When I started my first internship in a Finance department in 2005, we actively used Excel for most of our Finance processes. I am amazed that after all these years, Excel is still prevalent as a data source for reporting. Although Excel certainly has its place, a performance management solution is imperative for carrying out complex financial processes, enabling Finance to become a true business partner.
My classic month-end experience
After graduating, I went into contracting. The close cycle was always predictably high-pressure, with strict deadlines.
My monthly close processes looked a bit like this:
- Accounts Payable (AP) closed
- Accounts Receivable (AR) departments closed
- GL department would start with checks and reconciliations. The figures would be reconciled in Excel sheets. After specifying discrepancies and adding backup for the figures, we would start running the monthly trial balance reports. In some of the companies, the reports also went through Excel Macros to provide additional calculations or supplemental data.
- Once the data was finalised, we would enter it in our consolidation spreadsheet for group reporting. Typically, three to five colleagues would make sure all the reporting data was submitted by entering data and solving intercompany mismatches.
There was a good amount of manual labour involved in getting the financial data in our consolidation tool. Exhausting, right?
Besides the intensity of the manual work, it was also very time-consuming. If you are working in a Finance department, you know that last minute changes are unfortunately commonplace. This meant we had to repeat all the steps: make changes in the General Ledger first, run reports, run the reports through an Excel macro (which was showing us which General Ledger accounts were impacted) and make changes to all the accounts impacted in our reporting and consolidation spreadsheets.
More changes? Well, here we go again... This was not all!
While the close was underway, there was a lot of pressure on getting the correct data reported in a timely fashion. During those hectic days, sometimes complex Excel workbooks would not function properly. A couple of the most common culprits were:
- Macros not working properly
- Broken links to other files
- Outdated links to other spreadsheet files which resulted in outdated or incorrect numbers
- Sometimes it was unclear which workbook contained the latest figures.
Sound familiar? Now issues need to be fixed as soon as possible... Panic ensues!
I also tended to encounter a single point of failure. There was a limited number of people – often just one – who were maintaining the complex Excel formulas, macros, and links to other files. This could not be easily handed over, as the maintenance of complex Excel workbooks required advanced Excel or VBA skills.
Introducing Performance Management
My first experience working with Performance Management was at a large multinational company in retail. At first, I did not understand why the operational workload was lower on this Finance department. The GL team was spending more time analysing and solving differences instead of entering the financial data manually on a recurring basis.
During the first five days of close, I was expecting that it would be operationally intensive, as I was used to pressure and stressful situations. In this Finance department, there were many different activities to perform during month-end, but the nature of the activities was not the same.
The automated process saved us so much time and energy. We spent most of our time analysing figures and acting as a true business partner. We identified opportunities to streamline the monthly close even more and our focus was shifted to analysing the discrepancies and narrative hidden within the figures. Getting the data in the reporting tool was no issue.
After the first close, I investigated how the monthly close process was set up. This was the most streamlined monthly close I had seen so far in my contracting days.
I found that GL data was extracted from the ERP source system, where all the transactional data was stored. During the days of the monthly close, there was an automatic hourly scheduled extract from the source system to the performance management system.
These extracted files contained all GL transactional data for all local entities. This was automatically picked up by the solution and processed hourly. A consolidation of the numbers was triggered right after the upload of data. This meant I did not need to spend any time entering data manually in the reporting system.
This was a big epiphany!
This assignment triggered my interest in the technology side of Finance. It led me to consider becoming a consultant, working in the constantly evolving world of performance management.
Why Excel is not suitable for reporting and consolidation
The upside of Excel is that it is flexible, quick to set up and widely used. On the other hand, it is error-prone, easy to disrupt, not scalable, and not easy to standardise. The version history is not optimal, and there is no approval workflow with audit trail, no full audit trail of changes and no tailoring capabilities related to data access and security per user or role. As mentioned, the specialist maintaining the complex Excel workbooks could potentially be a single point of failure.
Why Performance Management?
From my own experience I have seen that when using Excel data, it is usually fragmented across different workbooks. In a performance management solution, this is not the case. The data comes in straight from the source systems which is your single source of truth. From there it will be mapped and gathered in one place that we refer to as “the cube”.
The cube is a database containing multiple dimensions; you can think of the cube as a big data warehouse. From this cube we can extract all the data and combine it, slice it and dice it. The cube is where the true power of performance management comes into play.
Using a performance management solution enables Finance to combine all the enterprise data and view it from different angles. This gives you reliable and faster insights, greatly enhancing reporting capabilities. Uploads of data from the source could be performed automatically on a scheduled basis, providing real-time data which enables Finance to make faster and more informed decisions.