FSN: Integrated group reporting may be more challenging than you think?

Integrated group reporting may be more challenging than you think?

10th July 2006
It was not so long ago that statutory reporting and management accounting were distinct processes, supported by separate systems and different accounting teams. But the availability of cost effective and readily deployable group reporting systems from the likes of Hyperion, Cartesis, Cognos, SAS and Extensity (formerly GEAC) made it economically, financially and operationally possible to combine these reporting streams. Whilst it is not universally the case that all large groups have unified management and statutory reporting processes, most have been trending towards this position. Gary Simon, FSN managing editor looks at the issues.

But the comfortable and predictable world of group reporting has been shaken by a period of unprecedented change. Compliance, international accounting standards and an heightened interest in non-financial reporting have once again put group reporting systems under strain. Group finance finds itself charged with responsibility for marshalling and reporting on all sorts of data, much of which lies outside of its comfort zone and sphere of responsibility. Yet it is constantly exhorted by suppliers, analysts, consultants and others to integrate data across the organisation. It seems that no presentation can pass muster unless it mentions the much hackneyed phrase, “One version of the truth.”

Whilst the concept of bringing data together in one place, to be shared by multiple stakeholders sounds like a laudable ambition, it is much more difficult to deliver in practice than many are prepared to acknowledge. Buying the latest integrated performance management system may be a help but it is far from the entire answer. As David Jones, of Paragon Consulting says, “If it were that easy then everyone would have done it. Systems have improved over the years but they are not a ‘silver bullet'.”

One notable obstacle to progress is that different streams of management information work in different timescales. The passage of statutory reporting is typically much slower than management reporting. The frequency of reporting is also quite different, with statutory reporting being half yearly or quarterly and management reporting most likely to be monthly. Add other functional areas such as customer, product and HR reporting into the mix and the challenges of bringing the data together can be quite boggling.

But managing specific elements of data on an enterprise level can present problems on a much more profound level. At a recent roundtable discussion on the challenges of integration finance directors from a number of industries pointed to the difficulty of maintaining metadata – data about data – or structural information relating to the organisation. Getting consensus around data definitions and the data that needs to be included in an enterprise data model is a formidable task. One FD told FSN, “Even if you can get agreement about the data to be held, then it becomes extremely difficult to maintain or change the agreed data without going through a myriad of committees. Other functional areas and business mangers are not going to be happy to give up the freedom to change data as they see fit.”

However, centralised data models need not act as ‘handcuffs' on the organisation. Implementing fixed and user definable areas of metadata, for example, is one approach that allows local business units or other functional areas to adapt to business change without jeopardising the integrity of overall group reporting.

On the other hand, getting users to specify their data requirements in the first place still remains an enormous challenge. “They don't know what they want, they haven't thought through what they require, and are scared of change,” remarked one frustrated finance director from the pharmaceutical industry. Granularity of reporting exacerbates the problem as it is likely that reporting in different operational areas will be at a different levels of detail according to the information demands in that area. On the other hand, others argued that it's not the finance function's job to be the guardian of all management information or quadrants of the Balanced Scorecard.

Some finance organisations are so burdened by meeting compliance and statutory reporting needs that they have deliberately kept financial and management reporting separate. One FD claimed that by keeping them separate, management accountants did not get dragged into financial reporting. Others reported that the scarcity of good technical accounting skills meant that the financial accountants had to be focussed on statutory reporting.

Furthermore, merging information is not necessarily the way that all organisations want to go. Homogeneous groups can have quite different needs from heterogeneous enterprises. For example, the finance director of an international brewing concern (a more homogeneous group) insisted that without global brands there was limited pressure to have a unified data model at a detailed level. “We have different brands in each company and are content to allow individual regions do their own thing. We put in first class management locally and let them make money. We don't interfere and don't make heavy information demands on them.”

Jones counters that in the interests of efficiency alone their must be merit in sharing information across the group, after all what is the point of being in a group if you cannot, for example, take advantage of group purchasing power. But not all groups are convinced that this needs to be done through elaborate systems. “What happened to discussion and communication?” asks one FD from an international mining group. “We hold weekly conference calls by function that allows for knowledge sharing,” she said.

“That might work for you but we have over 200 finance directors and managers,” says another. “We prefer to have satellite finance functions bringing appropriate disciplines and consistent processes into each area of the business,” he added.

It seems that when it comes to the thorny issue of integration there are as many approaches as there are organisations. Richard Wyles, managing director of Paragon Consulting, agrees. He told FSN, “There are no right or wrong solutions to the challenges of integration. There are clearly benefits to integration but the drivers in each organisation are different. What this debate illustrates is that you can't take a ‘one size fits all' approach.”

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