3 methods to get valuable data out of financial management systems

Finance departments these days are being hard pressed to play a larger role in supporting the business and operational decision making within an organisation. Besides the mandatory financial function, finance departments need to measure and manage corporate performance against strategic objectives. They need to do more with the same or even fewer resources. FD’s of companies have had to find ways of getting faster and more effective data out of their existing financial management systems to be able to meet this demand.
Listed below are 3 methods you can use to get valuable data out of financial management systems.

(1) Effective management reporting

Beyond regulatory and market demands, finance departments are playing an increasingly bigger role in management reporting. Finance departments must provide company leaders with timely and accurate performance information. This information enables effective corporate performance management (CPM). CPM represents an expanded scope of responsibilities for finance departments as it extends beyond the traditional components of corporate reporting and includes planning, budgeting and forecasting coupled with business analytics. Providing the data is no longer enough;finance departments are now expected to deliver insight into how to interpret results to drive decision making and improve performance.

Effective management reporting allows for an improved reporting cycle that benefits the business by allowing:

• Greater confidence when certifying financial statements.
• Lower compliance costs and less volatility in financial data.
• Scalable processes and better information to enable decision support.
• Management to pursue other strategic objectives and value added activities.

(2) Effective use of Technology

The accounting systems and software are in place to capture, analyse and produce reliable financial data. Most companies, whether big or small, have an accounting package that they use for their business. Effective use of the current package can make a big difference to the company’s bottom line. Excessive reliance upon Excel spreadsheets, excessive manual journal entries, manual account and bank reconciliations are prime examples of not using technology effectively. This, however, does not mean that companies need to purchase new and expensive accounting packages. It is advisable to seek out an independent and objective financial expert, such as an outsourced part time financial executive, who can objectively assess the current system to ascertain if the current system is being fully leveraged. These outsourced financial experts have current and up to date experience across a variety of platforms and are able to advise on which package to use or how to get the most out of their current package. We often get involved with clients and are amazed at how much money, time and effort has been spent upgrading to new systems when their existing system was more than enough. All that was required of the old system was a better understanding of functionality and perhaps better trained staff. Salesmen of ERP systems are fantastic at selling a Ferrari (at a discount) when a BMW would have been perfect and then selling very expensive consulting time to convert the Ferrari back to a BMW with a slightly bigger engine. (For the record, I am a very big BMW fan)

The effective use of technology is essential to gaining timely, accurate and transparent data. However, buying new systems and software is not always the answer and can often do more harm than good. In some instances companies have too many applications with overlapping capabilities, which can create confusion and incorrect data coupled with redundancies that interfere with accurate reporting.

My advice to any company wanting to change financial management systems is to ask the following basic questions:

 

1. Is the change a nice to have or a must have? If it’s only a “nice to have” DON’T DO IT.

2. Have you evaluated a number of different options?

3. Have you had an independent expert evaluate the options specific to your industry and company needs?

4. Assuming you have decided to go ahead, have you trained your staff effectively? This is your biggest risk as employees hate change.Limit this risk by excessive training if needs be. Be sure to include this training in the quoted inclusive cost of the software as it can become very expensive.

5. Prior to final switch over, will it be possible to run both systems in parallel? You can’t afford any down time and there are bound to be some problems with the new system.

(3) Effective training of financial staff

Effective training and continuous up-skilling of financial administrative staff is critical to getting valuable data out of financial management systems. It doesn’t matter if you have the most up-to-date accounting software available on the market, if your staff does not know how to use it correctly then there really is no point. The-up skilling not only applies to junior or administrative staff. Everyone from the CFO / FD needs to have continuous education on the company’s chosen accounting software. This will ensure that the data produced is trusted, up to date and as accurate as possible which is critical, as it provides the FD’s and CFO’s with tools to accurately advise company leadership as to the processes that need to be undertaken to positively impact on the bottom line.

For more information on Grant Robson and The Finance Team visit www.thefinanceteam.co.za