Technology moves so fast, sometimes it makes sense to look back…in this case to a time even before Finance had the use of accounting software, much less the instruments of “Business Intelligence.” We may find, as the French say (in French, of course), that “the more things change, the more they stay the same…”
For the longest time, “keeping the books” up to date and producing statutory financial reports were core elements of the Finance function—even if bookkeeping and financial statements were not so great as a basis for business strategy formulation.
CFO’s used year-end, quarter-end, or at best, month-end reports as a basis for preparing budgets, measuring key performance indicators (KPIs, even if the term/abbreviation was not yet in use) and developing growth strategies.
The problem was that the timeliness of traditional methods of reporting didn’t allow for truly proactive financial planning. Data being used was a long way off from being “real-time.” Of course, businesses don’t stand still and wait for guidance while reports or financial statements are being finalized. In the time it took to produce reports, and then formulate a strategy—in the past, and today—the business environment would change. Factors used as input metrics did not exist anymore or were irrelevant. It is for this reason that budgets and KPI’s were often ignored and seen merely as a box-ticking exercise.
From Desktop to the Cloud, Yet Same Old, Same Old?
The first stage of “digital transformation”—it is entirely fair to call it that, applying a current term to the still remarkably recent past—concerned the nearly universal implementation of the kind of desktop accounting software that became synonymous with the industry.
The evolution of desktop systems (with Server capabilities) proceeded with two notable developments:
(1) the adding on of non-accounting functionalities encompassing CRM, ERP [enterprise resource planning], POS and other areas of the business, and
(2) the inclusion of basic “Business Intelligence” capabilities, mostly for enhanced reporting across different ERP modules to provide broader, mostly graphical representations of Actuals in as near-to-real-time as was possible from these table-based systems.
If we pause here a moment to consider BI we will see a through line even to the present day…There is no doubt that the addition of BI capabilities (whether in-built or purchased from a different vendor) made accounting users far more able to create, evaluate and share reports, often via impressive visualizations. And yet…though no longer necessarily ignored, KPI’s (especially creation of new and ad hoc metrics) and especially budgets (along with forecasting and other strategic planning) became ever more frequently offloaded into every-expanding Excel spreadsheet “systems.”
Excel - the most used Business Intelligence product the world over
The pervasiveness of Excel as a perennial favorite of Finance professionals—it is acknowledged as the most used Business Intelligence product the world over—has been commented upon endlessly.
Suffice it for now to say that there are two solid reasons for this:
(1) Excel is a brilliant standalone tool for creating metrics and KPIs, i.e., the often complex calculated values that either can’t be found in or easily programmed into accounting systems, and;
(2) spreadsheets can be used as templates to type in numbers into complex (if crazily confounding) budgeting/forecasting “applications” made up by users to satisfy the highly individualized means by which companies model, distribute and mash up their planning exercises.
Let’s next consider the latest stage of Finance’s digital transformation, namely, the move to cloud accounting systems. Business of all sizes have made the transition and are now able to obtain data anywhere, anytime, via any means (phone, tablet, web, and good old desktop) and realize the benefits of: speedy processing of information; reduction in overhead cost; reduced licencing fees; pay as you use; access to real-time information, and; automatic upgrades.
The cloud, in sum, has made modern accounting systems even better for transmitting and organizing Actuals—data can be captured, books reconciled and financial statements produced all with a simple scan from a mobile device or click of a button.
However, while it’s great to have financial statements always updated from the accounting software, releasing the “business intelligence” from that data in a matter of seconds without the right tools is still difficult. This is especially so when we broaden the definition—as we should—of Business Intelligence to include the kind of ad-hoc metric building and “write back” and “what if-ing” required of collaborative, mission-critical planning (budget/forecast) models.
And so, not surprisingly, Excel remains pervasive, even as all systems, including accounting, moves to the cloud. Cue the French phrase (in French, if you like), “The more things change, the more they stay the same…”
The Cloud, BI, The Future
Can we read the signposts towards the next stage of Financial Transformation?...at least, what’s needed in this next stage is pretty clear. Given that Finance staff have not abandoned spreadsheets, any new transformation must incorporate this favorite and firmly rooted end-user tool. And why not? The means exist to use Excel not as a means to download data, but rather as an empowered front end to shared reports, analytics and plan data. And there’s no reason to stop at Excel: all users should be able to connect from not only any device, but from any front end of preference.
Speaking of plan data—the concept of Business Intelligence must be inclusive of future-based data, i.e., the figures necessary to guide the future course of the business. Any solution that follows from accounting data must accommodate budgeting, forecasting and any other planning exercise (standard or ad hoc), and follow seamlessly from the basis for planning, i.e., Actuals data.
These above are what we would note as requirements to the next stage of Finance’s digital transformation; others foresee far better capabilities for predictive analytics, along with increased use of artificial intelligence. All that said, it is always difficult to fathom what really lies ahead—it wasn’t the French but Yogi Berra who said, “It's tough to make predictions, especially about the future”!