Why Business Intelligence Tools Can’t Produce Good Financial Statements

Let’s face it: out-of-the-box reporting tools that come with most ERP systems are lackluster at best. Software companies know that when they demo to prospective new customers, most aren’t looking very closely at the financial report writer. That’s especially true if the software publisher offers some kind of business intelligence (BI) tool for advanced analytics and executive dashboards. Amid all the flashy demos of sales reports and impressive visualizations, it can be easy to lose sight of core financial reporting requirements that everyone seems to just assume are built into the software.

In fact, this is one of the complaints we hear most often from ERP customers who come to us looking for a solution. They struggle with consolidations, eliminations, revaluations and other statutory adjustments needed to comply with local-GAAP, IFRS, and other global financial reporting standards. If they’re running multiple companies with different ERP systems and charts of accounts, the problem gets even more challenging. Add multiple currencies to the mix, and financial reporting gets downright complicated.

There are many reasons why general-purpose BI tools simply aren’t the right fit when it comes to producing accurate, flexible financial statements quickly and efficiently. Here are the top four:

#1: Financial Reports are Fundamentally Different

Think about your company’s chart of accounts, and then consider how that maps to your summary income statement. There will be ranges of accounts that roll up to a single line in the P&L, – but very often you’ll need to include an odd account somewhere on the report where it’s out of sequence with your account numbering scheme. That might be a contra-revenue account, for example, or some other expense category that simply appears out of order, somewhere further down in the list of expense accounts.

General purpose report writing tools (including BI products) were simply not designed to handle these kinds of anomalies. A robust financial report writer, on the other hand, gives finance users complete flexibility to quickly and easily define custom row definitions that conform to their exact needs.

#2: Multi-ERP Reporting Requires a Lot of Heavy Lifting

Another challenge is that ERP vendors typically don’t build tools to facilitate reporting against their competitors’ products. What if you operate a group company in which the parent organization is running SAP S4/HANA, two subsidiaries are running SAP Business One, a third sub is running Plex for manufacturing, and a fourth is operating on locally produced ERP software developed in Brazil?

Yes, most BI tools will enable you to build an elaborate data warehouse and feed GL balances from each of those source ERP systems; but at that point, you still have to normalize the data if there are mismatched charts of accounts or overlapping accounting periods. As soon as that information leaves each of your five different GLs, you own the task of getting it to all fit together into a coherent set of financial reports. A well-built financial consolidation tool handles those differences automatically, mapping all accounts to corporate standards, and accounting for different calendar structures with no additional user input.

#3: Multiple Reporting Standards Require Manual Effort

In today’s global economy, more and more companies are operating subsidiaries in multiple countries, – each with its own systems and processes, and each with its own statutory reporting requirements. What happens when you need to produce a China-GAAP report for your offshore manufacturing subsidiary to comply with local laws; but you also need to incorporate that company into your consolidated financials, which must conform to IFRS or US-GAAP?

It’s unlikely that your existing ERP systems can distinguish between the representation of accounts and transactions across those 3 standards (or more, if your company requires it). Once again, BI tools won’t accommodate your needs, unless you extend the data model you’ve built for all the information you’re importing from your various ERP systems, then build a custom interface that enables finance to record transaction attributes within that combined data store. Suddenly, your financial statements have turned into a full-blown software project. A good financial report writer supports unlimited chart of accounts mapping, allowing financial statement templates to be created for any regulatory layout or standard.

#4: Proper Currency Revaluation Can be Tricky

Currency revaluation can cause particularly difficult issues –which many companies prefer to avoid until absolutely necessary. Although the existing ERP systems might handle multicurrency locally, it can be tricky to align subsequent revaluations with data previously exported to a data warehouse and it may be virtually impossible to add additional reporting currency values that are not held in the underlying system. The devil is often in the details, – but a good reporting tool will handle these issues. When it comes to financial reporting and compliance, the details often matter a great deal.

The bottom line: expect that ERP companies may gloss over financial reporting, or who try to sell you on general purpose reporting & BI tools. Look beyond the flashiness of the demos and drill down to the core requirements around consolidated reporting, the level of expertise needed to design and modify reports, the financial standards and statutory compliance requirements that your company must meet, and the nuances of multicurrency evaluation.

If your company is seeking a purpose built solution for financial reporting, consolidations, and compliance to operate in a competitive global environment, Mondial Software can help. To learn more, read our free White Paper or contact us to schedule a free consultation and demo.

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