By Alok Ajmera, President and Chief Operating Officer, Prophix Software
Half a century ago, the first electronic spreadsheet – LANPAR – was introduced to replace paper-based bookkeeping ledgers and make business management more efficient and effective. It was a great tool at the time, but 50 years later more than two-thirds of companies still use a clunky spreadsheet-based approach to corporate performance management (CPM) that is painfully inadequate for today’s complex real-time business operations, sophisticated financial processes and onerous planning needs.
Besides Woodstock’s Summer of love, 1969 gave us the first microprocessor, the UNIX operating system, the first ATM, the birth of ARPANET, the debut of the 747-jumbo jet, the first test flight of the Concorde and a baby named Jennifer Aniston. She’s still around but the Concorde and 747 are retired, and the Internet, microchip and UNIX are unrecognizable from their humble origins. The world has moved on and so must corporate performance management.
Modern software tools that incorporate machine learning and analytics enable financial professionals to move beyond spreadsheets and into a new level of operational sophistication. They accelerate and streamline budget management, automatically pulling in data in real time data from a myriad of systems, enabling the creation of comprehensive, insightful forecasts and plans.
Streamlining Financial Data Results
Automating these CPM processes frees finance teams from the tedious, time-consuming and error-prone tasks of manually collecting data and moving it from spreadsheet to spreadsheet, workbook to workbook in order to generate actionable insights. With data collection and report generation automated, finance teams become value generators rather than number crunchers. They can focus on applying the insights their data provides to business operations, increasing competitiveness, improving profitability, minimizing risk and driving results.
For example, with meaningful access to data in real time, finance professionals can build dashboards that provide comprehensive, easy-to-understand holistic views of performance. This is the Holy Grail of one true picture of the company. What is working, what isn’t working, and what will and won’t work in limitless what-if scenarios?
This one true picture is essential to simplify analytics, streamline workflows, and ensure optimal data governance across the organization, which is of course essential to financial teams in meeting compliance requirements.
Automating and integrating the planning process can eliminate the back-and-forth hunt for numbers and reduce the time to generate plans from months to days. Integrated financial planning also serves to break down silos and fosters collaboration, giving financial teams a more complete and uniform picture of the organization, which enables management to make smarter decisions. Where will more resources create a better return, and where would they be non-productive?
But despite the clear cost-benefit and enhanced profitability that automated CPM provides, most businesses continue to slog along in a spreadsheet world, consigning finance professionals to what is essentially non-strategic busy work. Often, by the time data is collected, scrubbed and combined, and reports are generated, the opportunities and risks that management needed to address are long gone. Consequently, leadership teams are stuck in a “good-enough” cycle. As long as the company isn’t in the red, financial performance is good enough. By re-thinking the approach to enterprise performance management – investing a little time and effort to update that process — financial officers can provide an extensive new level of insight into the health of the company.
Driving Business Decisions through Trusted Insights
Data is the key to unlocking hidden value and risk in customer relationships, but the data most firms use to manage their own performance is often locked in kludgy home-grown systems. But it’s not enough to collect the data. You have to be able to do something useful with it. For most companies, it’s difficult if not impossible to collect and synthesize their data into meaningful business insights in time to do anything about them. As a result, the relatively small percentage of firms that have automated CPM have a huge competitive advantage. This is true whether data operations are on-premise, in the cloud or a hybrid of both.
Different companies have different choke points. By automating CPM, business leaders can identify those choke points in real time and make better decisions about managing their operations faster to create better results. Adapting CPM to operations gives management operational information and analysis much faster, enabling to cut costs and increase effectiveness by managing staffing levels better, reducing administrative burden, closing the books earlier and getting more useful information to sales teams.
Now apply that capability to the financial planning process. Instead of starting to collect guestimates several months in advance, automating financial planning with a modernized approach and sophisticated software tools, gives organizations greater insight into their company performance – a shared picture across the whole organization that leads to reduced risk and better business results.
The business environment is constantly evolving. Businesses that fail to adapt are flying noisy, fuel-gulping 50-year-old 747s while their more-nimble competitors are winning today’s race with the equivalent of super-sophisticated 787-Dreamliners.