Using a dedicated solution to guarantee data consistency in heterogeneous architecture is self-evident for many financial departments. Whatever we call it: Master Data Management, Data Governance, Charts Of Accounts mappings, Reference Data, Hierarchies’ management, Master Entity management, Data Stewardship, Financial MDM… These initiatives bring significant results for the users and real added value for Corporate Finance.
Using a core model is a good way for a company to structure and align business processes across the whole enterprise. However, it can be too rigid and therefore slow down flexibility in the changing business environment for complex architecture. We all know that enterprise systems architecture will continue to stay more or less heterogeneous even if there are always some plans to rationalize it. Investing in a Financial MDM is a good way to align master data in different applications and does not require a huge budget. Financial MDM allows business users to centralize, update and publish trusted and relevant master data to systems and to end-users. The specific types of master data managed by financial departments are: charts of accounts, legal entities, organizational dimensions, analysis dimensions using general ledger accounting flexible fields and reference data. Financial master data needs to be governed. Flexibility is key to allow business users to easily update their own systems. These changes have to be part of a data governance initiative to structure the process in accordance to rules, policies and guidelines.
- Empower financial business users
Controllers, accountants, data stewards, local CFOs and everybody involved in finance processes should be owners of their data. These business users should be active in any process managing changes in master data. For example, they should have the possibility to create a new cost center or to attach an existing legal entity to a new management center. If users could benefit from this empowerment, the process would be more efficient due to their business needs knowledge and to their understanding of the potential impact in the financial reporting systems. They would also be able to audit and follow on-line their request in the different workflow steps. However, changes need to be monitored using compliance and policy rules and therefore preventing business users from compromising the integrity of the enterprise repository. The goal is to replace all disorganized request flows based on Excel files, emails or files between end-users and IT department by an auditable process.
Benefits include time and cost decreases in the change process and better confidence in data quality and figures.
- Ensure business hierarchies and related links consistency
Hierarchies and related links are key to using financial applications; they help to manage master data connections inside a hierarchy or between financial master data and other master data. For example:
- When a new Chart of accounts is designed, linking an account to its parent is key for future aggregation of data.
- When legal entities have to be sorted, hierarchies can be built according to dimensions such as geography or organizations.
- In a General Ledger, every accounting flexible field is a potential analytical dimension.
- Respecting relationships is also very important when reorganizing sales territories taking into account geography dimension, human resources, client or product information.
That’s why hierarchies and relationships are often used in EPM (Enterprise performance management) and Business intelligence. Financial Applications share entire or partial hierarchies with different levels of detail, different points of view. So, Financial MDM helps companies to be more efficient because hierarchies and their relationships are managed in a single place. Every modification impacts all applications at the same time. This increases consistency and data quality among all hierarchies. It also accelerates deployment of new applications based on existing validated hierarchies.
- Link local needs to corporate standard and consolidate all lines of business
Business models in many companies often rely on the autonomy of the subsidiaries or business lines to manage them as independent profit centers. The Corporate finance department must consolidate all activities of the group and also control the global consistency of these decentralized processes. Nevertheless, if the headquarters try to force a local subsidiary to adopt a core model without taking into account local specificities (market, policies…), they often fail.
Building a Financial MDM is the way to federate local needs with corporate standards. It ensures the convergence of all Finance statements and audit of published financial information. Using a role based security ensures that users only access data according to global governance. Business rules insure accuracy from local to corporate level. Finally, local reporting and corporate reporting are aligned. Auditability of all users’ actions is traceable.
Financial MDM provides a unique solution for both Corporate and local needs allowing all users to share corporate policies and regulations.
- Accelerate M&A
When a company wants to develop external growth by acquiring a new company or merging with another one, integration of systems is often a long process. You have to consolidate data from heterogeneous systems, different activities and different policies. Financial MDM maintains a trusted repository. Therefore, new applications from a new company can be easily integrated in this existing trusted repository. For each new company, you have to map the new financial system with your reliable foundation. It also helps considerably in the transition time (before the final process of acquiring a new company) to continue to process on two separate systems, sharing the same repository. Sometimes, for strategic or economic reasons, there is no need to integrate all systems in one. In this case, the strength of Financial MDM is to centralize and manage reliable mapping of all systems.
- Analyze your master data across heterogeneous environments
Financial MDM allows users to manage versions. To analyze, compare and simulate changes in master data across heterogeneous systems. It allows business users to search, query, compare and audit while looking for discrepancies and improving data quality. For example, you can easily find the differences between a chart of account in US GAAP in one application and another one in IFRS. Without Financial MDM, it’s difficult to do it especially when charts of accounts are located in different applications and from different software vendors. This quickly turns into a nightmare when you’ve got hundreds applications (per country, per business unit) running on heterogeneous environments (SAP, Oracle, in house development, Excel files).
The reporting capabilities allow individual business users to create reports based on reliable information from which ever source they choose. This kind of solution is also very efficient to produce a single point of documentation storing history and evolution based on versions and time periods of financial MDM. Changes can come from external context, major reorganization or migration from one system to another. Audit files store all changes and can be easily accessed by auditors to monitor the life cycle of the master data and be fully compliant with the Sarbanes-Oxley regulatory requirements.
To summarize, here are the benefits for investing in a Financial Master Data Management solution that is totally adapted to the finance departments and their constraints:
- Significant cost reduction for updating master data across all systems.
- Risk reduction due to dedicated tools to manage financial master data instead of unstructured processes based on thousands of Excel spreadsheets, emails and phone calls.
- Increase data quality for all financial reporting. The CFO is responsible for the accuracy of all data from their finance department.
- Shorten smart close process by sharing the same repository, same rules and same policies within all financial applications.
Disclaimer: the views expressed are my own and do not necessarily reflect the views of Oracle.