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Is data the secret to success in financial management?

Gary Simon is chief executive of FSN Publishing Ltd. and leader of the FSN Modern Finance Forum for CFOs on LinkedIn. With more than 30 years’ experience in the financial systems market, Simon is a popular speaker and has authored four books and many product reviews and whitepapers.

An upcoming FSN study, “Innovation in Financial Reporting,” shows that finance functions that have mastered their data outperform their peers in terms of the speed of forecasting, accuracy of forecasting, and time needed to close the books.

The report defines four categories of finance function:

  • the “Data Overloaded,” who are overwhelmed by too many data sources and poor data governance
  • the “Data Constrained,” who cannot get hold of the data they need to drive insight
  • the “Technology Constrained,” who have packaged the data but do not have the tools or tech-savvy resources to exploit it.
  • Just 19% of the 616 global finance organisations that took part in the research fall into the remaining category of “Data Masters.” These Data Masters actively manage data as a corporate resource and have the tools and resources needed to provide competitive edge and insight.

Data Masters leave their contemporaries in their wake when it comes to operational performance. For example, two-thirds of Data Masters can reforecast the enterprise within a week compared to just 40% of the Data Overloaded, and 36% of Data Masters are able to close their books within three days versus just 10% of the Data Overloaded.

What does it take to become a Data Master?

Fortunately, the report shines a light on the attributes of Data Masters, highlighting an amalgam of cultural and organizational factors. In broad terms, Data Masters are less challenged by cultural failings and in-house politics. And neither are they paralysed by a fear of failure when it comes to investing in innovation such as a new ERP system.

But Data Masters also have the upper hand when it comes to technology. The biggest challenge to collaboration in reporting for all categories is everyone working off different reporting platforms and not having “one version of the truth.” However, only 46% of Data Masters are affected by this, compared to 73% of the Data Overload, 66% of the Data Constrained, and 62% of the Technology Constrained. And whereas one-third of organisations must contend with three to eight general ledgers, 65% of Data Masters use just one or two. Clearly, Data Masters enjoy a more controlled and simplified data environment exemplified by modern ERP systems.

The value of a unified ERP system

Unified ERP systems in the cloud make it easier for modern finance systems to acquire and consume data. This is crucial in an environment in which the most insightful data is increasingly derived from non-financial and other unstructured data sources that lie outside of the general ledger. For example, organisations that have achieved a balance between investment in financial and customer-facing systems (CRM, web analytics) fare much better on the three performance measures mentioned earlier (speed of forecasting, accuracy of forecasting, and time to close the books) than organisations that take a more haphazard or lopsided approach to investment in innovation. Once again it is the Data Masters that have the advantage. Earlier FSN research, “Innovation in the Finance Function 2018,” showed that a balanced approach is the best for driving business insight.

The research shows the importance of aspiring to data mastery. It holds the key to finance function success and smart CFOs know that it can only be achieved with a modern unified system that simplifies control, is open to new data sources, and “joins the dots” between back-office finance systems and customer-facing systems.

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