Organizations require the nuts-and-bolts practicality of accounting and financial management applications for essentials such as closing the books at the end of a quarter. But routine activities like this only begin the process of assessing an organization's financial status, according to experts. Equally important are the financial reporting and analysis applications that pull data from core financial accounting systems and help managers make sense of the latest numbers.
By submitting your personal information, you agree that TechTarget and its partners may contact you regarding relevant content, products and special offers.
A growing list of regulatory requirements makes timely financial reporting a necessity for most companies. At the same time, internal policies push business managers to regularly mine financial data for opportunities to improve performance.
Fortunately, there is a wide range of tools available to facilitate and improve financial reporting and analysis -- some using new and innovative technologies.
Exploring new options in financial management software
The good news for financial reporting and analysis tools is that they're designed to be easier to use by C-level executives and business managers. Intuitive interfaces shield nontechnical users from the complexities of gathering information from financial accounting systems and slicing and dicing data. Experts in financial management software say this represents a change from the recent past when analytics specialists and the IT department had to be called in to create reports, a process that could take days or weeks to complete.
More on financial reporting and analysis
Learn how to apply in-memory analytics to finance
Read the latest on Oracle Hyperion Financial Management
Understand operational risk management technology
On-the-fly financial analysis and reporting enables financial planners and business managers to make more timely inquiries and conduct more extensive what-if analyses for uncovering problems and opportunities. "Analysis today is less about processing big batches of data; it's about giving you more immediate access to the information you are looking for," said Chris Arndt, a partner at Red Granite, a technology consultancy based in Chicago.
But familiarity with embedded analytics and larger trends like the consumerization of IT may also be making end users more demanding. People are starting to expect their business applications to look and act similarly to the apps that run on their personal smartphones and tablets, said Marc Hoppers, managing partner at Dallas-based Cogent Co., an IT consultancy. "This is driving third-party, niche analytics providers to offer products that overlay on top of existing [platform analytics]," he said. “Business managers still get reports as always but can derive additional insights from the data and manipulate it and make it easy to use."
Organizations are seeing other advantages with a new generation of specialized analytics programs, Hoppers says. The smaller specialty tools launch quickly -- often within four to six weeks -- because they are designed to piggyback on top of traditional enterprise analytics platforms. "They don't address the needs of an entire enterprise; they addresses specific challenges," Hoppers explained.
For example, business managers at the headquarters of a restaurant chain pay close attention to labor costs, a prime indicator of profits. By combining an underlying financial-management suite with a special-purpose analytics program, managers can pull data from ERP, point of sale and HR systems for a consolidated view of performance. "It's been a game changer in the way they think about productivity," Hoppers said.
One trend that's introducing new flexibility in financial reporting and analysis is in-memory analytics, which enables users to query data residing in a computer's memory instead of on physical disks. The difference: The in-memory approach significantly shortens query response times, which in theory allows users of business intelligence and analytics applications to make faster decisions.
ERP vs. specialized financial software a fundamental choice
As with accounting and financial management applications, enterprises face a fundamental choice when it comes to financial reporting and analysis programs. One option is to use the report generators and analytics that come as modules in their ERP suites. Alternatively, organizations may opt for third-party applications that layer report templates and analytics tools on top of spreadsheet programs and financial management software suites.
The deciding factors are similar to those that come up in debates about integrated suites versus specialized "point" applications. Modules engineered to work with a larger platform don't require extra time and resources for integrating reporting and analytics into larger financial accounting systems. IT managers can usually assume the add-on will work in the foundation suite as advertised. "That's one less variable you have to worry about," Arndt said.
Economics may be another consideration. Organizations can sometimes negotiate a lower price for financial analytics modules when they're part of a larger ERP package.
But consultants say third-party companies that specialize in financial reporting and analysis may devote greater resources to creating and releasing new features more frequently than vendors who see this area as just one piece of a larger suite. Also, large organizations that run with multiple ERP platforms throughout their operations may have a tough time deciding which core vendor's financial analytics software to standardize on.
Internal skills also matter. The best analytics choices may be the ones easiest for the IT department to support and for business managers to use.
Learn how a company saved $1 million thanks to financial software
Discover how Red Robin restaurants use budgeting software