Finance is no longer the province of number-crunching accountants. Today's finance departments are expected to meet ever-changing compliance and regulatory requirements, help drive progressive performance management disciplines, and partner with business units to find new ways to profitably grow the business. To pull off such a modern-day multi-tasking exercise, today's chief financial officers (CFOs) more than ever must ensure that their core finance operations run as seamlessly and efficiently as possible.

Challenges abound
Chief financial officers are navigating a treacherous financial and business environment. After curtailing the cost of finance for the past decade, many CFOs saw their infrastructure expenses escalate as they invested more employee hours and technology dollars trying to fulfill increasingly challenging compliance requirements. And most companies expect the compliance burden to continue well into the future.

In a recent study conducted among members of the Oracle Applications User Group (OAUG), 54% of executives surveyed predicted they will devote more staff time to compliance management over the next five years (see figures 1 and 2, below).

The fragmented nature of finance system architectures can easily confound compliance efforts. It's not uncommon for an enterprise to maintain multiple systems, including numerous enterprise resource planning (ERP) instances and disparate analytic processes and tools. Integrating and reconciling the data from these systems is not only slow, costly and laborious but also complex and highly risky. These associated impediments can combine to threaten a company's very existence.

Harvard Pilgrim Health Care (HPHC), a major Massachusetts health insurer, learned this lesson firsthand. Six years ago, state authorities placed HPHC into receivership after the company disclosed two years of surprise financial losses totaling $227.4 million. Harvard Pilgrim Health Care's viability was clearly jeopardized. (See the bottom bar to learn how HPHC integrated their system and returned the company to profitability.)

enlarge Source: OAUG white paper, "Beyond Compliance: Business benefits emerge from new processes."

enlarge Source: OAUG white paper, "Beyond Compliance: Business benefits emerge from new processes."

Many CFOs hear the HPHC tale and realize it could have been them. In today's competitive marketplace, businesses are under great pressure to quickly capitalize on growth opportunities while reducing expenses. In the rush, some companies work around the system integration issues by applying a quick fix on the existing architecture with manually intensive, costly reconciliation processes. Now more than ever, CFOs need to re-evaluate core financial operations and leverage technology to help their staff perform day-to-day work faster, more reliably and with company-wide consistency.

The benefits of finance data integration—simplified data movement and enterprise-wide data consistency—provide compliance improvement opportunities as well. Leading organizations are starting to use the data warehouse to streamline and automate controls and processes, therefore simplifying the compliance effort. The data warehouse reduces the number of control points to be documented and audited, thus improving management confidence in the financial results and curtailing the ongoing cost of compliance.

The enterprise data warehouse (EDW) is a proven, widely tested solution for finance's drive toward a leaner, more effective operation. Adding an effective EDW to the financial system's environment allows companies to focus operational and transaction-processing work on the ERP, while key reporting and analytic workflows are performed on the EDW platform.

Leading global corporations are leveraging their EDWs to increase the speed and reliability of reporting and consolidation processes, reduce the risk and speed of ERP integration initiatives and simplify the infrastructure that can confound compliance initiatives.

System consolidation
Companies often end up with multiple accounting systems due to a legacy of decentralized organizational structures (e.g., different geographies of an enterprise, all with disparate data systems) or a history of acquisitions. Left alone, these companies' many systems can produce multiple versions of their financial "truth." It's no surprise, then, that consolidating and integrating financial results for external reporting within these multi-system environments can turn into a nightmare of compliance risk and cost.

Reducing the number of systems can improve the monthly close and consolidation process. Many CFO organizations have found that the use of common applications and standard data definitions automates much of the manual data gathering, scrubbing and reconciling once performed by numerous staff.

Although most CFOs recognize the reporting and operational advantages of standardizing on a single ERP system, whittling away at the number of ERP systems is a task easier said than done. Every ERP system has a vocal constituency and houses at least some important business processes. As a result, an immediate forced march to a single standardized ERP often risks disrupting key business processes and the very accuracy of the company's financial reporting.

To avoid such potentially catastrophic consequences, most organizations try to make the ERP transition gradually over the course of three to five years. However, during this transitional phase, the business needs to function without disruption.

By serving as the sole repository of all source system and ERP data, the EDW solves this quandary. Considered an integration layer, the data warehouse can enable quick data standardization even while the business rolls out a single ERP system or runs multiple ones. What normally takes the ERP five years to produce, the EDW will deliver within months.

Ultimately, a data warehouse allows finance to deliver information in near real time. Data from the general ledger (G/L) can be pulled and analyzed every hour, for instance, allowing a company to decide on an appropriate action. This kind of responsiveness and agility are hallmarks of an effective EDW.

Using the data warehouse as the integration layer in an ERP consolidation delivers numerous benefits, including:

	Simplified consolidation without business disruption
	Fast path to data standardization
	Timely capture and access to data both inside and outside the ERP system
	Improved transparency (one version of the truth)
	Reduced compliance risk and cost (fewer control points to be documented, tested and audited)
	Streamlined reporting and easier, faster analytics and decision support

Simplification for better insight
NCR Finance, the group responsible for global financial reporting at NCR, faced this problem of disorganization and inefficiency. Core financial information was stored on 57 separate financial applications across the enterprise. Close cycles on the books stretched to a minimum of 14 days, and even then the diversity of financial reporting norms meant that management's view of the business was inconsistent. Different divisions around the world did things their own way, without regard to how the same reporting was handled elsewhere.

To solve the problem, NCR implemented a Teradata EDW. The EDW provided NCR Finance with a single, integrated view of enterprise data, allowing them to summarize global financial results within the EDW with improved speed and reliability. NCR Finance cut several days out of the monthly close cycle and greatly simplified the reporting process—without sacrificing completeness or accuracy.

The EDW relieved the systems crunch that occurred at month's end when transaction needs compete with analytical needs for the same resources. "You are moving the analysis to the data warehouse, which frees up the ERP system," says Bill Neufarth, NCR's EDW director. Enterprise resource planning and source systems are freed to do what they do best—process transactions—while the EDW serves as the flexible analytical platform that management demands.

Through the EDW, NCR management also gained access to daily and monthly reports detailing product line and industry information, as well as a previously unavailable view of the customer dimension. "Without doubt, implementation of the EDW and its support of the ERP initiative have proven to be a key enabler in the transformation of NCR," says Neufarth.

Channeling finance energy to improve processes
In addition to supporting the elimination of multiple ERP systems and speeding and bolstering the close and consolidation process, a data warehouse can help CFOs reduce the cost of key finance functions. The ability to automate the data integration process allows for either reduction in staff or the reassignment of financial analysts to spend more of their time on analysis instead of data-gathering and reconciliations. This enhanced focus on analytics opens up the means for finance to improve the effectiveness of key finance processes, such as:

Enhanced procurement: Although there may be some centralized procurement function within finance, each business unit typically has at least one procurement official of its own. Often, invoice matching and vendor payment are handled by divisional finance instead of corporate, resulting in fragmented processes that prevent the organization from getting the best prices and volume discounts. In leveraging its data warehouse, finance can collect and analyze purchases throughout the enterprise, enabling the organization to centralize and aggregate purchases across a smaller group of vendors, thereby maximizing volume discounts. Finance can also analyze consumption patterns and vendor performance and pass that insight along to the business units. Such information helps buyers negotiate and time their purchases to get the best price and purchase lot sizes.

Linking accounts receivable to data: Today accounts receivable (A/R) information may be scattered across numerous billing systems, many of which lack any analytical capability. High-level summarization precludes A/R professionals from having the supporting detail necessary for effective decision making. During the collection process, for instance, efforts are inefficient and, at times, unnecessarily combative because collectors have access to a limited amount of information. Accounts receivable data alone is rarely sufficient for a full understanding of why a customer has not paid within terms. However, using an EDW to link A/R data with key operational information such as delivery records, service level performance and customer contractual terms, the organization can analyze payment patterns and establish more intelligent collection categories that better focus collection efforts. Armed with this detail, sales reps, collectors and customer service personnel can make better-informed decisions.

Improved core finance
By simplifying the finance infrastructure and employing a central data warehouse, finance can significantly improve the efficiency of core financial functions, reduce the cost and risk of compliance, and invest more time in decision support and growth opportunities.

Through these steps the CFO can make a significant contribution toward achieving the business's overall strategic objectives. CFOs at world-class businesses do it every day. T

Alan Radding is a Massachusetts-based writer specializing in business and technology.

� Teradata Magazine-September 2006