Financial Transformation

9 best practices to empower finance to do more than manage the books.

The finance department sits at the information nexus of most organiza­tions. It regularly collects financial and non-financial data from every business unit and consolidates it into summary and detailed management reports.

Finance, therefore, can be a powerful agent of change by leveraging information to assist executives and line-of-business managers to optimize processes, achieve goals, avert prob­lems and make decisions. Accomplishing this requires business intelligence (BI) to empower the finance department. When implemented properly, BI provides timely insights, which enable better strategic and tactical decisions.

Implementing BI in the finance department, however, takes a commit­ment to transition to a more efficient and effective information-delivery environment. The data warehouse must provide accurate, timely data in an acceptable format with all accounting rules applied. And the BI tools must be flexible and fast enough to meet finance’s reporting and analytical requirements.

Opportunity Knocks

While some leading organizations have already transformed their finance departments from record keepers into strategic advisers through BI, for most this remains a golden opportunity. (See figure.) Before getting started, companies should adopt these nine best practices to ensure a smooth transition:

Figure: Room for Improvement

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1. Get a sponsor, and find and understand the pain. Implementing BI is an exercise in change management. To succeed, you need an executive sponsor and a chief lieutenant to drive requisite changes and sustain the initiative until it reaps dividends. The best candidates are those seeking greater visibility into strategic and operational performance, and who are willing to certify and use the reports the new environment will generate. They will be highly motivated to champion the effort and ensure its success.

2. Partner finance with the BI team. While responsible for delivering clean, consistent financial data, applying appropri­ate rules and adjustments, and integrating it with operational data from non-financial systems, the BI team cannot do it alone. It needs to work closely with subject matter experts in finance who under­stand rules and processes and can interpret the data. This requires a tight partnership in which each respects what the other does and understands the problems each encounters along the way. To achieve this, engage finance experts or tech-savvy analysts to work with the BI project team.

3. Homogenize the general ledger and chart of accounts. To meet finance’s needs, consolidate all general ledgers onto a single platform and harmonize the chart of accounts throughout the organization. This greatly reduces the tedious integration work that can slow down data warehouse deployments. If organizational structures make such standardization impossible, use financial consolidation tools to harmonize this data. In addition, the data warehouse can serve as the single point of integration during the migration to a new, global general ledger system.

4. Build an enterprise data warehouse (EDW). To deliver a single view of the organization, the BI team should design the data warehouse to be enterprise in scope, linking operational and financial data. This enables users to shift from a financial view to a transactional one to see what’s driving the numbers, and vice versa. Keep in mind that an EDW is often built in steps—one logical data mart at a time—each providing business value. This process requires visionary sponsors willing to sustain their commitment and funding over time.

5. Provide self-service BI tools. Executives, managers and other financial staffers must be able to access data directly without IT involvement. This requires the BI team to implement self-service tools that make it easy to drill from summary-level views to detailed data without getting lost, and to preserve views by scheduling them as regular reports. These reports should be able to pull data from multiple locations so users can view critical information in one place with one tool.

6. Deliver timely, detailed data. Reports that contain only sum­marized views of financial and operational data are virtually useless. To get to the root of an issue, financial managers and analysts need to see details and to filter data by different dimensions. They also need to see the freshest data possible to identify issues, analyze options and work with the business to take action before a problem affects the bottom line. BI teams need to architect the data warehouse to provide timely data or offer robust tools that can federate data from multiple locations in real time.

Office Depot Ramps Up
BI for Finance

In 2005, Office Depot, a supplier of office products and services, implemented a business intelligence (BI) initia­tive to standardize information used for decision making. Today, the company boasts a 20TB global data warehouse, integrates data from all major functional areas, and sup­ports more than 4,000 corporate, retail and field sales users in North America and Europe.

Rather than having to piece together data from multiple systems, the company’s finance department now has all of the information it needs in one place. Additionally, the data warehouse aligns financial and product hierarchies with a shared set of facts, providing a common language that enables finance and merchandising to communicate about product profitability and figure out ways to improve it.

For example, financial analysts noticed that black-and-white copiers were generating less profit than color copiers. They worked with the business managers to shift their inventory to color copiers. In another instance, financial managers noticed pricing discounts were edging higher than expected in several locations and notified business managers, who took action.

“Because we now report immediately the cost of produc­tion and product margins, we have been able to help the business change its strategies more quickly,” says Greg Thompson, director of financial systems at Office Depot.


7. Coexist with Excel. Although financial managers and analysts are typically comfortable using Excel, most do not understand its limitations as a data-management system. To experience the benefits of Excel without the drawbacks, use it as a client to BI servers that manage the data in a consistent way through the data warehouse. Also, prohibit the use of Excel-based reports that conflict with CFO-certified ones generated from the data warehouse. This will prevent users from publishing reports without permission.

8. Create an ad hoc environment for financial analysts. Performing ad hoc analysis requires combining data from multiple systems, including the data warehouse. The analytical environment must be flexible enough to allow analysts to apply sophisticated transformations and calculations. BI teams should consider exposing users to tools that extend the scope and scale of their analysis. Options include tools that deliver:

  • Predictive analytics to model patterns in large volumes of data
  • The ability to interact with data visually
  • Analytic sandboxes that allow users to combine and merge ware­house data with their own

9. Leverage the data warehouse to support other financial appli­cations. More than a reporting vehicle, a data warehouse is a corporate resource of integrated data that can support a multitude of analytic applications either directly or through a series of logical data marts. These include applications for planning and budgeting, profit­ability and risk management, and performance management—such as dashboards and scorecards.

Accurate Forecast

To succeed, the BI team must create an environment that contains all of the data the finance department needs, with the appropriate rules and calculations already applied. The data must reconcile—to the penny—with operational reports generated from the general ledger. Also needed are reporting, analysis, dashboard and planning tools that access the data warehouse as well as other sources. This will empower users to explore data on their own without assistance.

When equipped with a solid infrastructure, the finance department will spend 80% of its time analyzing data instead of collecting it. Without one, the opposite is often true.

In the end, finance will be able to work with the business to look into the future, instead of only reporting on the past. Armed with analytical insights, finance and business managers can collaborate to optimize pricing, reduce inventory, streamline procurement or improve product profitability.

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