Business leaders used to say, “The controller function is like a rearview mirror that shows where the company has been, while the financial planning and analysis (FP&A) function is the windshield that shows where the company is headed.” While this was a fairly accurate depiction once upon a time, it’s now definitely outdated, like an older model car.
Now envision a modern vehicle with many autonomous and driver-assist capabilities. The controller function is the equivalent of the sensors deployed throughout the car, collecting and combining critical information from both inside and outside the vehicle, enabling it to safely operate. Now the controller has a 360-degree view — not only where your company has been, but where it’s going and how it’s getting there — and works in tandem with the FP&A function to predict and project potential outcomes and guide company decisions.
While this analogy may not fit every company’s circumstances, it does reflect the information needs of today’s transformational chief financial officer. CFOs need and expect their controllers to deliver more value, and a major part of that value is providing enriched data that goes beyond traditional generally accepted accounting principles (GAAP) reporting.
What does this data look like and how can controllers provide it? Let’s take a closer look.
Thinking Beyond GAAP
The traditional role of the controller has been to ensure correct accounting practices are being followed so that accurate financial data can be reported. The day-to-day duties of accounting are typically centered around processing transactions, safeguarding accounting controls, executing the financial close and reporting on historical financial performance, among other activities. The data inputs include journal entries, invoices and other financial information processing, with the outputs to the CFO being primarily GAAP reports and other “rearview mirror” perspectives.
In today’s dynamic and chaotic business climate, however, accurate financial reporting at the GAAP level is simply not enough. CFOs need more, much more, to make data actionable and enable the type of analysis that yields deep insights that the executive team and board need to make strategic decisions. What CFOs need now is enriched data.
What Is Enriched Financial Data?
Enriched data is data that has been processed and enhanced with more detail to make it more usable and understandable. For financial data, enrichment turns raw financial data such as transactions into more valuable information by organizing and expanding it with greater detail to add context.
A popular way to think about organizing and enriching raw financial information is by using “dimensions.” Dimensions are added detail that help you group data with similar characteristics, such as locations, products, customers, projects and more. Then you can easily group and analyze the financial data based on one or more dimensions.
Going back to the car analogy, think of dimensions being like the sensor data coming from the different parts of the car. Being able to group all the data coming from the sensors on each of the four wheels in a dimension gives you a way to easily analyze all the wheel data to understand speed, road conditions and other important metrics.
Using dimensions to enrich financial data with operational, market or other information lets CFOs uncover and understand company performance beyond the financial figures. For example, enriched data can help CFOs determine customer churn or customer lifetime value by product, manufacturing plant or region.
Challenges of Data Enrichment
What does it take to enrich your financial data with the kind of detail that your CFO needs? That depends on three things: your ability to collaborate and align with other parts of the organization, how much time your team has to focus on providing enriched data, and whether your company’s financial and operational technology are integrated. Let’s look at these one at a time.
The first challenge is breaking down organizational silos between the controller team and the FP&A group as well as between the controller team and the rest of the business. As a controller, you need the ability to collaborate within finance and outside of it to get answers and gather more detail to enrich your data. Part of this collaboration includes working with your IT group to implement technology and process improvements that enable you to streamline and automate data enrichment.
The second challenge is time and resource availability within your team. If all your group’s efforts are focused on the transactional accounting tasks such as the financial close, with no time for more strategic efforts, then you won’t be able to dedicate the resources needed to find ways to enrich financial detail for the CFO. Freeing up your time means first focusing on making your accounting processes more efficient through automation.
The third challenge is technology alignment. If your financial and operational systems are already integrated, it’s much easier to pull data and detail and have it automatically flow into your financial system. It’s difficult and resource-intensive to enrich financial data without the right level of integration and alignment across the core technology on which your business relies.
That said, top software packages often offer built-in and customizable integration with other popular technology offerings, for example, integrating accounting and customer relationship management (CRM) software. Working with your IT department or external consultants can help you understand the level of effort and investment required to efficiently connect the systems you need to enrich your data.
Staying Ahead of Data Needs
Once you have the systems, processes and collaboration in place to deliver enriched data to the CFO, it’s important to keep your eye on changes coming down the road. You too should be looking out the front windshield, anticipating and planning for internal and external drivers that can impact the financial data and dimensions you need to provide.
For example, some of the best controllers are those who not only keep an eye on new accounting standards that will become a future requirement but also apply those standards proactively to compare and understand where the company is today and the future financial impact. This will help your CFO proactively understand what the changes will mean to your company and take appropriate steps to mitigate negative impacts.
Another driver that could impact your enriched financial data is whether your company is on track to go public, which will require compliance with different accounting and reporting standards. This transition often means making fundamental changes to your accounting processes, which would impact how you’re organizing and enriching data today. It’s critical to plan for and implement these changes well in advance of going public.
Great Finance Requires Great Accounting
It takes great accounting to produce great finance. Everything that today’s finance organization does is enabled by accurate data from the controller’s organization — with levels of detail that go far beyond a journal entry or a figure on a balance sheet. These underlying details support the numbers and build confidence in their accuracy, while increasing utility across the business.
When your CFO goes in front of the board, the bank or investors armed with enriched data and actionable insights, they can clearly tell the whole story — where the company has been, where it’s going and how it will get there..
To learn more about how you can deliver enriched data to your CFO, reach out to the Armanino team or investigate our, solutions that help drive data..