an arduous and time-consuming process. Why is this the case?

In any organisation, department or product heads are given budgets at the start of every month or quarter and their performance is gauged against this budget. To view their individual performance against budgets, department heads resort to the canned reports from the General Ledger (GL) generated by the finance teams. They view the report data, look for variances, and take corrective measures to eliminate cost overruns and maximise budget efficiency.

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Seems pretty straightforward till this point, doesn’t it? Well, it’s not, especially when there are deviations in data.

The GL reports show aggregate data for spends vs. budget. This data output has none of the rich transactional details that are necessary for investigating the root causes that trigger a budget deviation or an unexpected increase in a particular expense category.

In this case, the departmental managers go back to the finance teams for the underlying details behind the GL data — the individual transactions that caused them to exceed their budget. This triggers a spurt of activity within the finance department causing workload to shoot up immediately during the month or quarter end.

The finance departments run additional reports to find out the required information for managers. The process doesn’t stop there. The departmental heads often have questions on the new reports generated. Once they receive the answers, they have follow-up questions and the cycle continues. It sometimes takes weeks for the issue to get resolved satisfactorily from both ends.

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The GL summary report contains transactional data that is extracted from different systems like HRM & Payroll, Accounts Payable and Inventory Management – each of them managed by different teams.

This makes the entire process even more complex and time-consuming. No wonder it takes weeks on end to solve one issue.

The reports generated by the finance department for comparison are income statements and balance sheets. They show profits,/losses and performance vs. budget for an individual manager, department or product and are definitely useful.

But imagine a Director who has 15 Managers reporting to him – he must view 15 individual reports. And to compare the performance of all managers together, he and his team have to do a fair amount of spreadsheet work.

Ideally, the GL should be able to generate these reports without putting the directors through this manual and error-prone process.

One way is to replace their current GL system with the latest ERP or accounting software. However, this might involve substantial cost and resource commitment.

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