Monthly Archives: September 2014

Better Financial Analytics for Everyone

Who can really benefit from this?

Lately I’ve been reading a lot of information on various websites and blogs and listening to client comments and questions about analytics, or more precisely, how to better use the vast amounts of data available in most business environments to create meaningful reports and drive the decision making process that will transform observations derived from this data into action items, ultimately responding to what that data was trying to tell in the first place.

The most common question I hear is: Can a good set of analytic tools be implemented in smaller organizations, especially those with limited resources and more basic IT infrastructures?

10 to 20 years ago the answer to this question would have been simply no.  Information technology was just too expensive and complex to deliver practical analytics tools to smaller organizations.

This has all changed, and very rapidly.  All businesses today, even the smallest have computerized accounting software with all of the basic functions, including manufacturing operations, supply chain management, customer relations management (CRM), financial reporting, etc. being completely automated.

There are vast amounts of data stored in the software’s various databases.  This data is selectively used to preform all required accounting and reporting functions.  Shouldn’t this data also be available to analyze from other perspectives, outside of the required reporting functions?

Incorporating a good and practical planning software solution that closely ties into the actual accounting software (through a general ledger interface), coupled with a simple to use (i.e., will be really used by people after implementation) can provide a good answer to the question posed above.

Those who read this blog have seen my posts on small and medium size company software solutions titled Budget Maestro and Analytics Maestro from Centage Corporation. (www.centage.com)  These are comprehensive planning, budgeting and business intelligence solutions that are closely integrated with the company’s general ledger to retrieve actual financial data and using the data from the planning/budgeting modules included with Budget Maestro, perform a real time analysis and display of the exact data in the exact visual and output format the user requires.

I’ve written before that visual representation of data can have a profoundly more dramatic effect on its users than plain data.  When you see your data in a visual format that you have previously established, you can understand it better, usually immediately.  When the same format is used over and over again to display the changing data over time, this function becomes even more powerful.

The organizations that use Budget Maestro with Analytics Maestro have been able to combine the many capabilities of the planning functions (among which are use of drivers and key performance indicators) with the visual display and reporting capabilities of Analytics Maestro.

Finally, even a smaller company can have financial planning and analysis tools that only Fortune 500 companies were able to afford not too long ago.

Now you can ask specific questions and get the answers almost immediately.  These might be:

  •  What was my Gross Sales revenue per square foot of retail space in the last 6 months, by month, by region, or by store?
  • What was our IT spending per employee per quarter for the last 12 quarters? If you want to see this data by department, this can be easily accommodated based on the organization structure set up in Budget Maestro and your actual accounting or ERP software.
  • Show me a display of key financial ratios such as Current Ratio, Inventory Turns, etc., as a graph with monthly data points, and compared with the same ratios as derived from the planning software (Budget Maestro).
  • How is my Balance Sheet going to look in the next 18 monthly periods, or 6 quarters?  Analytics Maestro can immediately provide that report, using your pre-defined format, using the planning software data.
  • How do my actual financial statements for the period just closed compare with my budget and forecast?  With Analytics Maestro you can see these forecasted statements (Income Statement, Balance Sheet and even a Statement of Cash Flows almost instantly) compared with the actual statements.

These are just a few of an unlimited number of questions that can be asked and routinely answered by Budget Maestro with Analytics Maestro.  This can provide valuable insight on the existing and future health of the organization.  The visual display will help users understand the data, convey it to management and enable informed decisions and corrective measures to be immediately implemented.

This visual display, its charts, formatting, colors, etc. can be easily modified by users. Custom templates can be created and used to populate the dynamic data flowing from Budget Maestro for all specified budget data, as well as actual and historic accounting data.

Small and medium sized companies finally have the tools that only very large organizations only a few years ago were able to utilize.  With the typically shorter decision making cycles in smaller companies, using these planning and analytics tools can provide a clear edge over the competition and the ability to steer the organization in the right direction with more confidence.

Accounting Technology Tools – Fact or Hype?

Do you really get value out of all your IT investments?

In another interesting article on www.proformative.com’s website the author Doug Sleeter, President at The Sleeter Group, Inc.  brings up the challenge of identifying good technology products and separating them from products that are often marketed using unrealistic claims; products that rarely live up to the expectation.  Although the author is mainly referring to software products, it is clear that these principles apply to all technology products and service offerings.

Software is a major contributor here, causing disappointment for users of various products soon after implementing these solutions.  This is primarily true for consumer software products but is also widespread among business applications.

I am exposed almost daily to technology products, many of which are software products in the area of accounting and finance.  These products are intended to either interface directly to ERP applications or used stand-alone.  Of these I can mention sales commission automation software, supplier management and performance software, contract automation, fixed assets management and maintenance, etc.  These products, according to their developers and publishers are there to solve common business problems and deal with challenges organizations face on a daily basis.  It seems that everywhere you look there is a solution they want you to believe you cannot live without.

In finance, the most common such application is in the area of planning, budgeting with forecasting, enterprise performance management and business intelligence.  Many of these applications are bundled in one package, as these tasks are usually related.  Others are licensed by function or offered as “light”, “intermediate” or “advanced” or in any imaginable selling configuration to entice people from different business environments and sizes.

In the past 20 or more years I have personally tried a variety of software products, all intended to enhance business functions or solve a real world business problem.  Lately, this has been far more noticeable with mobile device applications, some of which are targeted to business users.  My experience with new technologies and the accompanying new software products is that in many situations it is hard to justify the commitment to acquiring and implementing many of the product offerings, even if it seems appropriate (and most often tempting) to invest in such products.  Proper research almost always proves that.

When evaluating new product offerings we need to carefully weigh the benefits (must be measurable) versus the cost (total cost, not just the software licensing fees).

Here are two examples:

Sales Commission software:  Unless there are more than several persons for whom sales commissions must be calculated and there is a complex commission plan in place, it is hard to justify licensing (either SaaS or on premises) such an application.  There is a one-time license fee (on premises) or monthly subscription fees (SaaS) plus annual license renewal fees (on premises).  To that you must almost always add implementation fees, consulting fees for special maintenance and modifications, training of company employees, and other costs.  When you reach a point where the benefits outweigh the total cost by a good margin, you are ready to commit to such an undertaking.

Payroll Processing Software:  Here there are clear benefits for nearly all size companies.  Experience over the last three decades shows that benefits gained by automating this function almost always outweigh the costs involved in doing it manually and guarantees compliance when correctly used.  Only in rare circumstances and usually in very large organizations is this service performed in-house.

As for the planning, budgeting and business performance management software mentioned earlier, I find that the benefits gained from implementing such software dramatically outweigh the costs involved when the following results are achieved:

A.    A well-implemented plan and analysis process, done year-round provides management the tool to gauge actual company performance against its initial or updated plan or budget.
B.    The planning software allows management to evaluate the forecasted future financial health of their organization, through accurately produced forecasted financial statements, customized reports and dashboards of financial ratios and KPIs, and other tools.
C.    Management uses the data obtained from the system to arrive at relevant decisions and act quickly in response to this data.
D.    Fewer decision errors are usually made when data is available immediately after an accounting period is closed.

Since this type of product is now available to small and medium size companies, many organizations can enjoy the benefits while implementing the software at a reasonable cost.

As with other software applications, there is also marketing hype and unrealistic expectations in the planning, budgeting and management performance product category.  My advice is always to evaluate as many products that are available for the specific market segment and company size and choose the one that can realistically deliver results as described in A-D above.

Remember that marketing hype is human nature, as we all want to present our product or service in the best possible light, sometimes omitting weaknesses or exaggerating features or benefits.  Separating the fact from the hype is what it takes to find the right product for the defined task.

Were you unexpectedly promoted to the CFO position?

A great opportunity for positive change.

I recently ran across a blog entry on the www.proformative.com web site, titled “The Accidental CFO” and authored by Samuel Dergel, Director – Executive Search at Stanton Chase International, accessed with a free membership to proformative.com, which is an excellent online resource and professional network for senior finance, accounting and related professionals.

In this article, the author discusses the seldom but possible scenario when an accounting or finance executive is promoted to the CFO position “accidentally”, or unexpectedly for various reasons.  The author then continues and gives several tips to the newly promoted CFO, as well as a little advice on how to grow into the role and develop relationships with senior executives and the outside world.

In my career in accounting and finance I was once “accidentally” promoted to the CFO role in a hi-tech company when the newly hired CFO decided after less than 6 months that the company was “too small” for him and that he missed the larger corporate environment.

I remember the quick transition period and having to come up with answers and solutions where there was no one to ask.  I also remember that for the first time I realized that I was in a perfect position to make good, positive changes and get the executive team to work more closely together on common company goals.

One area that presents a great opportunity for a new CFO, “accidental” or not, is the area of planning, budgeting, and business intelligence.  In recent years, companies of all sizes have been able to make use of outstanding planning, forecasting, reporting and business performance management (BPM) / business intelligence (BI) tools.  You no longer have to be the CFO of a fortune 500 enterprise to be able to harness all the power that your corporate ERP system and all other peripheral information systems can provide.

A forward looking CFO will always look for ways to not only improve relationships with senior executives and key employees, as well as key persons on the outside world (bankers, investors, key customers, key vendors, etc.), but to also improve the way the company translates its goals and visions into actual performance and the ability to monitor this performance and make the necessary adjustments in order to better align the actual performance with the anticipated results.

Today’s CFO, more than ever before, can have the tools designed to do just that.  Using a list of “must have” general features I recommended in the blog entry “10 Must Have Features of a Budgeting & Business Intelligence Solution”, they can implement a planning and BPM/BI solution that will become the best trusted and used financial tool the organization can rely on.

The CFO will work with the organization’s operational departments to have these tools implemented and put to use.  They will also closely work with finance to ensure that all data is correctly captured in the system and is routinely analyzed.

Whether you are a veteran CFO, a newly appointed one or “accidentally” promoted to this role, you have a tremendous opportunity to add value to your organization, value that can be measured and that will be appreciated by everyone involved.  As an added bonus, and amidst the sometimes-elevated stress that is part of this job, you will find great satisfaction in realizing that harnessing the power of current information technology is a major contributor to your organization’s success.