Real-time reporting: out for the count

As recently as five years ago, many organisations were still providing their
management team with a printed pack of historical data, about three weeks after
the month end.

Best practice now involves providing near real-time forward-looking reports
to all stakeholders, which includes a wide range of staff, investors, analysts,
government, trade unions, customers, suppliers and the general public.

‘Five years ago the “bean counters” spent all their time looking backwards,
trying to explain what happened,’ says Norman Green, financial director at
Oracle UK. These days, Green spends no more than half an hour each month-end
checking the actuals are in line with the previous forecast and understanding
the variances.

‘I spend a lot of time each month working with the business, projecting
numbers and understanding what is going on. The month-end close is just
confirmation that the forecast was good.’

As all stakeholders have become more demanding, management reporting has
evolved rapidly, with organisations pushing their figures beyond the narrow
confines of the finance department and the senior management team. In this
process, traditional standard management reports lose their value, as the
different groups of users have totally different information needs.

Raw figures are of little value without a context. Traditional comparison was
with prior year data that was even older and with a budget that was drawn up
before the year even started. This approach is no longer viable, as users are no
longer required to react to what has already been recorded in the ledgers.

They are now expected to identify problems in advance and prevent performance
declining. They need to make decisions based on up-to-date forecasts that
reflect forward-looking operational drivers of performance. But analyst Gartner
estimates only 15% to 20% of large companies have introduced rolling forecasts.

‘Operational reports show what happened yesterday or even what is happening
today,’ says Martin Richmond-Coggan, European vice-president at Applix.
‘Planning data is what makes it relevant. Our clients have finance departments
working on data that is only hours old, so they can report on a quasi real-time
basis. The whole process becomes more relevant as people find out how the
business is going and can “tweak” it constantly.’

Nigel Youell, financial applications marketing manager at Hyperion, agrees
that best practice is not just about providing information, but acting on it.
Once users have the information, they need to analyse it in different ways and
take action. ‘The organisation must move forward and execute against refreshed
plans that reflect changes happening in the market,’ he says.

The move towards more rapid and open reporting has advantages and
disadvantages that are very closely linked. Green points out that releasing
information out quickly to all stakeholders is good for everyone.

But, it can be a challenge when Oracle’s global CFO has access to the UK
financial results at the same time as him. ‘Everybody has to be on the ball and
rapidly understand what is going on,’ he warns. ‘However, that speed enables us
to spend our time looking forward, not backward.’

David Phillips, head of value reporting at PricewaterhouseCoopers, believes
the benefits are not just in the capital markets, but in all relationships,
including the job market. More open reporting also brings discipline to the
business. ‘Like it or not, if you are more transparent about what you do, there
is nowhere to hide.’

He advises clients not to report externally unless they are confident the
data is reliable, that they understand it and to consider the trends. ‘Beyond
that, you have to go with the ebbs and flows of the good and the bad and respond
to them.’

Making information relevant to each different recipient is a major challenge
that must be tackled. This can only be done by accountants and analysts.
However, technology plays a crucial role by linking different systems to create
context, and allowing reports to be distributed securely in whatever format is
most appropriate to users, whether a static web page, spreadsheet, dashboard –
or even paper.

This raises the philosophical question of whether we are doing more extensive
reporting because the technology is available, or whether technology has been
developed to meet the need.

‘It is a virtuous circle,’ says Paul White, director of product group at
Microsoft Business Solutions UK. ‘Technology has moved on, so more is possible,
but business has moved on, so more is required.’

However, Business Objects’ research reveals only 15% of users in an
organisation who can positively benefit from business intelligence systems are
doing so. ‘The 85% are the disenfranchised majority,’ says Phil Wood, the
company’s product marketing manager.

‘They are not going to become data analysis experts, so they need to be given
information in context with insight.’

Nigel Rayner, research vice-president at Gartner, advises finance departments
to discard traditional planning and budgeting processes, and instead use an
enterprise-wide set of operational drivers that management can relate to and
report against, which can be converted by software into financial outcomes.

‘The whole process of planning and control and performance management and
reporting needs to fit in with the methodology that the management team are
actually using to run the business,’ he says. ‘Systems are now available and
mature to deliver that. However, people don’t understand what they can do and
how they can help.’

Compliance with regulations like Sarbanes-Oxley and the operating and
financial review has highlighted the importance of reporting, especially
forward-looking reports. But they are not the driver.

‘It is primarily business driven, which is a good thing,’ says Phillips.
‘Organisations recognise the need to understand better and engage with their key
stakeholders, so improved reporting is primarily driven by good business

Related reading

HMRC banknotes