Number crunching is an exact science. In a business context, its success is based on one underlying factor - access to accurate data that spans multi-dimensional systems. Yet financials are often completed in isolation by departments using disparate systems that fail to present an enterprise-wide view of the performance of an organisation.
To make better-informed decisions and take action before windows of opportunity are lost, financial departments increasingly need access to information extracted from cross-functional sources and presented in a meaningful context.
Says David McWilliam, managing director of Cognos SA: "Businesses often invest in an ERP system with the assumption that it will provide them with the data they need to make business decisions. However, to achieve this, it is necessary to create a shift from business processes to visibility and performance management. Business intelligence (BI) is the key that will unlock the potential that resides in the ERP system."
Enterprise resource planning (ERP) solutions contain the raw data that the office of finance needs to draw on to establish the status of various financial components. While access to information such debtors may provide an overall view of monies outstanding, insight into days sales outstanding (DSO) and the regions, products and customers responsible for bad debt is essential to cash inflow.
Adds Christo Nel, pre-sales product manager at Cognos: "Having an understanding of cash outflow, or what is owed to the company`s suppliers, is just as critical. Considered a juggling act, balancing the dynamics of cash inflow and cash outflow requires analysis of information that delivers an accurate view into the performance of debtors and creditors. Creating a set of metrics with which to measure the performance of debtors and creditors is the basis for a successful financial operation."
"A BI solution that draws information from a multi-dimensional structure, often with the ERP system providing source data, is the panacea to performance monitoring of financials. While ERP systems can extract information to create financial reports such as income statements and balance sheets, they can often not provide a view of the performance of individual areas which collectively contribute towards the overall performance of the enterprise."
Analysing key financial ratios and understanding the general ledger is a critical part of financial analytics. Visibility into day-to-day processes provides the foundation for corporate performance management (CPM).
A driver for the adoption of BI solutions that leverage additional value from ERP systems is the need for self-service. Users want to be able to access information themselves rather than through the ICT department. In addition, companies with data require a data warehouse that offers an optimised data structure and BI that delivers `end-user` content.
Nel explains: "A history of asking the right business questions has allowed Cognos to create a best-practice framework for financial analytics. This framework includes a BI toolset that sits on top of the data structure and incorporates tried, tested and proven business logic. It shortens the time to implement a BI system and provides a method to deliver relevant information that ultimately assists to make sound business decisions."
A framework doesn`t necessarily equate to templates as the processes still need to be built and the data warehouse must be populated. It is far more beneficial to have pre-built reports, metrics and connections to multiple data sources - not only the ERP system - to assist with understanding financial performance, cash flow, supplier and debtor relationships.
This is essential to creating the foundation for CPM as it delivers visibility into ERP data to allow for informed decision-making. This, in turn, creates the building blocks for monitoring performance through scorecarding and driving performance through planning.
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