In conversation: MHR Analytics and Tagetik on the future of data

AccountancyAge spoke with Michael Jeffery, head of analytic pre-sales and financial performance management at MHR Analytics, and James McEntee, managing director of Tagetik UK, to discuss how data will help firms plan for recover, and technology’s place as ESG disclosures grow in importance.

How will data help corporates as the global economy moves towards recovery?

McEntee: One of our customers is based in hospitality. Not only are they struggling because of lockdown with their bars and restaurants not being able to open but also because of the lack of predictability for the future. Using data and planning solutions, as soon as they hear of any changes – like when the government releases new information – they can then start modelling that information, to gain perspective on the impact on their bottom line.

If they have the right level of modelling and the right data to support that, it allows them to see where they can invest in their business. Without that level of data, analysis or modelling, they simply are unable to estimate exactly what the recovery looks like for them.

Jeffery: Data has always been crucial to business and always will be. In recent times there’s been an explosion of data which raises questions around the availability and timeliness of its use.

As we move forward through recovery, I think automating data use becomes key. Sifting through it and realising what the key elements are and how that can shape the metrics and KPIs you use as a business are crucial decisions as they’re going to have changed over the last 12 to 15 months. Data will aid the recovery, the automation of it initially, but also making sure that key data is recognised and used appropriately.

McEntee: If you’re just tracking financials, that’s not necessarily telling you the right story. If you go into levels of customer satisfaction, and you have a lot of unhappy customers transacting because they haven’t had anywhere else to go, that’s telling you you’re not going to come out of this situation well. The data needs to move away from just financial data: there’s a lot more than needs to be acquired. Acquiring that data and managing it is one of the key challenges for corporates right now.

Jeffery: That’s why the xP&A (extended planning and analysis) phase has become very significant. There is a move away from using purely financial data and to better incorporate more operational and organisational data.

The pandemic has shifted cash forecasting and budgeting from a quarterly or yearly occurrence to monthly, and in some cases weekly activity. Do you think this change is here to stay?

Jeffery: I’ve worked with companies who’ve wanted to do 13 week rolling cash forecasts, where they use flash forecasting every week to collect and pick up the data almost on a daily basis. When you’re talking about significant disruptions to your supply chain, even the best run business – businesses with good treasury and cash collection mechanisms – could struggle if one of their suppliers or customers has a problem.

Even the most well managed companies have an opportunity to at least monitor cash if not forecast it more closely in shorter timescales. This comes back to the modelling arena, and how quickly you can remodel your business and establish what’s likely to happen through all these changes.

People should be more attuned to their cash positions even in ordinary times. We need to start discussing changing wider forecasting methods like rolling forecasts, maybe even looking at zero based budgeting, and incorporating cash and balance sheet forecasts within those processes

McEntee: We’ve also seen more movement towards regular forecasting. By gathering the right data, looking at your modeling and by engaging other parts of the business rather than just finance, you’re creating far more consistent and regular forecasts.

It has been purely financial transformation so far. We’re beginning to see customers think about using solutions like Tagetik or other CPMs as more than just financial hubs but as data hubs, fogging that line between what is data warehousing, financial planning and enterprise performance management. There is now a central hub of data which can take different data sets and give you more information on a more regular basis. Certainly, our enterprise level customers are moving towards this, with the SME market a little further behind.

There is more movement towards ESG disclosure. What effects will this have on consolidation? Is tech also moving to fulfil this need?

McEntee: The technology has improved so much over the past few years that it is able to gather huge amounts of disparate data. As a supplier, Tagetik has received a number of disclosures requests by our customers, saying “Tagetik as a responsible supplier, we expect you to report this data to us”. This isn’t a very recent thing but there has been a big explosion in the conversation around the data that’s required.

Jeffery: For ESG disclosure, tech can fulfil some of that that need now. Certainly, tech from a modelling and data collection perspective, already has those capabilities to help. For example, we could design something which distributes templates where people could put in energy or asset use, and the modelling would take care of converting that into the relevant emissions. But often the data to do this is not readily available.

The same thing is true of other ESG disclosures – especially the narrative elements: you will need to collect some of the information from sources which may not exist. Therefore, you have to provide the relevant people with a template which can collect it for you. The tech then provides the process to output some of that data, be it numerical, textual or financial information. The tech already exists to be able to do that but will need tweaking or updating to be fully compliant.

In terms of the requirement to disclose this kind of information, it will become greater as we move forward and the public demands answers to these types of questions.

There is a lot of talk of inflation, how can tech/CRM solutions help corporates hedge against this?

McEntee: We would always start financial planning through a driver-based model. Inflation, exchange rates, etc, anything which is a driver that’s going to impact your business, you need to not only see the immediate impacts in near future forecasting, but also the other scenarios that could happen, which then support those business decisions happening quicker.

Technology can help by building things up in the right way and understanding where those variables are in your business, where the sensitivity is and making sure that you’re driving your forecasts from that basis, rather than purely from a best estimate. As to whether you need to make changes to your supply chain, pricing model, resourcing model or recruitment, as long as you have your models set up the right way, you can see those different scenarios playing out in front of you, which helps make the decision-making process a lot quicker.

Jeffery: Because of the uncertainties of the times, you do have to have that modelling capability we’ve been referring to. This could be an opportunity to look at things like how tech can help you do something like a zero-base budget. Start from the very bottom because there’ll be some fundamentals within the business, be they inflation, exchange rates or other drivers of the business, which are going to have substantially changed and could change more with even more volatility going forward.

Tech helps you have multiple scenarios of what you may think will happen about various parts of your business. If we take xP&A as something which is going to become more relevant and more apparent in organisations over the next few years, the number of forecast scenarios that you want using those key drivers will change as well.

What do you expect for the future of data governance and regulatory disclosures?

McEntee: Supporting and tracing your data, anything that comes through a disclosure and tracing it back to its source is going to be essential. That could mean key investments for big corporates to bring in chief data officers and essential point of ownership for business-critical data from both an internal and external governance perspective.

For that you need very strong management of very disparate data. You need to have a lot of confidence in what data you have. That responsibility will sit more and more with corporates. As far as disclosures changing, it’ll keep happening. Data governance, like we’ve discussed about the other types of disclosures will become more ‘public’ information.

Jeffery: The other thing that will drive that is social media platforms. As we’ve seen during the pandemic, people have got a lot of access to information. The need for corporates is to be able to make sure there’s transparency and reliability around where the data is coming from, and that it all comes through approved sources. That really means that internally as well as externally. There has to be more regulation internally about where your data and pronouncements come from. But I also think that means the regulation will become tighter externally as well.

In the industry that we’re in, we talk about doing the financial, budgeting and planning processes so that people like accountants can have the ability to use the reporting tools to gain insight into the reports that have been made. What can also be done here is to provide the time to be able to go back to that source data and get insight into to whether those processes are right. Whether that data really is as reliable and as approved from a data source point of view as we’d like it to be.

MHR and CCH Tagetik have recently partnered up. What can your two organisations do now that they couldn’t before with this partnership?

Jeffery: MHR provides services to our customers around payroll and HR. What we do from an HR and payroll perspective is we provide our clients, both public and private sector, with a service from source to disclosure of information. The partnership with Tagetik allows us to access people who can provide that same service to our customers, but from a financial perspective rather than an HR one. We at MHR gain the ability to be a one stop shop for that source to disclosure, be it from a payroll or a financial perspective. It gives us a wider service that we can give to our existing and new clients going forward.

McEntee: We are businesses that come from slightly different angles. We have very capable and trustworthy software. MHR are an analytics team that have strong access and confidence in data. It also takes Tagetik out of the office of finance, which is where we primarily sit. It extends our capabilities and our products into different markets by leveraging the knowledge and reputation of MHR Analytics.

Click here to discover how MHR Analytics can help your business with ESG disclosures, take a look at the Tagetik solution – https://www.mhranalytics.com/solutions-hub/corporate-performance-management-with-cch-tagetik/