Management needs to know the results of the activity of the period as quickly as possible. They are looking for answers to the following questions, among many others:
Management needs to know the results of the activity of the period as quickly as possible. They are looking for answers to the following questions:
- Are initiatives working? Management really wants to see what impact decisions had on the business, more importantly on results. How are decisions measuring up in reality as compared to theory or projected analysis? Getting Actuals into the communication pipeline, while ensuring management is using results tied to the external reporting is the goal. But, the more manual efforts or workarounds in existence, the less sustainable and repeatable. And now there is the element of doubt. This doubt breeds additional off-line processes as managers and leaders look to their direct teams to provide more input/analysis and move further from the controlled processes that Accounting can provide.
- What’s happening externally that is affecting our business? External pressures (regulatory, tariff, fuel prices) impact Actuals. When oil prices plummeted, the impact to the consumer was less cost for transportation, and more disposable income (in theory) for retail purchases. To the oil and gas producer, however, each downward tick in the price per barrel meant analysis and re-analysis to adjust for the financial impact. Leadership needed access to accurate Actuals to understand the message to shareholders, identify strategic solutions to address the downturn, and to identify trends, impacts, and future initiatives. Forecast assumptions rely on Actuals and a quick close to allow the analysis processes to begin and to provide information to support decisions.
Quality and accuracy breeds trust. Replicable and sustainable Accounting results rely on a better flow of data from source to reporting and back to operations with the fewest number of manual adjustments possible. Controls and audit trails serve a purpose to ensure results are provided and trust in the data means little room for noise/emotion in the results.
Ratios, metrics, and KPIs should not differ across the organization. There is always a handoff between the reporting and analytics tools to ensure that while the level of detail may differ, such as that between legal entity and management reporting, there is a lowest common denominator that supports quality and accuracy between tools.
Processes and technology are symbiotic in addressing ever-changing business needs for reporting. A consolidation solution will not address a management reporting need, but it can complement it. Actuals prepared without sustainable systems, controls, or processes will breed off-line solutions to get at data for analysis more quickly, but at a cost to accuracy. This is not to suggest that lengthy and cumbersome processes and procedures are necessary, they are not. But, supporting efficiencies, usually in the form of technology, to provide a path forward for Accounting to get Actuals back out to the business and provide insight to the results vs. just reporting results should be a considerations for all finance teams, whether they look forward or backward.
My next installment will discuss using the right tool for the job as it aligns across the finance organization.
A solid close process, system, and team provide value to an organization that is significant. And it should be appreciated beyond the “just a cost-center” mentality. It is the backbone of providing insight, visibility, confidence in the health of the organization, and the direction of where it is heading. Now, add an acquisition or divestiture and this throws a monkey-wrench into an already taxed close process with no room for margin of error, delays, or inaccuracies in the best of situations.