So far in this series, we have not focused on technology at all. And that is deliberate - we see a lot of improvements to management information and decision making that can be made even without focusing on technology. But, to make best informed decisions, at some point you'll need to gather data inputs, prepare analysis, run calculations, turn your insights into digestible formats for different audiences, and communicate next steps to decision makers.
To do that you need an engine room – and technology solutions can clearly make that engine more powerful and more effective. The wider environment is increasingly dynamic with fluctuations to interest rates, inflation rates, and raw material availability as examples. At the same time, many more data requirements continue to emerge – including environmental reporting and social impact disclosures. As a result, relying on gut feel or manual processes to collate, analyse, forecast or report information is likely not to be scalable or fast enough.
If you're looking to use technology to improve your decision making – be that speed of information, richness of analysis, or usability of output formats – then the options largely fall into one of four categories (putting artificial intelligence aside for the moment). All of them bring benefits and drawbacks, so you need to think carefully about the system that's right for you.
The reports of Excel’s death have been grossly exaggerated. It's still used by virtually every organisation and finance team. It's powerful, easy to use, and universally recognised – meaning that availability of skills is no barrier. Excel can be used to run highly complex models with scenarios and sensitivities. It's still the most commonly seen tool for the complex modelling that's needed for IPOs, acquisitions and refinancings.
But, it's not necessarily scalable and robust. Updating Excel workbooks can be time consuming and prone to error – even when Excel is optimised with macros and teamed with robotic process automation to reduce the level of copy/paste of data. If you want to input data from multiple sources and in real time, Excel is probably not the best place to keep it all given the instability and the human oversight need to keep track of macros, formulae, version controls, and so forth.
Your core system is the centre of your finance function. With finance likely to play a key role in decision support for the whole business (even if non-financial metrics should be factored into decision making), it would make sense to use your core finance system as an engine for the data collation and analysis you need. If you have an enterprise resource planning (ERP) in place then all the better since your financial data will likely already be integrated with data from other modules of your ERP, such as HR and CRM.
We see many organisations looking to maximise the use of their ERP or tightly integrated solutions from the same software author in this way – adopting additional modules such as Hyperion, Oracle HFM, Sap BPC, or others as relevant to their ERP. Big ERP providers are competing with the more focused solutions covered in the next two options so are definitely 'upping their game' in this area, with visual outputs of their tools improving constantly.
But, what if the data sets you want to analyse do not appear in your ERP? For example, if you're looking to decide where to open your next store based on your own financial data plus externally supplied data on footfall and customer sentiment? The big advantage of using your ERP as a decision engine would then be diminished – and specialised tools may become more attractive – especially if you want to focus more on forward looking data rather than historics alone.
Tools such as Alteryx, Tableau, Qlik, Oracle EPM Cloud and PowerBI have become more prevalent over recent years. In simplified terms, these tools can 'sit above' your data sets (from multiple source systems, or a data warehouse, or a data lake) and provide user-friendly, sophisticated analysis and visualization capabilities. The graphic outputs are good, the solutions tend to be quick to mobilise, and they're intuitive meaning that any users can 'slice and dice' the information that you provide pretty easily.
Giving end users access to dashboards in these tools can give them more autonomy – but without changing the actual underlying data. In fact tools like Alteryx can help with the quality of your underlying data. Plus, these tools are becoming more common place meaning that skills are pretty transferable.
But, these solutions are not suited to all tasks. For example, PowerBI and other visualisation tools are a great way of providing filterable dashboards but are not a solution for consolidation, statutory reporting, or forecasting.
Where the decision-making and reporting needs are more complex, some organisations may choose to deploy a dedicated enterprise performance management (EPM) tool. There are a plethora of options already on the market for these cloud based SaaS solutions – of the likes of Anaplan, OneStream Jedox, Board and Planful. These can be very rapid to deploy and bring rich functionality ranging from budgeting and forecasting through to automated drafting of statutory reporting, tax-filing, and complex scenario planning. The level of competition in this part of the market is helping to raise standards and lower costs too.
But, not all organisations will genuinely need these tools. If you're not going to use the full capability of a dedicated EPM tool like this, they may be an unnecessary luxury that will just confuse the technology landscape in your business.
There will be further benefits and drawbacks of any option within each of those four routes – and you can of course have a mix too. For example, we often see the reporting layer in conjunction with leveraging systems and Excel too. So – how do you make a choice for your organisation?
Your budget will of course play a part in your decision and you can consider multiple factors. There are two things you need to look out for when making cost-based considerations.
Do you want an all-singing, all-dancing solution that will automate your year end accounts, analyse your data 56 ways, and provide 90 different scenarios in your rolling forecast? Or are you just looking for a way to create some dashboards to present your financial performance visually? Before you get distracted by all of the options, we would strongly suggest spending time clarifying exactly what you really need and what is a 'nice to have'.
Technology is never the answer on its own. Any engine will rely on the quality of data input to it, the skills of the users to interpret results, and all of the other factors in the MBID framework. We would strongly suggest you consider all of those aspects, rather than focusing exclusively on technology alone.
Our next article in the Making Best Informed Decisions series will focus on the importance of factoring in the impact of tax - including capital allowances and research and development claims. For more guidance on your systems strategy to support your ambition to make best informed decisions, contact Simon Davidson.