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Better Performance Reporting and Analysis

Increasingly, finance and business unit managers are seeking to respond to threats and opportunities more quickly and to reallocate resources more authoritatively and dynamically.

A forward-looking and analytical view — the ability to conduct what-if analyses, for example — goes to the heart of much of what finance and business unit managers need to manage their companies amid increasing competition, regulatory oversight, and higher investor and board expectations. Executives need to be able to report timely, accurate data on historical performance, to be sure.

Increasingly, however, finance and business unit managers seek to respond to threats and opportunities more quickly and to reallocate resources more authoritatively and dynamically.

In this study, we sought to explore finance executives’ views on
their ability to report and analyze financial information. What do their companies do well? Which stakeholders are well- or ill-served with information and analysis tools? And what barriers do companies face when trying to improve their financial reporting and analysis capabilities?

In addition, we wanted to understand how executives’ views on these and other matters vary according to their companies’ strategy for finance systems technology — that is, do companies that have invested aggressively have different views on their ability to gather, report, and analyze information?

To gauge finance executives’ opinions on these topics, CFO Research executed an electronic survey to readers of CFO magazine in November 2005. Our research program gathered a total of 164 responses from senior finance executives — more than half of whom work for companies with $1 billion or more in annual revenue. Our solicitation to participate in the survey was focused on senior finance executives and, as a result, respondents’ titles are typically chief financial officer (30 percent), vice president or director of finance (33 percent), and controller (16 percent). Respondents come from a broad cross-section of industries, with the manufacturing, financial services, consumer products, and wholesale/retail trade industries particularly well represented.

Queried on their satisfaction with the ability of their finance teams to execute a list of reporting and analysis activities, senior finance executives say they are broadly satisfied with their teams’ performance. Fully 86 percent of respondents are somewhat or very satisfied with their transaction-processing capabilities, and nearly 80 percent of respondents express this view of their external reporting and regulatory compliance capabilities. It seems clear from this data that companies’ investments over the last several years in basic financial management technology and process improvements have paid off.

But management reporting and the elements most closely tied to a company’s ability to plan and execute company strategy are rated less favorably by survey respondents. As shown in Figure 1, respondents express greatest dissatisfaction with their abilities to plan, budget, and forecast, to conduct ad hoc analyses, and to support business decisions such as M&A restructuring, product pricing, and so on.

These results are wholly in line with recent trends in finance and in business more generally, as companies have responded to the pressure of heightened regulatory scrutiny and higher investor expectations by investing heavily in transaction processing, basic consolidation and reporting, and compliance technology and systems.

Companies may well be taking on sophisticated information and analysis initiatives in stages, investing first in systems and processes for historically oriented reporting activities and postponing investments to support forward-looking activities such as planning, budgeting, and forecasting, ad hoc decision support, and internal reporting to decision makers.

Survey data on stakeholders’ satisfaction with their access to timely and accurate performance data shows, on one hand, a largely satisfied community of investors, executives, and managers within finance and business units. More than 70 percent of top executives and external users of company performance information are somewhat or very satisfied with their ability to get timely and accurate performance data, say survey respondents (see Figure 2).

Less satisfied, says the survey data, are those who rely on such information — and seek to build on it with additional analysis — to make day-to-day operating and investment decisions. Financial systems end users and the finance and general management teams of business units are consistently less satisfied with their access to high-quality information. Thus, those who are most likely to be called on to work with information to create plans, make decisions, and do other analytical work — rather than reviewing the work of others — are least satisfied with the information at their disposal.

In an effort to understand which pieces of management reporting and analysis are most in need of improvement, we asked finance executives to rate how well their processes and systems equip them to meet a broad array of reporting and analysis objectives. A majority of survey respondents say their processes and systems to allow what-if scenario analysis and to give end users flexible desktop access to additional information needs improvement (see Figure 3). Tools for static reporting on business performance and even on line-item details in budgets and results were rated more favorably.

In a separate question on broader finance system issues — including security and access privileges and performance tracking against plans — analytical, ad hoc analysis capabilities emerged again as a source of dissatisfaction. While a majority of respondents say their systems maintain suitable security and 44 percent give high ratings to their control over end-user access, a solid majority give poor performance ratings to both their what-if analysis capabilities and to their access to non-financial performance information (see Figure 4).

A majority of respondents call for improving the timeliness of information, and more than one-third say broader sources of information (that is, more types of information) is a top area for improvement that would deliver business benefit (see Figure 5). But respondents’ call for easier analysis again comes through loud and clear in the data, as 71 percent say improving the ease of analysis of their performance data would yield the greatest business benefit.

This article is excerpted and adapted from ”Performance Reporting and Analysis: Finance Executives Seek Better Applications to Dig Deeper.” Cartesis and Microsoft funded the research and the publication of our findings; at CFO Research Services, Sam Knox and Celina Rogers conducted the research and wrote the report. You may download a copy of the full report by filling out a brief form.

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