With the technology that is now available, management reporting should be a breeze. The period ends, underlying systems are closed, we press a button, we analyse, comment and the management report is made available to consumers. Fast, efficient, effective.
Unfortunately, not! So many companies of all sizes struggling to perform this most basic of processes efficiently and effectively. In this article I look at why this is and what you can do about it.
Collecting transactional data at the required granularity level
Reporting in the manner you wish is heavily reliant upon the way you record and store underlying transactional data. For many organisations, this will be your accounting system (or ERP) although this may be supplemented by data from operational solutions.
Your ability to report efficiently is driven by the ability to extract data at the granularity level required for decision making. Therefore, coding structures need to be designed at the lowest level at which you need to analyse, thus allowing you to start the analysis process at a summary (balance) level. Starting at the transaction level can significantly impact efficiency.
Changing the coding structure may be a solution. If functionality is simply not available (e.g. your accounting solution does not allow a department or cost centre), the answer may be more complex. Either you will have to change your solution or deal with this in your reporting process.
Finding the right solution to report from
Here lies the biggest conundrum. Do you report directly from your underlying systems or do you extract the data and load it to a reporting solution? Let us look at the two options in more detail:
- Direct reporting from your underlying solutions
In the modern tech world, this can be achieved in two ways. The first is through a report writer that is either provided by the vendor, or a third-party solution, such as business intelligence (or BI). The second, and still more common, is the use of Excel in some form.
When using a report writer, or a third-party solution, there is likely to be a strong reliance upon the format and granularity of the underlying solution and the data stored. A report writer (or Excel add-in) supplied by the vendor will only work with one data source. And, whilst many BI solutions (and Excel) can connect to unlimited data sources, there may be limitations on data sources for each individual report.
This is especially important. For the process to be efficient, all data in the management reporting pack needs to be accessible without manual intervention. A classic example is plan and forecast data, or calculations such as year-end outlook. Where does this come from? Also, how and where do you add the accompanying narrative? This is often why Excel becomes the default methodology as it can answer these questions. However, we then have the limitations of Excel which are much discussed, including using it as a database which it is not. This is where the process and maintenance inefficiencies can start to mount up.
- A bespoke reporting solution
In this scenario, data is loaded to the reporting solution from multiple data sources. These solutions invariably have extract, transform and load (ETL) functionality that enables this process. “There was a time when getting data out of accounting systems was a problem”, says Andreas Ley, Managing Director at LucaNet UK. “Not anymore. Many solutions, such as LucaNet, have ETL functionality and pre-built connectors to most accounting systems making this a turnkey part of an implementation.” ETL functionality also allows the manipulation of data as it is loaded, overcoming coding inconsistencies between systems (e.g. GL codes in disparate accounting systems).
With a reporting solution, you are not just able to store data, you are also able to perform calculations and model data that is held within the solution database. Andreas continues “in certain solutions, this includes consolidation, budgeting, planning and forecasting capabilities. This goes well beyond a BI solution where you are merely reporting data from a source with some simple calculations performed at run-time.” These Corporate Performance Management (CPM) solutions have modelling capabilities and functionality, thus allowing all data (actuals, plans, forecasts, budgets and outlooks) to be held within one data repository.
The use of a reporting solution with an underlying database also allows one further benefit that is often under-estimated. That is the ability to load data at a transactional as well as at a summary balance level. Andreas concludes, “this simplifies the analysing and commenting work by giving drill-down capabilities and transparency from high-level data to underlying granular data”.
Storytelling – adding strategic insight and value
Data alone is not enough. The finance team need to add value through storytelling, explaining variances to plan and (hopefully) providing strategic insight. This is a much-discussed subject that I will take as a given to the reader and will not go further here. However, even if this principle is accepted, doing this efficiently and effectively is key.
Where to collect narrative
This has and continues to be, a problematic part of the process. Most reporting solutions can collect text. However, this is often limited in size and is held at a certain reporting intersection (at input level). A typical example is that comments can be held at the input account level but not at the summary balance level. Solutions can deal with comments but not commentary. Again, therefore Excel remains so popular as it can be designed to deal with both.
Assembling and publishing the report pack
Another hot area of debate. Whilst we are seeing a move towards self-service reporting, this transformation is slower at the higher levels of an organisation. Still, the most common method of reporting is the report pack of some description.
This can be a highly manual process, usually using a combination of Excel, Word and PowerPoint with output to PDF. This copy and paste process is time-consuming and open to error.
What we are seeing now is solutions with Word and PowerPoint add-ins, as well as Excel, which address this problem. These office tools can be used in a conventional way with data elements refreshing automatically against underlying data sources. There are specialist Disclosure Management tools for this purpose and most CPM solutions now offer this functionality as standard.
What is in the report pack?
The whole purpose of a report pack is to provide information and insight to help understand performance and define future actions. It goes without saying that the contents of the report pack must meet this objective, otherwise it is a pointless exercise.
Our experience is that report content is very rarely questioned. For many organisations, it has remained unchanged for years. If you ask anyone involved in the process, the answer is “it has always been like that”.
It is time to transform management reporting!
In many cases, busy finance teams are consuming huge amounts of time delivering management reports that do not meet their objective. Take this opportunity now to challenge the effectiveness of the process. Question what it should contain, what information the consumer needs.
Once you have done this, look to make the process as efficient as possible using technologies that are available. If you do this, then the period ends, underlying systems are closed, you press a button, you analyse, comment and the management report is made available to consumers. Fast, efficient, effective!
If you want to learn more about financial reporting, watch our latest on-demand webinar ‘Monthly Financial Reporting with LucaNet’ where we provide an update on our reporting functionalities and demonstrate how you can save time and speed up your reporting while producing reliable figures.
Monthly Financial Reporting with LucaNet
This article is sponsored by LucaNet.