With financial data management (FDM) tools evolving rapidly, CFOs are seeing a vast improvement in everything from corporate-level forecasting to streamlined reporting.
But what does the future hold for financial data management?
Is it still as relevant to the CFO role as it once was? Or are CFOs moving towards a more digital era of managing financial data?
In this article, we explore why financial data management is still a top priority for CFOs and how it works.
Keep reading to discover the answers to these questions (and more!):
- What is financial data management?
- What’s the difference between financial reports and management reports?
- How has financial data management evolved?
- How are companies leveraging new financial data management technologies?
- How does financial data management work?
- What are the top data management and analytics trends for CFOs in 2022?
What is financial data management?
Gartner defines financial data management as a set of processes and policies (often assisted by specialized software) that…
"...enable an organization to consolidate its financial information, maintain compliance with accounting rules and laws, and produce detailed financial reports.” - Gartner.
The ‘specialized software’ mentioned includes analytics, reporting, predictive modeling, and data visualization tools.
Financial data management also ensures the company meets legal requirements and compliance regulations.
“Financial data management maintains a logic-driven data structure (such as a chart of accounts) to provide different snapshots of financial data.” – Gartner.
More than 50% of enterprises use a data management platform (DMP). Accurate financial data management is crucial for any organization. But why?
Here are four reasons why CFOs should put data management at the top of their list of priorities:
1. It helps centralize governance and creates more efficient finance operations.
2. It helps to put effective business transformation initiatives in place. Not just within the finance function, but across the entire company.
3. It ensures continuous and accurate internal and external reporting.
4. It provides self-service for finance users while also decreasing dependency on IT.
Arguably, the main benefit of financial data management is that it gives you (and the CEO) peace of mind knowing the company aligns with your country's legal requirements. Therefore, your company will be in a much better position with lower financial and legal risks.
Financial reports vs management reports: Key differences
Financial reports focus on ensuring an organization is always in the good books in the eyes of the law. On the other hand, management reports help managers make better-informed decisions.
Although they share some similarities, the two are very different, and you mustn’t get them mixed up.
Here are some of the key differences between financial reports and management reports:
1. Different audiences
Financial reports are intended for external stakeholders such as suppliers, creditors, investors, and bankers. Management reports are usually for internal stakeholders such as managers.
2. One is optional, the other is compulsory
While financial reports are a vital part of financial data management and mandatory for legal purposes, management reports are optional. Yes, they provide insights to help a business grow, but they’re not compulsory.
3. Time frame differences
A financial report aims to showcase the performance of a business during a set time. Management reports are more flexible. They can work for whatever department or purpose you want to monitor.
However, financial reports are evolving from being quite rigid with a timescale to a more flexible approach that provides insights in real time.
4. Past vs future
Finally, financial reports focus on the past performance of the business. Management reports make future predictions.
How financial data management has evolved
Historically, CFOs spent their days building financial reports from scratch. Creating intricate spreadsheets of data was their bread and butter. And, in many ways, it still is. However, with digital transformation at the forefront of many companies’ growth strategies, new technologies have paved the way toward a more data-driven culture.
CFOs are no longer solely focused on transactional matters such as managing investor relations and helping to steer the company towards financial growth.
Nowadays, CFOs are business pioneers. They are more than just ‘number crunchers’ making sure the company doesn’t fall into a downward spiral of debt.
Modern CFOs are business partners. They're often seen as the CEO’s right-hand man or woman, whose expert insights and knowledge are vital to a company’s success.
As the role of the CFO continues to evolve, the role of financial data management has grown alongside it.
Financial data management supplies stakeholders with data to reach a single source of economic truth. This ‘truth’ is always up-to-date and precise. This results in greater accuracy and real-time insights that help organizations make better data-driven decisions.
Many organizations face a pressing issue: the sheer volume of available data that must be assessed and analyzed.
Once upon a time, organizations relied on enterprise resource planning (ERP) systems to collect and analyze data from multiple sources. But ERP systems are often too rigid and limited to handle the problem effectively.
To get a handle on data, organizations began leveraging new technologies that could swiftly handle what Deloitte names, the ‘data tsunami.’
According to Deloitte, these new technologies help organizations:
“Strengthen data - management foundations by, for instance, establishing enterprise or finance data lakes, streamlining reporting practices, and cultivating data management and analytics skillsets.” – Deloitte
How companies are leveraging new financial data management technologies
Advanced financial data management tools and software can help tackle common data challenges, such as:
If you’re tired of manually entering data into spreadsheets every day, seek out software that'll assist with these types of processes.
Automated and analytic-based models are proving to be useful for streamlining financial planning.
Integrated cloud planning systems are another great option, especially for companies who want to improve their existing financial data management processes because they can address both internal and external data requirements.
Improve entry traceability and audit responsiveness by automating reconciliations and streamlining the workflow of your finance team.
Consider creating hierarchies to get a handle on your data when it comes to management, financial, and regulatory reporting.
Improve your existing financial data management processes by leveraging big data to make it accessible across the organization.
You can also use specific software to clarify information needs across multiple units of the business and build interactive reports that make it easier for users to access many layers of data more efficiently.
How does financial data management work?
Maintaining a compliant record of financial information is vital for organizations of all sizes. Not to mention, it’s handy having all that data in one place, ready to be sectioned, printed, or emailed to necessary parties.
But how does financial data management work?
Let’s look at some of the key steps involved in financial data management:
Automated data extraction
Gone are the days when you had to manually type numbers into spreadsheets for hours each day. With automated technology, you can sit back and relax while the software extracts data for you. Of course, this is assuming you have the technology to do this automatically.
Most financial data management systems have pre-built APIs that pull data from financial accounting endpoints. Therefore, you don’t have to chase down other teams across the organization to access essential data.
Transform financial data management into a story
Once you’ve collected the data you need, you must bring it all together to create a transactional story that the CEO and other key stakeholders of the organization can understand.
Creating a graph data model is useful for achieving this because it presents the data in a visual way that’s easier to digest.
An effective graph model will accurately tell the story of a complete financial transaction – without any errors or gaps.
Top financial data management trends for CFOs in 2022
Streamlining financial data management processes is set to be a top priority for CFOs and finance teams in 2022 and beyond. But what else lies on the horizon?
Here are some interesting trends around data management, analytics, and technology in finance (according to Gartner).
1. Data storytelling
Dynamic data storytelling is quickly becoming a growing trend in the world of finance. It’s not enough to put data into a spreadsheet and pass it on in hopes everyone will understand. You’ve got to give them the story behind the data.
According to Gartner, dynamic data storytelling is replacing traditional predefined dashboards. Not only that, but by 2025, data stories will be the most widespread way of consuming analytics. And augmented analytics techniques will automatically generate 75% of those stories.
2. Augmented financial data management
By 2023, augmented data management will be responsible for drastically reducing reliance on financial analysts for repetitive and routine data management tasks.
Since finance analysts will likely spend less time on mundane tasks, they’ll free up around 20% of their time for other things such as training, collaboration, and high-value analytics tasks.
3. Pervasive cloud deployment
Cloud applications are leading the way for sharing and dispersing enterprise data – including data generated throughout the financial data management process.
Gartner predicts that by next year, public cloud services will be essential for 90% of data and analytics innovation.
4. Convergence of financial data management and analytics platforms
Another interesting trend reported included data and analytics processes moving towards a singular platform that incorporates multiple capabilities across the data life cycle, from data entry and storage to analysis and AI and ML.
“By 2023, 95% of Fortune 500 companies will converge analytics governance into broader data and analytics governance initiatives.” – Gartner
Key takeaways: Financial data management
1. Financial data management is a set of processes and policies that helps an organization maintain compliance and produce accurate financial reports.
2. Advanced data management tools and software can help tackle common data challenges related to financial planning, operations, and decision support.
3. Collecting data is the first step. Once you have that data, you must transform it into a story that the CEO and other key stakeholders of the organization can understand. For example, this can be in the form of a graph or a well-presented table.