rising to the challenge - bridgepoint consulting · 2016-09-27 · rising to the challenge...

Rising to the ChallengeAchieving Real-time Visibility across the Organization


About the AuthorRaef Lawson is Vice President-Research and Professor-in-Residence for the IMA® (Institute of

Management Accountants). He received his MBA and Ph.D. degrees from the Leonard N. Stern

School of Business, New York University. He holds a variety of professional certifications, including

CMA, CFA, and CPA.

Prior to joining IMA, Dr. Lawson spent 20 years as a professor in the Department of Accounting

and Law at the University at Albany, SUNY, where he also served as department chair.

Dr. Lawson can be reached at [email protected] or 201.474.1532.

This study is sponsored by NetSuite, the world’s leading provider of cloud-based business

management software. NetSuite helps companies manage core business processes with a single,

fully integrated system covering ERP/financials, CRM, ecommerce, inventory, and more. More than

12,000 companies and divisions of large enterprises use NetSuite to run more effectively without the

high costs and inefficiency of on-premise systems. Named by Gartner as the world’s fastest-growing

top 10 financial management solution company for the last three years, NetSuite netted the 2011

CODiE Award from the Software & Information Industry Association (SIIA) for Best Financial Manage-

ment Software.

Contents 3 Introduction 3 Executive Summary 3 Key Findings15 Conclusion16 Appendix: Respondent Demographics

Published by Institute of Management Accountants

10 Paragon Drive, Suite 1

Montvale, NJ 07645

www.imanet.org

© 2013 in the United States of America by Institue of Management Accountants

All rights reserved

22


IntroductionLast year IMA® (Institute of Management Accountants) conducted a survey of select members that exam-

ined the priority issues and challenges faced by finance teams in today’s challenging economic and business

climate. The most important challenge—streamlining process and improving productivity—was the subject

of our recent Rising to the Challenge: Productivity in Accounting and Finance Organizations research study,

www.imanet.org/mgi/Rising_to_the_Challenge.aspx.

This report expands on our prior research and focuses on the two issues identified by our respondents as

being next in importance: improving the management reporting cycle and achieving real-time visibility across

the organization.

Executive SummaryBusinesses today are operating in an increasingly complex, competitive environment. To cope with these

business demands, organizations are increasingly calling on their accounting and finance teams to go beyond

their traditional role of information suppliers and to provide analytical insight into the business. Key difficulties

in fulfilling this new role include both improving the management reporting cycle and achieving real-time

visibility across the organization.

Many companies possess disparate information systems, a lack of integration among these systems, and

systems that are outdated and cannot meet current business requirements. While most manufacturing-related

systems are highly integrated into companies’ overall ERP systems, other key related areas, such as business

intelligence and budgeting and forecasting, typically are not. This lack of integration is also common for

systems that support other functional areas, including customer upsell/renewal, marketing, support, and

e-commerce.

In order for accounting and finance teams to be able to provide analytical insight into the business and to

provide real-time visibility into their organizations, companies will need to replace or update their outdated,

unintegrated, disparate information systems. By doing so, these teams will have the tools needed to provide

the predictive insights and transparency that is now being demanded of them.

Key Findings

Critical Issues Faced by Accounting and Finance Teams

The past year has seen a continuation of challenging conditions around the globe, with economic uncer-

tainty prevalent in Europe, continued political unrest in the Middle East, an anemic recovery in the U.S., and

an economic slowdown in the Far East. Has this affected the priorities of the finance function?

To answer this question, we surveyed IMA members regarding the importance of 14 possible business

concerns facing their organizations (For details regarding survey respondents’ demographics, see the

Appendix). When asked what was the single most critical business concern facing their organization,

respondents provided a wide range of responses. These included comments such as:

33


• “Transparency in the financial process—communicating with managers and staff when issues arise and

before issues arise.” • “Keeping clear communication between departments on all matters, both financial and operational.” • “Real-time management response to market, competitors, and global environment, using information

as a competitive advantage.” • “Adding financial clarity to day-to-day operations without causing extra work for nonaccounting

department heads that are already overwhelmed.” • “Using cloud computing and technologies to help improve productivity.” • “Streamlining reporting across the organization and gaining a more real-time look at financials/

operations through the implementation of an ERP system.” • “Have the Accounting/Finance area become an integrated business partner with all the other opera-

tional areas in the organization, leading to a totally integrated decision-making team that drives the organization.”

• “Overcoming a culture where success is now assumed, but urgency needs to occur to continue to fulfill our mission.”

These concerns and the many other responses received reflect a diversity of concerns consistent with

other research conducted by IMA on the changing role of the CFO organization and the increasing respon-

sibilities assumed by the CFO team. What emerges is a picture of accounting and finance organizations that

need to continue to deliver excellence in their traditional role while also assuming an enlarged role, often

subject to challenging resource constraints.

Survey respondents were asked about the importance of 14 specific business concerns. With the excep-

tion of one addition this year, these were the same concerns as those contained in our survey conducted last

year (See Figure 1).

44


Figure 1. Importance of Business Concerns Facing Accounting and Finance Organizations

(Note: Average ranks based on a scale of 5=Of critical importance, 4=Very important, 3=Important,

2=Slightly important, and 1=Not important).

The average rating of importance of the concerns this year was consistent with those from the prior year:

Streamlining processes and improving productivity was again the concern rated of highest importance, on

average, followed by improving the management reporting cycle and achieving real-time visibility across the

organization. The consistency of the survey results attests to the ongoing nature of the concerns finance pro-

fessionals have in these areas.

Our prior study focused on streamlining processes and improving productivity; in this study, we focus on

the next two most important issues facing accounting and finance organizations.

55

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Information Challenges Faced by Organizations

In order to successfully compete, businesses need timely, accurate, and insightful information. This infor-

mation often needs to be supplied in real-time and to provide a view into company performance across the

organization. Table 1 lists various challenges companies face in achieving this goal.

Table 1. Extent to which Organizations Face Visibility Challenges

Mean Rating

Accurately projecting the company’s finances into the future 3.43

Obtaining real-time visibility across the organization 3.35

Seeing an accurate forecasted revenue picture 3.28

Measuring the success/failure of our strategy 3.26

Analyzing trends in our business 3.12

Managing financial risk 3.11

Changing strategic direction 3.09

Get better visibility and insight into customer transactions and activity 3.02

Accurately seeing actual vs. quota vs. forecast 3.00

Resolving conflicting sources of information 2.99

Understanding which customers/products are profitable 2.98

Trusting the numbers that the system provides 2.97

Managing KPIs in our business 2.96

Effective evaluation of financial opportunities 2.93

Ensuring accounting control in accordance with external financial reporting regulations 2.90

Closing the books and reporting in a timely fashion 2.90

Ensuring strong financial compliance by maintaining a complete audit trail 2.87

Determining real marketing and sales ROI 2.80

Getting a clear picture of bookings, billings, and backlogs 2.57

Efficient acquisition of other companies 2.33

(Note: Table presents average rating of importance, based on a scale of 5=A critical challenge,

4=To a great extent, 3=Somewhat, 2=To a small extent, and 1=Not at all).

Technological advances have changed expectations for the accounting and finance team. They are

expected to spend less time on recording and verifying the numbers and more time making the data connec-

tions and explaining the number implications to the business—applying the finance lens on decision making.

There is also increased emphasis on moving past explaining historic numbers to providing a forward-looking

forecast of an organization’s finances, risks, and opportunities. Achieving real-time visibility throughout an

organization is assuming much greater importance.

6


Key Areas of Challenge

Given the current economic environment, it is not surprising that a key priority for companies in

achieving real-time visibility is the traditional area of understanding cash flow (See Table 2). However,

nearly as many survey respondents identified issues around sales and marketing as being key areas of

challenge: “Understanding lead and marketing performance” and “understanding new sales revenue

performance” are challenges faced by over 40% of respondents. Areas related to traditional finance

roles—such as accounts receivable, accounts payable, and payroll processing—are much less likely to

be areas of concern for companies.

Table 2. Areas in which Organizations Face Challenges Around Achieving Real-time Visibility

Percent

Understanding cash flow 47.4%

Understanding lead and marketing performance 42.5%

Understanding new sales revenue performance 41.9%

Understanding customer service performance 37.8%

Understanding accounts receivables results 25.8%

Understanding account payables results 25.6%

Understanding performance of subsidiaries and international division 25.4%

Understanding customer renewals and upsell performance 25.1%

Understanding payroll, including handling all filings and deposits for federal, state, and

local jurisdictions15.2%

These results point again to the increasing expectations placed on the finance function and the

challenge of meeting those expectations. No longer is the CFO organization merely expected to be a

compiler and reporter of financial information. Instead, the accounting and finance function is increas-

ingly partnering with others throughout the company in order to provide insights that drive enhanced

organizational performance.

Challenges in Achieving Real-time Visibility

Meeting these raised expectations will require adequate information systems, which many

organizations lack. Key challenges among system deficiencies are two related challenges: the pres-

ence of disparate systems across the organization and a lack of integration among these systems (See

Figure 2).

7


Figure 2. Greatest Challenges Around Achieving Real-time Visibility (% of Respondents)

Compounding the challenge posed by the lack of system integration is the presence of outdated systems

unable to meet new business needs and systems that can’t keep up with organizational growth. Finally, lack of

a data warehouse was cited by a quarter of respondents as one of their greatest challenges in achieving real-

time visibility.

These challenges of disparate, unintegrated, outdated systems and inaccessible, unorganized data hinder

organizations from achieving the visibility into their organizations’ operations and from making better

business decisions.

8

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Challenge in Integrating Systems

The challenge of integrating systems is due in no small part to the means by which companies accomplish

this task. As indicated in Table 3, the most commonly used means for integrating systems is through the use of

spreadsheets.

Table 3. How is Integration Achieved?

Through the use of spreadsheets 68.3%

Directly integrating applications 53.9%

Through middle-ware applications 31.2%

Other 2.5%

The use of spreadsheets for integrating systems can lead to several problems. Foremost among these—as

experienced by 76.9% of our survey respondents—was the need for excessive manual effort (See Table 4).

Other common problems include having multiple “versions of the truth,” difficulties in maintaining and updat-

ing the system, and the lack of timely reporting.

Table 4. Problems Encountered as a Result of Using Spreadsheets

Excessive manual effort 76.9%

Multiple “versions of the truth” 48.4%

Difficulties in maintaining/updating the system 48.1%

Lack of timely reporting 45.3%

Serious spreadsheet errors 26.5%

Excessive costs in run and maintaining system 21.2%

These results paint a picture of many companies using disparate systems that are poorly integrated, re-

sulting in challenges in achieving real-time visibility into their organization.

Integration of Various Systems

Enterprise resource planning (ERP) systems can help integrate information across an entire organization. To

what extent does this occur? Our results indicate that most firms still have a long way to go before they have

truly integrated their information systems.

Figure 3 indicates the frequency of integration of various business systems into firms’ ERP systems. Manu-

facturing, inventory, and procurement systems are each integrated by about 45% of all survey respondents.

As might be expected, given that these are related to activities in a common business process, the means of

integrating these systems is very consistent within firms. When looking at just respondents in the manufac-

turing industry, the percentages are much higher (66%, 62%, and 60%, respectively). Given the increasingly

competitive and global nature of many manufacturing industries, it is clear that automation and integration of

these systems is essential for companies to maintain their competitiveness and that they are being responsive

to this need.

9


Figure 3. Integration of Systems with Organizations’ ERP

When it comes to finance and accounting systems, a mixed picture emerges. While traditional accounting

and finance activities, including basic accounting and financial close and reporting, are commonly integrated

into the system, business intelligence and budgeting and forecasting are much less likely to be integrated.

This finding reinforces the conclusion of many prior surveys that find that financial planning and analysis is the

number one “pain point” of finance and accounting professions.

Marketing-related systems are the least likely to be integrated. Only 9.5% of systems have integrated their

marketing systems, and the system is completely standalone for nearly half of the respondents. Other related

systems, including business intelligence, Internet/e-commerce, and customer service and customer renewal/

upsell, are all among the least-integrated systems. This is reflective of the common disconnect between the

front office and finance functions. No wonder companies are struggling to obtain the real-time information

needed to compete in the marketplace.

As might be expected, integration of the various systems varies by firm size. For example, as depicted in

Figure 4, only about one third of firms with less than $1 million in revenue have integrated accounting sys-

tems. This percentage rapidly rises, with firms with more than $10 million in revenue being almost twice as

likely to have integrated systems.

10

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Figure 4. Integration of Accounting Systems with Organizations’ ERP by Firm Size

Improving the Management Reporting Cycle

Survey respondents were asked to identify which challenges they encountered in improving their man-

agement reporting cycle (see Figure 5). The most common challenge, faced by slightly more than half of the

respondents, was the timeliness of performance reports and analysis, followed by integrating multiple data

sources and the length of time required to close the books. Figure 5 indicates that there is a great deal of

consistency with responses from those received in last year’s survey.

11

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Figure 5. Challenges for Improving the Management Reporting Cycle

Note: “Complying with government rules and regulations” was not an option in the prior (2011) survey.

Survey respondents were further asked to identify which of the challenges was most pressing. The responses

were consistent with the overall frequency of the various challenges.

Time Required to Close Books

As noted above, a commonly identified challenge facing organizations is the length of time required to

close the books. As indicated in Figure 6, the most common length of time required to close is five days, while

the median time to close is seven days.

12

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While some organizations close their books very rapidly, 12% of companies require more than three weeks

(15 business days) to do so. Worse still, a significant number of companies are still working on closing their

books at the end of the following month. No wonder companies are struggling to achieve visibility across their

organizations and to provide timely, actionable information.

Figure 6. Business Days Required to Perform a Monthly Close

Capabilities of Business Performance Information Systems

In order to achieve real-time visibility across the organization, companies’ information systems need to

deliver the necessary information in a timely manner and in a readily usable format. Table 5 lists some features

that can help provide these capabilities.

13

100%

90%

80%

70%

60%

50%

40%

30%

20%

10%

0%

1

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5

31-4

0

20%

18%

16%

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8%

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Percent (Right Scale)

Cummulative Total (Left Scale)

2 3 4 5 6 7 8 9 10

16-2

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0


Table 5. Capabilities of Current Business Performance Information System

Drill-down capabilities to customer, employee, and transactional details 48.6%

Ad-hoc reporting capabilities 47.9%

Key performance indicators and reporting on key variances and period-

on-period trends

39.6%

Visibility across organization, including sales, finance, etc. 29.1%

Search-based analytics 28.2%

Personalized dashboards 26.4%

Real-time business intelligence 21.9%

“What-if” financial modeling capabilities 17.3%

Anytime, anywhere accessibility 17.0%

Real-time performance across subsidiaries and geographies 11.5%

Mobile device accessibility 11.4%

As indicated in Table 5, most companies’ systems lack such features. The most commonly available is the

ability to drill down to customers, employees, and transactional details, with 48.6% of companies possessing

this capability. Many companies lack capabilities—such as key performance indicators and reporting on key

variances and period-on-period trends, visibility across the organization, search-based analytics, and real-time

business intelligence—that enable informed business decision making.

Despite the discouraging current state of business information systems, the future looks brighter. Many

of our survey respondents (41.5%) have implemented integrated business systems or plan to do so (see Table

6). Another large percentage (40.7%) have added business intelligence software and replaced siloed business

systems (32.9%) or plan to do so.

Table 6. Technology Investments Implemented or Planning to Implement

Integrating disconnected business systems 41.5%

Adding business intelligence software 40.7%

Adding data warehouse 33.4%

Replacing siloed business systems (finance, CRM, etc.) with a

single business suite/database 32.9%

Consolidating global finance systems 25.2%

Moving current financial systems to cloud computing 15.6%

Moving subsidiaries and non-HQ divisions to the cloud 4.8%

14


ConclusionBusinesses today are operating in an increasingly complex, competitive environment. To cope with these

business demands, organizations are increasingly calling on their accounting and finance teams to go beyond

their traditional role of information suppliers and to provide analytical insight into the business.

Our findings indicate that finance professionals are running into difficulty fulfilling this new role: In addi-

tion to streamlining processes and improving productivity, achieving real-time visibility across their organiza-

tions and improving the management reporting cycle were identified as the most pressing obstacles.

Organizations also confront challenges in converting data into actionable information. Forecasting is a

challenge, both with regard to revenues and company finances in general. Using data to measure the success

or failure of company strategy, to analyze business trends, and to manage financial risk also present

challenges.

Improved information systems will be needed for the finance function to meet its expanding role. Many

companies currently possess disparate systems across the organization, a lack of integration among these

systems, and systems that are outdated and cannot meet current business requirements. The use of spread-

sheets, while common, can lead to a variety of issues, including excessive manual effort, multiple “versions of

the truth,” and difficulties in maintaining the system.

While most manufacturing-related systems are highly integrated into companies’ overall ERP systems, the

same is not generally true of systems in other functional areas. In accounting, traditional financial accounting

systems are commonly integrated while business intelligence, budgeting, and forecasting are not. This lack

of integration is also common for systems that support other functional areas, including marketing, customer

support, customer upsell/renewal, and e-commerce. While the level of integration of these systems increases

with firm size, there is a general lack of integration regardless of company size.

As noted above, accounting and finance teams are increasingly being called on to provide analytical in-

sight into the business and to provide real-time visibility into their organizations. In order to do so, many firms

will have to replace or update their outdated, unintegrated, or disparate information systems. By doing so,

these teams will have the tools needed to provide the predictive insights and transparency that will add to the

value of their companies.

15


Appendix. Respondent DemographicsThis survey was sent to 46,995 IMA members; it was returned by 1,501 members, for a 3.2% response

rate. The following summarizes the demographic characteristics of the respondents.

Table A1. Industry of Respondents

Manufacturing 35.1%

Business Services 19.4%

Government/Nonprofit 10.8%

Finance 10.1%

Wholesale/Distribution 7.6%

Construction and Contracting 4.9%

Healthcare 4.7%

High Tech/Software 3.8%

Retail/e-commerce 3.6%

Figure A1. Respondents’ Management Levels

16

Top Management

Senior Management

Middle Management

Lower Management/Entry Level

41.2%

18.9%

15.2%

24.7%


Figure A2. Annual Revenues (or budget if a nonprofit or governmental entity) in U.S. dollars

Figure A3. Number of Employees

17

17.8%

Less than 50

51-100

101-200

201-500

501-1000

1,001-10,000

More than10,000

9.5%9.3%

14.8%

14.8%

24.5%

9.3%

Less than $1 Million

$1-$10 Million

$10 -$30 Million

$30-$75 Million

$75-$200 Million

$200-$500 Million

$500 Million-$1 Billion

$1 Billion-$5 Billion

$5 Billion to $10 Billion

More than $10 Billion

5.8%

13.2%

13.6%

7.5%

10.4%

12.3%

10.5%

5.2%

11.8%

9.7%


Figure A4. Location of Primary Business Unit

Figure A5. Type of Organization

18

Publicly traded

Privately held

Nonprofit

Government Agency

Other51.9%

31.8%

2.3%5.5%

8.5%

North America

South America

Europe

Middle East

Africa

Asia/Pacific

1.3%

5.3%0.7%

69.8%

7.8%

15.1%


19

About IMAIMA®, the association of accountants and financial professionals in business, is one of the largest and most

respected associations focused exclusively on advancing the management accounting profession.

Globally, IMA supports the profession through research, the CMA® (Certified Management Accountant)

program, continuing education, networking, and advocacy of the highest ethical business practices. IMA has

a global network of more than 65,000 members in 120 countries and 200 local chapter communities. IMA

provides localized services through its offices in Montvale, N.J., USA; Zurich, Switzerland; Dubai, UAE; and

Beijing, China. For more information about IMA, please visit www.imanet.org.

rising to the challenge - bridgepoint consulting · 2016-09-27 · rising to the challenge...

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