Since the introduction of financial software and reporting in the late 1970s, technology has always had a starring role. First, as a hero; more recently, as shown in the newly released FSN Future of Financial Reporting survey, as a villain. As the FSN report discovered, almost half of CFOs surveyed were unable to agree that their data is always trustworthy and accurate. But get ready for technology’s latest iteration—with the emergence of a new breed of financial software that is ready to don the superhero cape once again.
Allow me to explain. In the old world, vendors built financial systems to help organizations make sense of the high volume of transactions resulting from major business growth in the final three decades of the last century. These systems were designed to support the specific requirements of financial accounting, from journal entry capture through to GAAP financial statements. And they worked brilliantly.
Limitations of Legacy Financial Systems
But the world moved on and demands changed. These systems worked so well that finance shops and the businesses they supported wanted more than traditional GAAP information. Instead, finance required more detail, dimensionality, and graphical representation. They needed financial insight into the business, and data that was relevant to a wider group of stakeholders. These stakeholders wanted any employee, not just IT, to be able to create reports on-demand to speed up decision-making across the business. But legacy financial systems were not designed for that purpose or built for mere mortals to use, which in turn led organizations to believe that they had a reporting problem to solve.
66 percent of CFO respondents said they were unable to make changes to reporting systems without IT involvement.
So, finance departments spent 20-plus years searching for a silver bullet reporting solution. They poured countless hours and immeasurable cost into one reporting technology after another—from specialist reporting tools and data warehouses to business intelligence (BI) and corporate performance management (CPM) systems—and then spent a lot more time and money stitching them together with their core finance systems.
As the FSN survey shows, this approach actually contributed more to the reporting problem than to the solution. In fact, 66 percent of CFO respondents said they were unable to make changes to reporting systems without IT involvement.
Today, most finance teams are still searching and waiting for a financial reporting panacea. Unfortunately, some may have to wait a long time, because they might be trying to solve the wrong problem.
That’s because the challenge was never really a reporting problem—instead, the inability to report was only the most visible symptom of a much deeper problem: that legacy vendors did not design their systems to deliver what we are now asking of them. They were not designed to capture enough of the right data at the source and were not built with agility in mind. They were built for the core P&L and balance sheet reporting required by GAAP, not the multi-dimensional management reports needed by business today. And creating any custom reports required deep system expertise.
Today’s financial management systems must inherently understand and adjust to change, and deliver information in real time, on any device, anywhere, and at any time.
And then, to compound this basic problem, the many data management, integration, and reporting tools layered onto traditional financial systems introduced a whole new set of integration, data definition, process, control, usability, and security challenges. The end result, and where we find ourselves today, is that financial systems in general, and financial reporting more specifically, have become complex, rigid, and expensive.
A New Breed of Financial Management Software
But the emergence of built-for-the-cloud solutions, including Workday, offers an alternative to the tyranny of legacy software. The secret is a system designed from scratch with a new goal: to unify transactions, controls, and reporting into a single system with a single data architecture, a single security model, and a single user experience. Today’s financial management systems must inherently understand and adjust to change, and deliver information in real time, on any device, anywhere, and at any time.
With such tools, CFOs are no longer restricted to the traditional BI/CPM “bolt on” or the newer, but equally disappointing, “solution” of re-platforming old software into the cloud, which moves the messy reporting problem off-premise, but does little if anything to address the core architectural issues that caused the problem in the first place.
Financial reporting is not going to become less complex; it is always going to be closely scrutinized as stakeholders ask for more contextual, relevant, and timely information. CFOs are coming to see their role as strategic partners, helping the organization make faster, smarter decisions based on real-time, relevant data.
So, the route to successful reporting is to address the underlying technology architecture and embrace financial transformation head on. And in the process, this new technology will elevate itself back to superhero status, minus the X-ray vision and ability to fly, of course—but then you can’t have everything, can you?
You can learn more about the financial reporting challenges facing today’s CFOs in the FSN Future of Financial Reporting report sponsored by Workday.