CFO Series: 5 Foundational Steps Toward Automated Financial Reporting

I was recently advising a company that downloaded its AMEX business card data into Microsoft Excel each month, sent it around the organization for coding, and then uploaded it into the general ledger rather than coding the transactions as they occurred throughout the month. Another client I recently advised would take the entire trial balance, export it into Excel, and perform “sum-if” functions to create a balance sheet and income statement reports for the organization. 

These organizations crippled the amount of time it took to create organizational reporting through poor data processes and report generation while increasing the risk of error.    

Automating financial reporting actually starts with some foundational elements before embarking on the final task. Without doing these items, you’re reporting will suffer from “garbage in, garbage out.” Read on to learn more: 

1) Define the KPIs 

Your organization must first the key performance indicators (“KPIs”) that you want to monitor. Getting everyone on board in the organization with these decisions is critical to future execution. Are your KPIs: bookings per day? Gross margin percentage? EBITDA vs. Budget? Day’s sales in AR? Is it billed revenue? Return on advertising spend (ROAS)? Finally, how will those KPI’s be calculated?    

2) Data Governance

Once the KPI’s are determined, you must ensure that you properly control the data governance around each of those metrics. No changes should occur without the input and approval of a Data Champion who understands the data’s intricacies in the systems. It may take a committee instead of a single Champion for larger organizations – but don’t let bureaucracy burden the process.  

3) Data Collection

Once those key inputs are determined, you must adequately train the individuals responsible for entering the data. For example, you must ensure controls exist to avoid duplicate data entry. These individuals should understand the importance of the data and how it impacts the organization. Ideally, the data is collected once at the “point of original entry.”  

4) Integrated Systems

Businesses should integrate critical organizational systems. For example, a company should appropriately integrate its practice management (“PM”) software with the general ledger. This way, total revenue is the same between the PM software and the general ledger. Without this integration, it can lead to significant amounts trying to simply “tie-out” data between systems with zero value add.    

5) Automate Recurring Reports

Excel has its place in organizational reporting, but that should be for ad-hoc analysis, not recurring monthly reporting. Once you complete the monthly processes, there shouldn’t be any time spent in the organization to pull data, create data mapping, and then create the reports. That is wasted time for the organization when you can easily automate those reports with various BI tools.  

There are excellent system integration tools today that are cost-effective. General ledger financial statements are easy to create, particularly with systems like Sage Intacct, allowing for multi-location, multi-entity, and multi-dimensional reporting. Finally, business intelligence tools such as Tableau or Microsoft Azure / BI are relatively easy to implement.    

Stop burning time and organizational energy compiling data and reconciling data sources. Use your humans wisely to drive strategic business decisions with analysis and insights.    

This is the fifth installment in our CFO Series. Check out all the posts in the series here.