Integration at The Core
BI and data warehousing combine with ERP to boost finance.
As an increasingly global and competitive marketplace intensifies the need for fast, accurate analytics, many finance leaders are finding that enterprise resource planning (ERP) systems alone are inadequate. The best way to leverage ERP data for informative, decisive analytics that can help drive corporate decisions is through an integrated business intelligence (BI) and data warehousing solution.
Finance organizations are seeking to evolve from a traditional cost-center role of simply reporting financial data to a role in which they provide improved, predictive analytics. In this progressive capacity, finance is able to help guide business decisions that increase revenue and lower costs.
To migrate to this new role, the finance department must accelerate reporting without sacrificing accuracy, and thereby free up time to analyze results collaboratively with the business. Using a smaller staff, they also need to reduce the workload and time required during monthly and quarterly accounting close processes. This can be accomplished by leveraging a single, integrated platform to drill into and analyze financial transactions as they are booked throughout the month.
Once freed from the manual effort of reporting, the finance staff can focus on the types of analytics that help the business operate more profitably:
- Procurement. Analyze spending patterns and manage vendor performance to maximize discounts and improve other purchase contract terms while ensuring compliance with established policies.
- Operational. Evaluate sales orders and inventory turns to reduce carrying costs and avoid stockouts.
- Performance. Identify divisions and departments that are overspending, underperforming, etc.
- Revenue. Determine the most profitable products and regions, and better focus business efforts.
- Cash flow. Leverage insight into the true drivers of aged accounts receivable to minimize outstanding balances, and analyze accounts payable to maximize early-payment discounts and ensure wise payment timing.
Transforming the finance department and how it works may sound simple, but it's not. Companies are making an ever-greater number of increasingly complex daily decisions and processing a larger amount of data to do it. Meanwhile, statutory and tax reporting requirements change frequently on local, regional and federal levels.
Addressing management's needs requires combining financial, operational and planning information, which often resides in separate systems, with data that can be incompatible, redundant or improperly formatted. In addition to analytical systems, tools can include spreadsheets and even manual calculations. Companies need to integrate this data, and unless specific tools are available, it can be demanding.
Some problems have more to do with the organization itself. Finance and IT don't always use the same terminology or approach, so the end result often tends to fall short of expectations. At the same time, getting the data right in a custom solution can be a time-consuming endeavor. The business changes so quickly that by the time the solution is delivered, something different is needed. To overcome these challenges, not only do finance and IT need to communicate effectively but IT also needs to be equipped with flexible tools that are already built to support finance.
Because ERP systems, a popular fix, are meant for transaction processing, they simply can't provide the flexibility needed to evolve easily with the enterprise. Once in place, they are difficult to reconfigure, and even if IT staff can customize the system over time, such changes may invalidate ERP vendor service level agreements. This is complicated by the fact that companies often resort to different ERP systems for different business units and geographies. The approach impedes a single view of the business, can fragment data and can create data management problems.
“Finance and IT don't always use the same terminology or approach, so the end result
often tends to fall short of expectations.”
To cut through increased data volume and complexity and give decision makers the focused facts they require, companies need insightful analytics bolstered by a robust data repository. The repository architecture and analytical platform must be flexible and scalable enough to adjust to new business questions or priorities. Without this, companies may produce reports more efficiently but still not obtain the information that management needs to run the business effectively.
For this level of efficiency, a reduction in the amount of data sourced across systems is necessary. Ideally, data should be in a single repository with consistent data definitions, whether it is for regulatory reporting, financial analysis or operational analysis. Information consistency improves operational efficiency by reducing complexity. Less time is spent on data collection and validation so more time can be spent on understanding the business and revenue-enhancing transactions.
It is essential that the platform and tools support both an ever-increasing flow of data and a growing user base with a host of ever-changing questions. It should also allow finance to implement changes in reporting views quickly and economically without affecting operational systems.
The design of analytical applications needs to support full transparency and data sharing, injecting a culture of accountability. The ability to track performance back to tactical and operational drivers—linking cause and effect—enables the changes required to improve performance.
The use of a robust data repository and decision support platform can empower finance to positively affect everything from operations and product development to cash flow. A flexible, scalable analytical environment can help financial organizations transform themselves from cost centers into direct contributors to the bottom line.
Chet Robinson is a communications and deployment manager with the Teradata Finance and Performance Management program.