Why Do Financial Reporting Tools Deliver No Business Value?
A funny thing happened to me at the Forum. It all started out with an interactive Q&A session with the FP&A crowd during my closing keynote presentation at the Financial Intelligence Forum in San Francisco. Here is a summary of that Q&A session that raises the question "Why do Financial Reporting tools deliver No Business Value?"
Q&A Part 1: “Raise your hand if you have replaced spreadsheets with a dedicated financial reporting tool to produce variance reports and updated financial statements?” About a third of the 60 or so attendees raised their hands. Let’s estimate this as 20.
Q&A Part 2: “Keep your hands raised if you were able to streamline the reporting process, in other words, your new reporting solution saved you time as compared to spreadsheet reporting.” 15 of the 20, or about 75% of the audience kept their hands up. This was not a surprise, but the results of question 3 force me to write this blog.
Q&A Part 3: “Keep your hands raised, if the reporting tool has added any business value, such as better decision making or insight into the business.” Red Alert NOT ONE HAND REMAINED RAISED.
So, the whole premise of the keynote was that software vendors (yes, I’m one of them) claim that their software should help save time, improve efficiency, as well as add business value, be effective. To better visualize the Planning Maturity Curve, please refer to the two images below that measures the return on investment for planning activity:
FIGURE 1: How Vendors Communicate
the Value Proposition of Reporting Tools
The Red Arrow indicates the impact of moving to a dedicated reporting software solution (at least as claimed by the software vendors who sell such solutions).
FIGURE 2: How FP&A pros (customers of
reporting software) report the impact of
moving reporting process off spreadsheets
The Red Arrow above indicates the ACTUAL IMPACT of moving to a dedicated reporting software solution as reported by the 20 or so FP&A pros who raised their hands at the San Francisco Conference.
In conclusion, I went in with Figure 1 (reporting tools save time and add value) and came out with Figure 2 (reporting tools save time, but do not add value).
While there are many possible interpretations of this data, let's limit ourselves to three cases: (1) Pessimistic, (2) Optimistic, (3) Super-Optimistic.
Pessimistic: Reporting is inherently not a value-add process and it therefore makes no difference whether you do it with spreadsheets, dedicated software, or an abacus. It will simply never be value-add. Figure 2 supports this view.
Optimistic: Perhaps reporting does have some inherent value; however, the move to reporting software generally does not impact the value-add, it simply saves you some time. Figure 2 also supports this view.
Super Optimistic: Maybe the financial reports can be structured in such a way to add value and improve decision making. In fact, with the right analysis tools, reporting can save you time and add value. This attitude would suggest that Figure 2 is based on a limited sample from one conference. The software vendors might just be right as noted in Figure 1.
Good news: If you don't buy into the pessimistic conclusion above, you may want to read the ultimate white paper on the topic of integrating actuals into financial plans. This paper details some of the key concepts that enable FP&A pros to add business value to reporting processes.
WHITE PAPER EXCERPT
Bad news: It’s our most technical white paper, so if you read it, be sure to spend some time reading it over and call us with questions. We’re here to help!