Finance Blog

BI vs CPM – What’s the difference?

‘Is there a difference between BI (Business intelligence) and CPM (Corporate Performance Management)?’

 A question that has plagued board rooms and senior leadership teams over the past few years.

In short, the answer is “yes” there is a difference, knowing which one to choose however means understanding how they differ and what your specific needs are.

 

BI tools are bits of software that are very good at manipulating large volumes of data, very quickly. They can help glean powerful information like performance metrics and trends. This kind of information is great … to some people. It’s generally best suited to people who work within business analysis.  The data and trends that come out of it will give you detailed performance data for whatever data silo is being looked at. It’s detailed and specific, you will be able to drill down to a single transaction level if that’s what is needed. It is, however, a bit of a one way street, it will provide the information but won’t help manage performance using the information.

CPM takes BI much further; it looks at various KPI’s (key performance indicators) from different sources, information from multiple systems and lets you see them collated together. CPM systems use the information gathered to give a picture of what has happened and is happening (company-wide) but also helps manage where that picture is headed.

The system will help plan, forecast, and view the information in the context of corporate strategy. It can link the data to specific objectives and action plans as well as showing where potential risks might lay. Because CPM systems give true context for the data, taking into account things like cross charging and moving exchange rates it is possible to have an accurate current picture side by side with the future forecast. The unique combination of accurate, companywide, current information against forecasts allows the best decisions to be made at the top levels of management i.e. a two way street.

The appropriateness of CPM and BI tools very much depends on the size and complexity of the business, generally speaking the larger and more complex the business the greater the need for CPM. The decision to get CPM needs to come from the need to have a true company-wide picture of performance.

'Is there a difference between BI (Business intelligence) and CPM (Corporate Performance Management)?'  A question that has plagued board rooms and senior leadership teams over the past few years. In short, the answer is “yes” there is a difference, knowing which one to choose however means understanding how they differ and what your specific needs are.   Read More

The evolution of financial reporting

Financial reporting cycles are under greater pressure than ever before. New compliance standards, increased transparency expectations and heightened traceability levels have all contributed towards a sizeable shift in the way in which organisations report performance information. As a result, Corporate Performance Management (CPM) is now becoming widely embraced as it allows organisations to be more efficient monitoring and managing their performance.

What are the benefits?

A consolidated approach to critical business data, not just financial information, provides a wider context through detailed budget comparisons and future forecasting that combines data from all key departments. Under this model, the financial reporting process includes forward-looking indicators including sales pipelines, competitor analysis, product launches and customer satisfaction levels.

With the primary objective of reporting being to reveal what is going on in the business at any given time, this evolution is now essential to meet the fast pace of today’s corporate landscape – with financial reports that are accessible to multiple teams helping to engender collaboration.

Cross-departmental dialogue allows finance to work strategically with colleagues across the business in order to facilitate and improve the decision-making process.

CPM systems allow key stakeholders to access the latest view of business performance against internal budget and competitors, as well as the big picture of a company’s financial health.

Accuracy of data is key

The accuracy of this, however, is largely dependent on data quality. While spreadsheets have traditionally been used for reporting, they can be both cumbersome and prone to costly errors. CPM software marks a change in approach.

Extremely complex processes, such as Reporting and Consolidation, Budgeting and Forecasting, are not best supported by spreadsheets with high probability for errors. Rather, best practice sees data held in a single repository that incorporates powerful analytical tools as well as controls to ensure validity, security and quality.

Traditional ‘row and column’ financial data reporting must be taken to a new level by adding context. Finance professionals that do not do so will be unable to fulfil the primary objective of financial reporting: reaching the right people at the right time with accurate and usable information.

Financial reporting cycles are under greater pressure than ever before. New compliance standards, increased transparency expectations and heightened traceability levels have all contributed towards a sizeable shift in the way in which organisations report performance information. As a result, Corporate Performance Management (CPM) is now becoming widely embraced as it allows organisations to be more efficient monitoring and managing their performance. Read More

Financial consolidation as a function in the finance world

‘Consolidation’ simply means the action or process of combining a number of things into a single more effective or coherent whole. However, to finance teams financial consolidation is a well- defined process that includes many complexities.

So what are the key steps in financial consolidation process

Collecting trial balance data (e.g., Assets, Liabilities, Equity, Revenue, and Expense accounts) from multiple systems, locations, contributors and mapping it to a centralised chart of accounts

Consolidating the data following specific accounting rules and guidelines, such as GAAP or International Financial Reporting Standards (IFRS)

Reporting results to internal and external stakeholders

Reports generated by the consolidation process include income statement, balance sheet and statement of cash flows.

It is not just about addition, it is about all the adjustments.

On the surface financial consolidation may present itself as a simple addition of numbers. However, it is more complex. Within financial consolidation specific adjustments need to be meet as the adjustments are being made from subsidiary level to parent company level, this includes the following.

  • Multi-currency conversion – in Europe alone there exist 11 different currencies over the 28 member nations
  • Intercompany transactions and balances eliminations
  • Adjusting journal entries – To reflect the correct position in the budget to which the expenses occurred
  • Accounting to reflect organisations that are not wholly owned by the parent company

Tools for Financial Consolidation

In mid-sized to large organisations the process of financial consolidation is predominantly handled by the finance team with the supervision of the financial controller and ultimately overseen by the CFO.

Historically financial consolidation was performed manually, however in the current climate there are several types of software tools used to support financial consolidation and reporting.

General ledger System – this works best if an organisation is using 1 ERP across the group, if there are additional other systems across the group the ability to collect data from other subsidiaries /locations and consolidate it.

Spreadsheets – Whilst these are regularly the tool of choice by finance teams, they are not inherently designed to support complex processes that accurate and timely financial consolidation requires. Loading data into a spreadsheet is a manual process and across multiple tabs within a work book the spreadsheet becomes difficult to navigate effectively. Additionally spreadsheets don’t provide audit trails regarding changes to financial results.

Purpose built consolidation tools – dedicated tools that are built specifically for financial consolidation are designed to integrate data for multi sources, with full audit trails and security, many have the ability to cope with multi-currency and multi- language entries. Historically these systems where deployed in online data centres they are now evolving and are available as cloud or SaaS offerings.

New standards of compliance, increased transparency and traceability of financial data are putting ever greater pressure on the time available in each reporting cycle. Consolidation reporting transforms data into consolidated financial information through automated processes to increase the speed and reliability of financial reporting. It enables, for example, the ability to compare and reconcile between management and statutory reporting; consolidate according to any accounting and reporting standards; and analyse information according to legal & internal management structures.

‘Consolidation’ simply means the action or process of combining a number of things into a single more effective or coherent whole. However, to finance teams financial consolidation is a well- defined process that includes many complexities. So what are the key steps in financial consolidation process Collecting trial… Read More

12 days of Financial Reporting (Infographic)

The Christmas season can be overwhelming and stressful because of pressing demands to deliver financial reports quickly. To complicate this already difficult situation, spreadsheet errors can be just around the corner, formulas are erroneously tweaked and you need to spend hours double-checking entered data.

Does it sound familiar? If so, there is a better way to get a grasp on your end of year financial reporting.

The Christmas season can be overwhelming and stressful because of pressing demands to deliver financial reports quickly. To complicate this already difficult situation, spreadsheet errors can be just around the corner, formulas are erroneously tweaked and you need to spend hours double-checking entered data. Read More

Lead your business out of the dark ages

For many financial professionals, the task of producing their company’s financial reports is both a painstaking and stressful process. This is often due to outdated systems meaning that the risk of errors is ever looming. In the last few years alone, we have seen how dramatic the effects of spreadsheet errors can be, both in terms of job security and cost to the business; Mouchel and its £4.3 million profits write down fiasco is a prime example.

To those on the inside of this process, the issues are clear, but sometimes it’s not as simple for senior management to understand. This article is aimed at helping you convince these decision makers that change is needed. You don’t want to waste time and resources preparing to pitch an idea for a project, only to be shot down and have to return to antiquated processes. So, here are our top tips to get the nod from senior management:

Collaborate and Listen

Some of the most successful projects from conception to implementation have had the support of individuals on multiple levels of the business, from eventual end users to those within the IT department. The more people within the business who feel included and valued in the project, the more they will strive to support your ideas and overcome obstacles together.

It can be useful to find yourself an advocate for change who holds a reasonably senior position, remind them that innovators get noticed as organisations grow and evolve. Each of these people will help bring a different perspective and their own experience into the mix.

Link to Company Goals

 If you work within a particularly acquisitive or fast growing company, then change and expansion are always on the horizon. Show how the change will allow for continued progress towards company goals and allow for long term expansion. Even pose the question: what will happen otherwise if the company infrastructure does not facilitate growth?

Focus on ROI

Without a doubt, the people you will be pitching your idea to are business savvy professionals with a head for numbers. It’s important to explain to them how they will see a return on their investment. One way to do this is to breakdown the cost into something more tangible for them, such as how many paid man hours need to be saved per week in order for the investment to pay for itself. In most cases, this is a very achievable number making it an attractive prospect.

It can also be beneficial to demonstrate how CPM systems are helping save money and time for others, perhaps even competitors or those in similar industries. There are a handful of case studies to help you on the Talentia website.

If you’d like tips on what to include in a compelling business case for change within your finance department, you’ll find a link to our webinar “A better way for finance to Excel” here

For many financial professionals, the task of producing their company’s financial reports is both a painstaking and stressful process. This is often due to outdated systems meaning that the risk of errors is ever looming. In the last few years alone, we have seen how dramatic the effects of spreadsheet errors can be, both in terms of job security and cost to the business; Mouchel and its £4.3 million profits write down fiasco is a prime example. Read More

3 Tips for Improving Your Financial Reporting Processes

Financial reporting is a key task for all businesses. With increased pressure on finance professionals to produce accurate reports and handle data correctly, it is essential to make the process efficient and reduce the risk of errors wherever possible.

There are a few easy steps that can be taken in order to get your reporting on track.

Have a single source of data

Whilst many business are still heavily reliant on spreadsheets, various studies have proven them to be highly error prone with 88% containing errors. By keeping all data in one place, you avoid the risks associated with trying to juggle multiple spreadsheets where the probability of an error having occurred somewhere increases dramatically. Spreadsheets are generally considered easy to use low cost solutions, yet the reality of gathering data from multiple sources results in a great deal of wasted time as consolidation across workbooks is challenging, especially for larger businesses. Another issue here is version control with multiple users changing documents at different times and overriding previously saved work. Having one source of the truth, where data is automatically consolidated and updates, allows you to rely on the accuracy of your reporting.

Collaborate effectively

Chasing people by phone and email to track the progress of tasks can be arduous and stressful. Systems with workflow tools give you a visual check up on where things stand and who is responsible for them at each stage, allowing users to collaborate effectively on projects. Reminders can be set and controls put in place meaning that you are in touch with each part of the process and each team member.

Self-service is key

As businesses grow, generally so does the number of users of financial software. Self-service systems reduce time spent on data entry and manipulation at head office, allowing your team to get on with making important decisions about the direction of the business. For security, users can be grouped and awarded access to only certain functions or visuals, meaning you can keep critical financial information secure even with multiple users.

Now think, are you doing all three of these things effectively in your business today?

Talentia Software recently produced a white paper – Uncertain political landscapes: A land of Unknown – about how to look at uncertainty not as an inhibitor, but as a catalyst for positive change.

Financial reporting is a key task for all businesses. With increased pressure on finance professionals to produce accurate reports and handle data correctly, it is essential to make the process efficient and reduce the risk of errors wherever possible. There are a few easy steps that can be taken in order to get your reporting on track. Read More

Mitigating the effects of market uncertainty through effective financial forecasting

The political climate across the western world is changing. Brexit, Donald Trump’s inauguration and upcoming elections elsewhere in Europe have all led to increased economic volatility. As a result of this, 90 per cent of CFOs now claim the level of uncertainty facing their business is above normal, high or very high[1]. To effectively manage a fluctuating economic climate, finance teams must look towards the vast amount of data they generate to provide a detailed overview of their financial footing.

For too long this data has been overlooked, with many organisations still opting to utilise spreadsheets for complex business processes. While this may be adequate for micro-businesses or single person operations, when this technology is scaled to larger companies it can easily result in errors and lost data. These inaccuracies could cause catastrophic damage should business decisions based on this data fail. During uncertain times, it is therefore imperative that firms undertake an in-depth analysis of their financial performance, preparing for the worst, and planning for the best. To effectively achieve this, real-time reporting will help translate the copious amounts of data a firm collects and convert this into detailed, reliable insights.

A new approach to financial forecasting

For companies willing to proactively review their budgeting and forecasting processes, a shift away from the annual budget is a starting point many will consider. While it still plays a valuable role through its focus on outlining broad themes, including revenues, costs, and organisational KPIs, rolling forecasts are increasingly utilised to provide far greater detail, feeding into yearly budgeting processes. This allows finance teams to clearly identify the strategic direction of a business, supporting effective decision-making and enabling rapid change when required.

To accomplish this, FDs and CFOs must extract greater value from technology, ensuring they have access to critical business intelligence when it is needed, rather than when the annual budget is drafted. Through a greater utilisation of innovative technology, businesses can effectively plan around market volatility, enabling agile reactions to issues that may once have not been addressed until the damage was done.

The in-depth analysis that modern technology provides offers financial workers the ability to plan ahead for change, meeting any challenges head on and positioning their business for success. The political climate across the western world is changing, from EU regulations set to be implemented prior to Brexit and the implications of leaving the EU itself, to shifting relationships with the US in light of the new Trump administration. The key to success will sit with just how flexible a business can be in meeting the new, varied challenges that emerge.
[1]https://www.financialdirector.co.uk/2016/10/11/brexit-fears-ease-but-uncertainty-still-high-among-cfos-reveals-deloitte/

The political climate across the western world is changing. Brexit, Donald Trump’s inauguration and upcoming elections elsewhere in Europe have all led to increased economic volatility. As a result of this, 90 per cent of CFOs now claim the level of uncertainty facing their business is above normal, high or very high[1]. To effectively manage a fluctuating economic climate, finance teams must look towards the vast amount of data they generate to provide a detailed overview of their financial footing. Read More

The end of the annual tax return – are you prepared?

HMRC recently published plans to bring about the end of the yearly tax return by 2020. Put simply, this will require that most businesses and self-employed workers provide at least quarterly updates to HMRC, through the utilisation of software or applications. This is a positive move by the institution, which has dedicated itself to embracing new technology and simplifying the process of the dreaded annual tax return, permitting finance departments to function in a more agile and dynamic way. On the other hand, the move could be seen as a long time coming, as many forward-thinking companies have been utilising technology enabling frequent reporting for some time.

A change of frequency – are businesses ready?
Technology helping firms keep track of their accounts in real-time already exists, however, the frequency of the new reporting process HMRC is suggesting could be problematic. Businesses in the UK are currently engrained in the yearly reporting process, meaning an increase in frequency will need to bring with it a new way of working. Embedding these processes within our working culture will be essential, yet, how HMRC is going to help companies achieve this remains to be seen. The questions this raises are: what will this process be, and who will be responsible for ensuring this works smoothly and businesses are compliant with the new rules?

This could lead to increased pressure on accountants and finance departments at the outset. A future HMRC accreditation scheme for software solutions should help facilitate the change, ensuring all data held for reporting has been through the right processes in order to provide frequent updates. Frequency and responsibility shouldn’t be a concern as the majority of modern finance solutions already help businesses audit numbers to determine if they have gone through the correct process. This is essential when analysing a chain of responsibilities that help a system arrive to a specific number. Financial software technology audits this trail easily to determine where a figure has come from and if the process was correct.

Eyeglasses on rustic wooden table. Forest background.

Enforcing best-practice – is SaaS the future of financial technology?
Many small and large companies still utilise spreadsheets, which are prone to errors, unsecure and don’t allow users to trace their workings. This move by HMRC to increase the frequency of tax reporting could be a way of enforcing best practice on those companies who are still utilising this outdated approach. Utilising HMRC software for financial reporting not only ensures that businesses can be certain a figure has been reached through the correct process, but this can also be reported in an efficient manner. Those who are already utilising this technology will be prepared for the 2020 deadline; however, firms that are not will have to consider embracing technology in order to remain compliant and avoid fines.

Software-as-a-Service (SaaS) technology will provide the key in preparing businesses for frequent tax reporting in 2020. When HMRC implement changes and roll-out updates, SaaS technology will ensure that businesses software can automatically update and therefore remain compliant. In comparison, utilising Excel, or legacy software in-house, means these updates will not be automatic, risking incompliance, and most worrying of all, fines.

To find out how Talentia’s Corporate Performance Management (CPM) technology could help your business remain compliant, visit: https://www.talentia-software.co.uk/solutions/corporate-performance-management.html

HMRC recently published plans to bring about the end of the yearly tax return by 2020. Put simply, this will require that most businesses and self-employed workers provide at least quarterly updates to HMRC, through the utilisation of software or applications. This is a positive move by the institution, which has dedicated itself to embracing new technology and simplifying the process of the dreaded annual tax return, permitting finance departments to function in a more agile and dynamic way. On the other hand, the move could be seen as a long time coming, as many forward-thinking companies have been utilising technology enabling frequent reporting for some time. Read More

PAS 1919: Does one size really fit all?

The British Standards Institution (BSI) recently launched a new voluntary best-practice guide, PAS 1919, designed to define what “good” looks like for in-house accounting. The move has piqued the interest of management accountants as not only does this signal BSI’s first foray into the accounting sphere, this is the first standard of its kind to be launched in the UK. With experience in CPM software and the various elements of corporate performance management, Talentia has taken a look at the guide.

PAS 1919 aims to enhance decision making and company performance by offering a framework for those working in a management accountancy function, or in a senior management position.

Is a standardised approach suitable to management accounting?

Despite being a positive first step towards a standard that could play an integral role in the world of finance, the guide has so far received a lukewarm reception from the industry. The most notable criticism has been that moving towards a standardised set of rules highlights a shift away from historical practices. This has caused concern as traditionally a bespoke approach is considered best-practice due to the complications caused by applying the same standards to businesses in different sectors and of varied sizes. Every industry works to a different model, a considerable hurdle in promoting this guide to a wider market.

Another concern from the industry is related to the cost of the new standard. Although charging for a best-practice guide of this variety is commonplace, this has been positioned to the market as a standard, receiving endorsement from the Chartered Institute of Management Accountants (CIMA). Although the fee is relatively low at £80, it has become a sticking point for many, who believe that a true standard would freely encourage the sharing of best practice.

Will PAS 1919 revolutionise management accounting?

 

A one size fits all approach, designed for the entire accountancy market, is unlikely to cause a tidal wave. If we look to PAS 1919 as a conversation starter for an industry that has lacked any structure and guidance in managing its own performance, then it does offer a helpful starting point and the beginnings of a foundation. Company evaluation is no easy task, and if this guide can act as a driver for more industry and size-specific standards in the future, it will undoubtedly serve to make the life of a management accountant easier and more efficient.

In the short term, PAS 1919’s real utility can be put to the test by applying it to highly regulated companies where there is no other option but to follow a best-practice approach. This would allow the BSI to test the guide’s success and iron out any issues raised. The same approach could be applied to a company under administration or financial difficulty, where the guide could be used to evaluate a company’s progression. There is no doubt that trying to turn something with requirements as unique as management accounting into a standard will be a huge undertaking, however, it is an encouraging first step in ensuring the internal health of a business and its future.

Talentia Software provide corporate performance management systems across a global client base. Book a demo or get in touch to find out more.

The British Standards Institution (BSI) recently launched a new voluntary best-practice guide, PAS 1919, designed to define what “good” looks like for in-house accounting. The move has piqued the interest of management accountants as not only does this signal BSI’s first foray into the accounting sphere, this is the… Read More