Efficient data management is essential for every company, especially in an age in which business processes happen faster than ever before. Controllers need to understand the importance of data warehousing for their companies and how it can impact the accounting process. 

Below, we’ll cover the most important things financial employees should know about data warehousing.

What Is Data Warehousing?

Just as a physical warehouse is used to store large quantities of valuable inventory, a data warehouse can store massive amounts of accumulated data. 

Data warehousing creates a central repository for a company’s past and current information, which can then be analyzed to guide future strategic decisions.

Data Warehouse vs. Database

How does data warehousing differ from simply creating a database? The difference lies in the type of data associated with each. 

A database typically focuses on updating real-time data and is designed for rapid queries and transaction processing, not thorough analysis. Additionally, a database is often created on an ad hoc basis, serving a specific application or a particular project.

A data warehouse is broader and less specific. Data warehousing focuses on the storage of a wider range of data and is designed for analysis and strategic planning, rather than zeroing in on any single aspect of your company.

Advantages of Data Warehousing

Controllers may already be familiar with their company’s databases, which might be spread out across multiple applications in the company they serve. But a data warehouse can pull these disconnected pieces of data together. It can be used to maintain the company’s financial health, but also to strategize for the future.

In one sense, then, data warehousing streamlines the collection of data so that controllers and other authorized personnel have direct access to their company’s data. This can speed up the process of data retrieval since it provides access to company-wide data in a centralized location as opposed to multiple databases.

At the same time, data warehousing is intended not merely to allow instant retrieval, but to analyze trends and patterns to make plans for the future. Controllers can use the data stored in these digital warehouses for tasks like: 

  • Advanced financial planning
  • Tax preparation and planning
  • Strategic budgeting
  • Managing customer demands
  • Analyzing investor behavior

The data obtained from data warehousing processes can be assembled into reports and used to hone the overall corporate mission, ensuring success for the future.

The Need for Data Verification and Security

Of course, the data warehouse is only valuable as long as the data is accurate. Data cleaning is the process of verifying data and cleaning out any errors. 

The best data warehouses are created on secure cloud-based platforms, allowing seamless integration across multiple users.

Additionally, the curation of data in a centralized warehouse does not mean that the data from other databases can be eliminated. Backups may be necessary to ensure data protection and the secure storage of sensitive company information.

Disadvantages of Data Warehousing

While these modern advances make data warehousing easier than ever before, there remain some drawbacks that controllers and corporate managers should be aware of.

High Demand of Resources

Data warehousing demands a high degree of corporate resources. This includes the technological resources that are used to create and maintain this virtual warehouse, but also the IT and financial personnel who will be manipulating this data.

Small Errors Can Create Unreliable Results

Because data warehouses are assembled from multiple distinct databases, this approach raises the risk of introducing errors into the entire process. 

Even a small error can undermine the results of the whole system. When this happens, the completed warehouse may suffer from a lack of reliability. Controllers might find their time and efforts wasted trying to reconcile old data or ferret out errors from a collection of databases.

Predictive Analysis Is Far from Certain

Finally, be cautious not to assume too much about the significance of information obtained through predictive analysis. While consumer trends might provide useful insight into your business processes, it’s difficult to make any meaningful long-term projections based solely on a company’s historical performance.

Rely on a Team Approach

Forbes recommends that companies don’t merely rely on one person to combine databases into one giant pot. Instead, adopt a team approach where you merge the efforts of internal IT specialists with external consultants who can simplify and summarize the data stored in the warehouse.

Controllers can assist this process by helping to prioritize data by creating goals to improve the overall capacity and performance of this data warehouse. This strategy can make the final product more useful for all parties throughout the organization.

Building an Unfinished Warehouse

A data warehouse might be best thought of as a permanently unfinished project. Personnel may manage this warehouse over time, which can also allow controllers and other staff to return for regular strategic review. 

Discuss More about Data Warehouse in Our Community

Looking to learn more about data warehouse? Controllers Council is a national community and platform of Controllers, Accounting and Finance professionals focused on accounting best practices, information and resources, recognition and networking. Membership has many features and benefits to propel your career and expertise, and to be an active participant in our exciting community. Discuss topics like the CPA licensure and more in our forum. Become a member today.

How to Leverage Financial Close Automation: The Ruby Slipper Café StoryWebinar Thursday, December 16

As organizational environments become more complex, compliance-focused and technology-driven, CFOs and controllers have even greater pressure to not only ensure the integrity of the financial close, but also provide strategic insights to help lead the future of their organizations. Register for this webinar to hear our industry experts including, Jennifer Beougher, CFO of Ruby Slipper Café.