Modern businesses are complex and often need to access financial data from any number of different platforms and formats. While each platform brings its advantages to the table, there’s no doubt that consolidating financial data in a single place is the most effective way for people in financial planning and analysis (FP&A) roles to bring value to their organizations.
A survey by Deloitte revealed that 75% of CFOs expect the pandemic to have a severe effect on their business and don’t expect demand to return to pre-pandemic levels until later this year. However, they identified digitization and streamlining processes as the keys to helping their businesses survive tough times. It’s safe to say that these expectations carry over to small businesses as well.
Consolidating data is the first step companies ought to take when creating streamlined processes. Here are five benefits of financial data consolidation for organizations of all sizes.
1. Better Budget and Cost Projections
FP&A professionals routinely run into hurdles when completing monthly closes that are essential for budgeting and cost projection. Often, finance departments prefer to use old, trusty templates and add data from various parts of the business as needed. However, as the month draws to a close, all of these data have to be updated and verified.
A single platform that allows departments to input their data in their preferred format and automatically transforms it into the FP&A team’s chosen format will increase the pace of the monthly close. As a result, finance teams can provide the CFO with better cost projections that feed into working capital calculations.
An automated system that pulls in numbers from departments in real-time makes life even easier for finance teams. Thanks to breaking down operating expenses in real-time, business owners can have greater confidence in their numbers and create accurate projections.
2. Consistent Reporting
Excel is still the software of choice in many businesses and with good reason. It’s versatile and highly customizable. Also, every professional in the industry has been trained on it. Moving to another solution doesn’t make sense.
However, consolidating data in an Excel sheet is tough, especially for larger organizations. The best platform solutions augment Excel workflows instead of trying to replace them. By integrating these solutions with Excel, finance teams can pull data automatically into their spreadsheets and have them organized for analysis.
Teams can then export these data to ready-made report templates that change dynamically thanks to real-time data feeds. The result is a consistent report format that eliminates manual work and eliminates errors. CFOs and business owners can easily view the financial impact of their decisions.
Ad-hoc reporting is easy as well, thanks to integration which results in advanced filtering functions appearing within Excel. Teams can slice and dice data easily to present better insights during meetings and presentations.
3. Better Investment Decisions
Many teams rely on manual reporting processes and this only increases the amount of clerical work they have to carry out. Gathering data from varied sources only increases this work, and there’s little time left for analyzing numbers.
Automating data collection into a single platform eliminates the need for manual processes. It also frees up teams to execute value-add processes such as identifying key drivers in a business. Capital allocation is one of the most critical tasks in a business.
Teams can paint a more accurate picture of a business’ strengths and weaknesses by diving into COGS, Capex, Opex, and other financial data. Owners, armed with this knowledge, can make better capital allocation decisions and model different scenario outcomes.
For instance, owners can model the outcome of buying a smaller competitor versus projecting revenues by building a business unit internally. While surface-level revenue comparisons are helpful, consolidated data can help decision makers analyze the effect of demand swings on department budgets and second-order consequences.
4. A Single Point of Truth
Disparate data sources make maintaining data integrity close to impossible. When everything’s decentralized, finance team members cannot run accurate projections or have confidence in their numbers, because they’re never sure of how true their assumptions are.
While creating a shared Excel file allows multiple users to share their data on a single page, it complicates data integrity. Excel cannot create a cell-level audit trail that can identify sources of error. Neither can it automatically validate data and check it for consistency. Preventing double entries and redundancies is also impossible.
Expecting employees to manually validate cell-level data is unrealistic. An automated platform that integrates with Excel will have minimal workflow impact and will bring the power of technology to eliminate manual validation processes.
The result is a fully validated source of data that has high integrity. Teams can build projections using this base and execute their tasks better.
5. Easier Access to Insight
Analytics platforms are everywhere, but they’re only as good as the data they’re fed.
Businesses that have powerful analytics engines backed by manual data validation processes are not extracting the most benefit from their software.
An analytics package can’t shed insight into a company’s financials without receiving a full picture. By bringing all of their data into a single place, running analytics and dashboarding data is simpler. Armed with insight, businesses can make better decisions.
Worth the Migration
Consolidating financial data into a single place might require a change in mindset, but it’s well worth the investment. The benefits outweigh the friction, and companies can improve the quality of their decisions significantly.