Today’s post is a little different than most – instead of focusing just on technical implementation details, let’s take a step back and think more conceptually about the “why” for implementing an enterprise data / master data management solution in the office of CFO / financial reporting.
* for the purposes of this article, we will be using Enterprise Data Management in the context of the hierarchies and COA structures that drive reporting.
Financial Data Accuracy
One of the most obvious returns on investment provided by an EDM solution is the increase of data accuracy throughout the organization. When systems are maintained separately – miscommunication, user error, fat-fingering, or other issues can result in inconsistencies between reporting structures. Additionally, we could have divisive ownership issues around these reporting structures without any definition or workflow process to assist in the governance and consistency. Who is to say that the true “owner” of the reporting tree is making the decisions or verifying placement?
These inconsistencies in structures trickle down to inaccurate and inconsistent reports across your organization – which number do we trust?
Many organizations use multiple purpose-built systems to generate and review data:
- ERP for detailed transitional level data and journals
- Consolidation solutions to track intercompany eliminations, ownership, and a consolidated corporate view
- Financial planning solutions to generate budgets and forecasts, operational reporting/BI solutions, etc.
…But the core of these applications and their data is the context – the COA and dimensionality – Enterprise Data.
But often, organizations (including FP&A, Accounting/Reporting, and CFOs) overlook the health and traceability of the data that is driving those systems and their reconciliation, and how that affects reports. Master data is the backbone to the entire ecosystem; yet purpose-build systems and processes around master data are never at the forefront of CFOs minds.
Value of an EDM Solution & ROI
When EDM is put into place, and the structures throughout an organization are consistent and maintained centrally – reports and data values will also fall in line. The system can identify differences between application structures, should there be any, and allow users to reconcile them easily within a business-driven interface.
The main benefit of increased data accuracy is really the informed business decisions that result from accurate financial reports. As a CFO – isn’t having accurate financial statements the real foundation of every decision made? One cannot fully evaluate the effectiveness of a program, the profitability of a business area, variance analysis, or the potentially negative effects of outstanding liabilities without accurate data. Not to mention the reduced auditing and change reporting costs that also are realized from implementing an EDM solution.
So not only can EDM prove its ROI with data accuracy in your reporting environment – but also with the resulting business decisions that stem from the accurately articulated information.