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Top 10 Areas Where Data Analysis is Adding the Most Value Results from Survey Conducted by Audimation Services,

Inc. During the past year, we gathered responses from our users at events, focus groups and various encounters along the way to see what information would be most helpful in their work. The most common request we receive is, tell me how data analysis is being used in other organizations. We surveyed our extensive database of accounting, auditing and financial professionals to find out what data analysis project or technique has brought them the most value. Nearly 600 individuals provided valid responses, and many provided direct examples of how they are using data analysis in their work. The survey also asked internal auditors to share information about the number of staff, which is as follows:

1. AP/AR Given the sheer amount of data embedded within Accounts Payable (AP) and Accounts Receivable (AR), data analysis is adding the most value in these areas. Many noted they are reviewing data within the vendor master file, while others mentioned these specific areas: o o o Purchasing to payment analysis Review of operating disbursements, with primary focus on AP Validation of payments to vendors

o o o

Analyzing AR open order data for system deficiencies within processes Evaluating AR aging files for internal and external financial reporting AR testing and searching for duplicate payments Notable QuoteCurrently we have been able to add value from a fraud perspective by performing audits of AP vendor master maintenance and AP transactions. We have also added value via our journal entry analysis.

2. Duplicate Detection If youre looking for recovery dollars, fraud, errors, anomalies or outliers, duplicate detection is a proven technique used to find them. Survey respondents indicated value in use of testing, analysis and review of expenses. Common areas for duplicate detection searches include payments, invoices, transactions and vendor returns for credit. 3. Sampling Sampling is a fundamental part of audit work, and with so many ways to sample, this frontrunner is no surprise. Multiple survey respondents indicated they use IDEAs statistical sampling methods for their sampling work to set the scope, providing defensible and valuable insights when results are extrapolated against the population. One internal auditor noted they use the statistical functions, summarizations and stratifications to allow management to analyze data to make projections and evaluate past performance. Some survey respondents provided details, such as using stratified sampling to examine gains and losses on backdated trades, stratify invoices and disbursements, and perform random samples. Data analysis is also used to sample and perform key word searches. One of the many benefits data analysis technology offers is the ability to analyze an entire population of data, as opposed to sampling. However, data analysis also allows you to join, sort and summarize areas of data to analyze smaller data sets. Notable QuotesWe use IDEA to help select sample sizes and perform audit tasks, which has greatly reduced audit time and manpower requirements. The ability to sort through large data populations of GL data has helped us greatly. Being able to combine databases has also been a help since it is hard to have IT create one database at times.

4. Data Imports/Extractions and Analysis of Large Data Sets Most auditors or accounting professionals will tell you their biggest challenges are knowing where to apply data analysis, getting the data they need and importing it into an analysis tool. Data analysis software developers have made great strides in developing new technology to simplify data imports, such as the addition of PDF converters, drag-and-drop capabilities, and the expansion of data capacity limits. Survey respondents indicated one of the greatest values data analysis offers them is the ability to convert PDF files, text data and information stored in spreadsheets into an analysis tool. Many responded they were using data analysis to perform data extractions, which would be nearly impossible for them otherwise, and extracting data based

on certain criteria such as by name or customer codes. One individual stated their overall use of IDEA and ODBC instead of MS query and SQL to download, analyze and summarize data had saved them hundreds of hours. Those surveyed said they value the ability to import and handle large amounts of data to be analyzed for different criteria, and setting up different worksheets within a file to perform various audit steps. Auditors are using data analysis to perform big downloads of financial transactions during the audit period, combined with summaries and analysis, to help scope and test during the audit. An internal auditor within the health care industry stated they are using data analysis to obtain entire payment data from an ERP system to conduct analysis on areas such as payment dates on weekends, and search for duplicates and vendor classification coding errors. Notable QuotesBeing able to import various types of reports (text, PDF, Excel, etc.) into the software has been most beneficial when attempting to compare data from various repositories. This process has been used to compare active employee records against payroll registers and building access (security) reports. The most useful aspect of IDEA is the amount of information the program can hold. We do many audits that involve server data, which can be quite large. Without IDEA, we would not be able to analyze this data.

5. Continuous Auditing & Monitoring Data analysis continues to be used to automate manual processes and testing by implementing continuous auditing. Several internal auditors responded they value the ability to develop continuous audit scripts to look for errors in account entry and the use of continuous monitoring for travel and entertainment (T&E), financial statements, p-cards, human resources and accounts payable. While continuous monitoring can provide near real-time information to identify control breaches, several survey responses indicated they were using continuous monitoring monthly or quarterly. One respondent noted they use continuous auditing in their audit department to monitor credit data, market feeds, credit and financial information to track and flag significant changes. Another stated they use continuous monitoring for Foreign Corrupt Practices Act (FCPA) compliance. Notable QuoteContinuous monitoring of store transactions where we score each unit and research the outliers.

6. Fraud Detection & Forensic Auditing While you may stumble upon fraud by searching for outliers or anomalies, many auditors and accountants are using data analysis technology as a forensic tool to search for fraud and schemes. Data analysis tools allow you to look at the data from different angles to get to the root cause of fraud, which is what many of our survey respondents found most valuable. Some of the ways data analysis is being used to search for fraud include trend and pattern analysis to look for indications of diversion of funds or theft, behavioral analysis and monitoring of spending trends. 7. Analysis of P-Cards

Procurement or purchasing cards (p-cards) have simplified the amount of administrative work organizations handle to process small purchases, but also increased risks. While p-card abuse has made headlines, particularly in government departments, they can be managed by implementing proper internal controls to reduce misuse and waste. Its naturally an area accountants and auditors must analyze to search for evidence of red flags, review transactions and track trends. Notable QuoteThe ability to script IDEA tests has enabled our company to automatically identify potentially anomalous procurement card transactions with maximum efficiency.

8. Payroll & Time Sheets Hunting for ghost employees, falsifying wage claims and tampering with time sheets are all key areas where data analysis is adding value, according to those surveyed. One respondent indicated they conduct payroll weekly dollar or total reasonableness testing, while another stated they use IDEA to perform 30+ analysis procedures on a quarterly basis covering purchaseto-pay, revenue, journal entries and payroll. Data analysis is also bringing value by enabling review of electronic time entry records for compliance with existing policies, procedures and labor regulations. Notable QuoteThrough the use of IDEA our payroll department has reduced the time required to review payroll prior to their weekly transmission to ADP from several hours to less than 30 minutes.

9. Joins & Comparisons Few will argue that one of the biggest values data analysis brings is the ability to join databases and files to sort, summarize and analyze data again, enabling users to look at the data from different angles to search for outliers, fraud, errors and other information. Those surveyed provided some applications of using joins to check for anomalies, create inventory turnover or perform open to sell analysis, and extract data from PDFs, then join it together for analysis. One survey participant stated they join databases to save hours reconciling outstanding check lists and another stated they benefit from joining large databases to replace a manual comparison process. Areas were data analysis is being used to compare sets of data include: o o o o o o o Active application user accounts against a list of terminated employees Physician scheduling system to the billing system Vendor terms including days paid early and aged receivables Missing invoice numbers Employee/HR to vendor address Tax ID numbers and conflict of interest Review of billing and pricing agreements against contract agreements Notable QuoteComparing the HR files to the AP vendor files provided information leading to employee fraud of valuable assets and other services. This technique provided the link needed to connect the employees address to the AP vendor delivery address, thus giving the needed data for further investigation.

10. Inventory Audits Given the massive size of some inventories, data analysis is being used to conduct inventory audits. It is being used to identify potential or obsolete inventory, slow-moving inventory, reconciling the inventory count with the general ledger, and performing sampling, valuations and testing on inventory data. One person surveyed noted they use data analysis as a business intelligence tool to better understand both long- and short-term inventory risk, and another indicated they analyze (oil and gas) well, property and cost center data. Honorable Mentions from Survey Findings While reviewing some of the survey comments, we found a few creative, or somewhat unexpected uses of data analysis we thought were worth mentioning: Centralized Accounting & Data Mining Centralized accounting and related services for processing company transactions. There is more volume in terms of transactions, but because it is done via centralized accounting, the data is easier to obtain and analyze. Compliance Several survey respondents noted they find data analysis valuable in meeting industry and documentation standards. One individual stated their internal audit department uses data analysis for planning, executing and document SOX procedures as well as audits of other areas and processes. Data Warehousing A growing number of data warehousing efforts with key data being extracted from legacy systems spread across the enterprise from various product lines. A long overdue process that is showing good results for data analysis on many fronts. Population Testing We try to incorporate data analysis in every audit we do. The biggest win for us has been performing a lot more population testing, instead of doing sampling. It takes the same amount of time for us, but provides much more clarity and value to the client. Summarization Summarization of data in IDEA (tool) that couldnt otherwise be summarized by company personnel. This gave us confidence that a process was working as expected. Teaching Tool for College & Universities IDEA is taught by more than 160+ colleges and universities throughout the U.S. to help educators bring data analysis techniques and technology into the classroom. One professor stated: I teach fraud examination and forensic accounting at the university, so IDEA fraud analytics has been of the most value for exposing my students to data analysis capabilities in fraud prevention and detection. Reconciliation The most important project involving IDEA at this organization has been reconciling govern ment data to the organizations mainframe. This is a requirement of the government contract. Revenue Reporting Many of those surveyed stated they use data analysis for reporting purposes including the distribution of company-wide reports used to analysis financial results. IDEA has enabled our company to analyze data for balancing and reporting purposes more quickly and efficiently. The program builds on techniques that other software utilizes. Another survey respondent noted, Revenue recognition with I DEA that was not feasible to be performed by any other means. Creative Uses:

Hourly energy bidding analysis Analyzing customer behavior around service renewal periods Analyzing customer surveys Measuring the effectiveness of a promotional program Analysis of financial and student enrollment data Direct billing review project FCPA monitoring Evaluation of fixed asset balances Integration of student information system with online learning management systems Risk assessment Medical bad debt projects Testing information in various system logs Banking Analysis of where wires were being split to avoid limits Loan grade and portfolio trending

Our survey of nearly 600 accountants, auditors and financial professionals working in various industries provided us with some interesting insights about how data analysis was being used, and which areas they believe were most valuable to their respective organizations. While data analysis has been around for more than 25 years, it continues to evolve in its technology advancements, use and significance. As one of our survey respondents noted, Theres just an immense amount of ways the data can be analyzed. Using data analysis technology to help you perform better, more in-depth, analysis in less time with minimal effort is not only effective, but worthwhile. Survey conducted in 2011 by Audimation Services, Inc. and analyzed by a third-party marketing consultant.

Finance Can Get a Big Advantage from Big Data


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Posted November 18, 2013 Keywords: Analytics, finance, Big Data

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All the hubbub around big data and analytics has many senior finance executives wondering what the big deal is and what they should do about it. It can be especially confusing because much of whats covered and discussed on this topic is geared toward technologists and others working outside of Finance, in areas such as sales, marketing and risk management. But finance executives need to position their organization to harness this technology to support the strategic goals of their company. To do so, they must have clarity as to what big data can do, what they want it to do, and what skills and tools they need to meet their objectives. Big data has always been with us, just on smaller scales: The term refers to data sets so large and complex that organizations have difficulty processing them using on-hand database management systems and applications. It has become a popular buzzword because technology for handling big data has crossed a threshold, making it at the same time more capable and cost-effective. Companies now can tap into huge amounts of structured and unstructured data using advanced data processing technologies, analytics and visualization tools to achieve insights not previously available using more conventional techniques. In a recent research analysis, I covered some of the potential benefits (and potential pitfalls) of big data as it relates to company management. Increasingly, the ability to analyze large quantities of business-related data rapidly holds the promise of fundamental changes in how executives and managers run their businesses. Properly deployed, big data analytics enables a more forward-looking and agile management style, even in very large enterprises. Because it allows more flexible forms of business organization, it can give finance organizations greater scope to play a more strategic role in corporate management. Big data and analytics are a natural combination. By itself, a mass of data is not especially useful, and there are significant challenges to teasing out insight from such large data sets. However, information technology has evolved to make assembling and working with extremely large amounts of data far more

practical. As well, routines involving advanced analytics that were once the domain of people with Ph.D.s in statistics are increasingly usable by business analysts, as new analytical software packages are designed to hide the complexity of the underlying statistical work. My colleague Tony Cosentino recently summarized the progress to date in adoption of big data analytics, covering some of the existing uses (already numerous) and emerging trends. Keep in mind that its not just a matter of learning how to master new software and munge data. Finance departments must sharpen their skills in determining how to best utilize big data analytics. And its even

more important that finance executives understand how to make practical use of big data analytics: In some cases users may want to consume only the output of the analytics created by other parts of the organization (such as demand forecasts by product families), while in others the organization may want to purchase applications that use or embed big data analytics (such as continuous monitoring for ERP systems governance) or enable price and profit optimization. Our benchmark research on operational intelligence, a technology-driven discipline that has been using big data operating across networks and systems has been using analytics for years, shows that the most common reasons for using such applications (cited by almost three in five companies) are to manage performance, detect fraud, comply with regulations and manage risk. These areas are broadly applicable for finance organizations, but I assert that as well as governance and control, initially the three main applications of big data analytics are planning, reviews and alerts. Heres how. Companies do a lot of planning, so its useful to segment the activity. One way is by time. There are three main planning time frames in which big data analytics plays a role. 1. Short-term tactical planning is used, for example, to project demand for specific products or create offers that might spur incremental demand. Especially in consumer products and business-to-

consumer marketing, these models are statistically and computationally challenging, as they must be continually updated and adjusted. However, this is not an area of business where Finance has taken a role. 2. Long-term and strategic planning can help determine the impact of a confluence of factors on markets and costs. Decades ago, the largest companies maintained strategic planning staffs to generate longterm forecasts to inform senior executives of important market trends. Except at companies that have very long cycles with specific demand and supply requirements, those staffs have disappeared or have been substantially reduced as corporations switched to third-party sources. 3. In the time horizon between short- and long-term planning there are techniques for improving the accuracy of forecasts of revenue and costs using large sets of historical data, which enable organizations to better understand the various factors that influence demand. This sort of advanced modeling using predictive analytics can be useful in improving the accuracy of corporate business planning and budgeting, which is at the core of financial planning and analysis. Predictive analytics uses techniques from statistics, modeling and data mining that weigh multiple current and historical facts and their interactions to predict outcomes. Good predictive models can identify the most important factors driving outcomes, and because of this, they often can be more accurate than simple extrapolation. For example, by examining large sets of historical data, a fast-food chain can predict with reasonable accuracy demand for certain menu items at specific locations at a given hour of a given day by taking into account factors such as the day of the week, time of the year, sales patterns over the past three weeks, advertising spend and special offers. As useful as predictive analytics are for forecasting, they may be even more valuable when applied to reviews and alerts. Predictive analytics can provide a baseline against which to compare actuals. This, in turn, enables an organization to get an earlier warning when results diverge meaningfully from what was expected, so executives and managers can react immediately rather than in days or weeks. For example, in business-to-business relationships that involve many routine purchases (any sort of supplies, for example) a divergence from established trends could generate an alert to the sales organization. Embedded analytics in an order-entry system could highlight late or smaller-than-usual orders. These might indicate a competitive threat or some other issue that would benefit from a timely interaction with the customer. This is just one of the ways that data captured by the financial systems can be used to improve the effectiveness of other business units, enabling the department to play a more strategic role in supporting the company. Another use is in accounts receivable, where predictive analytics can promote customer satisfaction. To illustrate, a company that does a routine analysis of payment patterns can have a good idea of when specific customers will pay. If one that routinely pays its invoice between the 16th and 19th day of the

month has not paid by the 23rd day, the analytics system generates an alert. A call to the customer or an automated email notes the delayed payment, asking if there was an error in the billing or some other point in dispute. There are a couple of advantages to this approach. If nothing else, if there is an issue, it is likely to be resolved more quickly. Moreover, from a customer satisfaction perspective, its a far superior form of customer interaction than waiting several weeks and then sending out a dunning notice demanding payment. Resolving any issue sooner improves cash flow, and if the company did make a mistake, asking for payment will only annoy the customer. Another use of big data in receivables is to automatically identify customers that are routinely tardy in paying. This can kick off an internal company discussion about what ought to be done about the situation, such as limiting credit or finding ways to accelerate payments. Governance is another area where big data analytics are already at work, with companies using it for fraud detection and alerting. For instance, software packages can monitor a companys financial systems for evidence of suspicious activities such as payments to bogus vendors or top-level alterations to financial statements. Such systems are designed to be high-level controls that reduce the need for manual internal and external audit work. And even more is possible. As I noted earlier, in the not-toodistant future it may be possible to have an auditor in a box a forensic system that continuously identifies and lists all suspicious activities, transactions and conditions and weighs their materiality. Such a system would permit more timely responses to the risk of material errors or fraud and facilitate examinations by external auditors. In addition to being far more efficient than periodic manual effort, the auditor-in-a-box concept is potentially more reliable because it examines everything rather than relying on sampling. However, there are challenges. Staffing and training are significant

issues for Finance in dealing with big data analytics. Our research into the challenges of utilizing big data shows that nearly four in five companies find staffing

and training to be an obstacle in utilizing big data. Despite the fact that analytics is an inherent element of the finance function, it almost always involves the broad application of basic approaches employing simple math (ratio and margin analysis, for example). Few departments have applied advanced analytics: Our finance analytics research finds that only 13 percent of finance departments employ predictive analytics. To be able to handle these staffing and training needs, finance executives must understand their departments big data analytics competence requirements. A useful place to start is to become familiar with the five personas Tony Cosentino developed to describe the people working with business intelligence and analytics. These personas illustrate the various objectives, skills and interests that individuals bring to the discipline. Adapting his approach to big data analytics to this discussion, at the top of the list are highly skilled statisticians who do exploratory work and create purpose-built analytics and analytical models to address specific tasks. These people usually have advanced degrees in statistics and understand how to use sophisticated analytical software and data sets to their fullest. Few finance organizations need this level of capability. A second type of user includes business analysts who have indepth knowledge of the business and finance issues, know how to access and apply available data relevant to the issue, and have the ability and commitment to master software that requires training but not an advanced degree in statistics. Depending on a companys size, finance organizations will need a person or a group of people with this level of competence. A third type is the knowledge worker. This description includes executives, managers and directors who need to interact with not just consume advanced analytics. These types of users should not be expected to learn how to create or structure analytics, but they need to know how to employ analytics embedded in dashboards or applications as well as visual discovery tools, which are increasingly user-friendly. This level is where the need is broadest, so finance executives must focus most of their efforts in terms of developing these skills. Big data analytics is an important development that will challenge finance organizations to use new capabilities to improve their effectiveness and enhance their companys competitiveness. There are many ways organizations can begin to address the challenge. At least, CFOs and senior finance executives should create a steering committee to identify opportunities to apply big data analytics; identify gaps in skills, processes, data availability and software; and establish timelines and goals. Moreover, if CFOs are serious about exploiting the potential of big data analytics, they must communicate its importance to their department and demonstrate a commitment to a plan of action.

Financing Through Factoring? Dont Let Chargebacks and Deductions Affect Your Dilution Rate

FEB19 Authors: Keith Alphonso | (Formerly) Director of Business Development at Aditya Birla Minacs Jeffrey Knopman | Cofounder and Principal, Profit Solutions Group Inc., an Aditya Birla Minacs Partner

If you are financing your business by Factoring, you had better factor in the possibility of being hit by
chargebacks and deductions issued by major retailers, specialty stores and catalogues.

WHAT IS FACTORING? So what IS factoring? Well, its been around for quite some time4,000 years to be precise. Legend has it that it is the brainchild of King Hammurabi of Mesopotamia, credited with having established the worlds first metropolis, Babylon. Factoring can be defined as a financial transaction whereby a business sells its accounts receivable (i.e., invoices) to a third party (the Factor) at a discount. A typical factoring transaction is when a Factor advances funds to a Seller based on accounts receivable. The amount advanced could vary and is typically between 70 85% of the purchase price of the invoices, with the balance being paid, net of the Factor's commission and other charges, upon collection. MINIMIZE CHARGEBACKS AND DEDUCTIONS TO REDUCE FACTORING RISK All Factors manage their risk by, among other things, assessing the dilution rate of the seller of the invoices. Simply stated, the dilution rate is the loss associated with the collection of the accounts receivable. The dilution rate is comprised of chargebacks/deductions such as returns, damages, markdown allowances, compliance infractions, trade allowances, slow pay, bad debt and other negative issues. To ensure a reliable cash flow, it is therefore important that chargebacks and deductions are constantly monitored and kept at a minimum. Factors should feel confident of being able to recover their funds when they provide you, the Seller, an advance. While legitimate or authorized chargebacks can be easily taken into consideration when planning cash flow, unauthorized or erroneous chargebacks issued by retailers could be very damaging. Given that 25 to 30% of all chargebacks issued by major retailers, specialty stores and catalogues are either unauthorized or erroneous; this needs to be taken seriously. In order to survive in this tenuous economy and garner a true understanding of the modern dynamics of deductions, it is imperative to re-evaluate the internal organizational structure of the order to cash cycle. One also needs to have the same meticulous focus and attention to detail as one would with merchandising, sourcing, production, etc. It helps to be aware of some of the top compliance deduction reasons including concealed shortages, freight and routing errors, early/late deliveries, EDI violations and carton shortages. Every deduction, whether alleged or valid, has a history. This point is critical when disputing or accepting deductions. Furthermore, retailers have been known on occasion to be in error when assessing chargebacks against their suppliers. MASTER THE FUNDAMENTALS IN DEDUCTION MANAGEMENT

The end game is to reduce the draconian flow of deductions, reduce days sales outstanding and turn a reactive environment into a proactive one. Companies can and should at least pay strict attention to the basics. Just like in football, where success is based on mastering the fundamentals such as BLOCKING, TACKLING, RUNNING and CATCHING, there are fundamentals in deduction management that must be mastered as well. We have come a long way from the time of King Hammurabi. Lets do him proud by mastering the deduction management process to ensure that the factor/client relationship is greatly enhanced by both the reduction in the dilution rate and the increase in cash flow.
- See more at: http://minacs.adityabirla.com/Blogs/tabid/390/EntryId/95/Financing-Through-Factoring-Don-t-LetChargebacks-and-Deductions-Affect-Your-Dilution-Rate.aspx#sthash.npcrL63x.dpuf

Six Lessons on Chargeback Management

MAR20 Authors: Sreeja Pillai | Asst. General Manager - FAO at Aditya Birla Minacs Jeffrey Knopman | Cofounder and Principal, Profit Solutions Group Inc., an Aditya Birla Minacs Partner

WHY IS CHARGEBACK RECOVERY CRUCIAL IN TODAY'S ECONOMY? Chargebacks and deductions are short pays that a customer withholds from the total payment due to the supplier, quite often for no fault of the supplier. They are a matter of significant concern, particularly for CFO's in the consumer product industries, such as apparel, food, home furnishings, consumer electronics, pharmaceuticals, health and beauty, etc.

Chargeback Recovery: Key Points for Better Management.

Chargeback recoveries are a structured and disciplined initiative to record, track, and recover the short pays taken by the customer. The recovery process typically involves the collaboration of multiple crossfunctional teams within the supplier's corporate structure, such as customer sales, account management, accounting, logistics and production. The success ratio of converting a chargeback into a recovery requires persistent efforts and a close coordination among these teams. LESSON #1: KEEP THEM CURRENT Timing is extremely critical in disputing claims. It is imperative that disputes are issued back to the customer as quickly as possible. Also, the chances of reversing the chargeback increases dramatically. It can be as easy as responding with a simple email thanking the customer for the payment and stating on record that there is an unauthorized or erroneous deduction that you'd like to investigate and reconsider. LESSON #2: TRACK AND VALIDATE EVERY DEDUCTION Like all business transactions, there are supporting documents and audit trails for every invoice payment and deduction. Often tracking the right documents in a timely manner remains the biggest challenge, particularly when the underlying process to maintain the documents for quick retrieval is missing. As soon as a check remittance is received and posted, and a short payment appears, the chargeback team needs to research the backup documents and validate if the deduction is correct. Most customers today have placed strict time constraints on disputing a chargeback. LESSON #3: FIND WHAT'S HIDDEN Monitor the accounts receivable (AR) aging report on a regular basis. Large sums locked up in receivables can cripple the business as they remain uncollected for months and may have to be written off. As per industry estimates 25 to 30% of all chargebacks deducted by customers may be unauthorized

and erroneous, but certainly recoverable. Unless they are correctly posted and accounted for, they could portray a misleading picture of a company's financial well-being. At the same time, the impact on cash flow management can be significant when the invoices are paid short and gross margins are negatively impacted. LESSON #4: INVEST IN TECHNOLOGY Often companies fall behind the curve on business intelligence (BI) technology investments. New age workflow and document management system (DMS) tools allow smarter distribution of work and help identify bottlenecks. Reliance on paper-based processing can slow down the process, increasing the risk of missed recoveries. To manage chargebacks effectively, review the order-to-cash cycle for each sales transaction so that line-level tracking at claim and invoice level is possible leading to smoother transaction closure. A manual process can become a major bottleneck, leading to lost opportunities, lower profitability, and significant financial under-performance. Several key features of Business Intelligence tools allow companies to measure and evaluate the profitability relationship with their customers in real time as well as merchandise performance, production metrics and cash flow management. LESSON #5: KEEP AN EYE ON THE DASHBOARD Devise timely reporting and monitoring mechanisms to track progress. This will also put in a sense of urgency in processing teams to ensure that timelines are adhered to. Chargebacks could be of various types including freight and handling charges, terms of payment, short shipments, advertising and markdown allowance claims. Define appropriate reason codes and conduct regular analysis of the top 5 reasons for deductions measured in dollars and occurrence rates. LESSON #6: GET THE PRO'S IN Devise timely reporting and monitoring mechanisms to track progress. This will also put in a sense of urgency in processing teams to ensure that timelines are adhered to. Chargebacks could be of various types including freight and handling charges, terms of payment, short shipments, advertising and markdown allowance claims. Define appropriate reason codes and conduct regular analysis of the top 5 reasons for deductions measured in dollars and occurrence rates. It is not worthwhile investing one's time in learning all the tricks from personal experience. Seek the help of professionals who have done this for other companies and use the opportunity to learn from their experiences. They can help identify all the dollars locked up in chargebacks, define a process to immediately identify invalid deductions, design a process to interact with the customers to discuss these issues and help set up a robust system to recover the invalid chargebacks. The chargeback process is indeed a major headache for many CFO's and an opportunity to plug profit leakages. Many companies still manage chargebacks manually and in a broken process that is timeconsuming, inefficient and prone to errors/leakages. It is definitely worthwhile to review the current DSO (Days Sales Outstanding) and look at monies locked up in unauthorized chargebacks and deductions. There could potentially be millions of dollars that need urgent attention as they remain uncollected. Chargebacks and deductions can be detrimental to the financial performance of suppliers as they can wash away the profits! Stop the ongoing dilution and become smarter in chargeback/deduction management.
- See more at: http://minacs.adityabirla.com/Blogs/tabid/390/EntryId/166/Six-Lessons-on-ChargebackManagement.aspx#sthash.Od7YABye.dpuf

Procurement Should Make a Takeover Bid for Accounts Payable


Posted on February 6, 2013 by ieijcb@attglobal.net

Spend Matters PRO started to feature a series on the evolution of the e-invoicing and related supplier network markets, including buying trends that may emerge in 2013. One of these analyses was more subjective than others, and featured a review of why it believes the time is right for procurement to take a more serious look at making a run for accounts payable, either as a close working partner with a dotted line relationships or to take over the function entirely. Many folks in procurement have not always felt this way. Spend Matters observe that: On an historic basis, Procurement and Accounts Payable have been slightly awkward bedfellows in many companies. Theyve been loosely coupled through the both the front-end (e.g., vendor on-boarding, registration process) as well as the back-end (e.g., approvals, dispute management, discounting, payment, invoice auditing) in both online and offline worlds when it comes to various aspects of supplier engagement and management. Perhaps the next step of this power grab will be to take over responsibility for accounts receivables and credit management.

Accounts Receivable Management System (ARMS)

Features ARMS is a comprehensive application for debt collection management ARMS manages the debt collection process by sending reminders by email or SMS to credit managers and customer contacts whenever payments are due or delayed ARMS prioritizes debt collection tasks based on customer risk and credit terms Cash-flow projections and outstanding positions are available to credit managers via reports and dashboards ARMS can be easily integrated with any back-end invoices database with the help of the ARMS API (Application Programming Interface)

Big Data Analyzer


(Part of Pure Analyzer Product Suite) Digital data is being created at a phenomenal rate, and with the ever-increasing number of users who are connecting to the Internet, with smart, mobile devices, this trend will drive increasing online transactions, and the resulting data they generate. Businesses who learn how master the flow of information will have a significant competitive advantage. Big data offers this opportunity. Big data is not about spending money on bleeding edge technology. It is about solving strategic problems or creating new sources of revenue or building competitive advantage. As of 2012, limits on the size of data sets that are feasible to process in a reasonable amount of time were on the order of exabytes of data. Additionally, unstructured data makes it harder to capture, store, search, share, transfer, analysis,and visualize. Our Big Data Analyzer tool allows our clients to solve these challenges in a non-invasive manner. Our Big Data Analyzer tool has four modules:

Big data: Admin Wizard


This module allow users to define extract and transform business rules. It provides a userfriendly interface which allows users to gather data from multiple structured and unstructured data sources. Key Features:

System uses NoSQL databases so that user can define their key fields without any restriction. Data can be taken from any source such as ftp, sftp, network drive, or database. Data format can be text, MS Excel, text files, etc. Data Files can be part of a defined data fileset. One file may have multiple types of records, for example, medical claim and claim details. User can define the fields mapping, validations. Custom validations can be added by adding custom functions. Threshold for errors can be defined to accept or reject record, file or file set. Multi-language support.

Big Data Processor


Big Data Processor in conjunction with the Text Data Analyzer processes the data based on rules defined by the user. Key features of big data processor are as follows:

Engine uses the information defined in admin wizard to gather, validate and transform the data. Industry specific data validator libraries allow users to define industry specific validations such as NPI check for health industry Extensible Transform engine allows companies to extend the transform engine by using extension api. Hadoop technologies make the big data processor scalable and robust. Big Data Processor uses Text data analyzer to detect data patterns. File and record acceptance and exceptions are handled according to user-defined business rules.

Big Data Admin Dashboard


It allows the administrator to view the data processed and data exception reports, listed by data source and date. Viewing the data exception threshold and actual exceptions allows admin to escalate issues to vendor and to manage quality of the data better.

Big Data Analytics


Big Data Analytics allows end-user to find hidden data patterns and insights using canned reports, ad-hoc search and reporting capabilities. Key benefits include

Identify data clusters for targeting using 70+ machine learning categorization models. For more details, click here. Trends Analysis Advanced concept based search 360 degree view of social and corporate data, structured and non-structured.

Big Data Infographics (charts, grids, tag clouds etc.) Track User and track comments / news Ad-hoc search Reporting Document summarization Document deduplication Document clustering

Social Media Analyzer


(Part of Pure Analyzer Product Suite) The avalanche of buzz that appears every day on Twitter, Facebook, and YouTube is mindboggling! Its impossible for mere mortals to read it all. Marketing managers need a way to know what users are saying. Our technology services can provide a way to measure how online user sentiment is changing over time positive or negative. Not only can we identify who the biggest influencers are who are swaying public opinion, but we can also provide competitive intelligence. Dont fly blind when it comes to evaluating the impact of your social media campaigns. This information is vital for marketing managers who need to effectively control public perception of their clients from measuring the impact of their own social media efforts to gaining insight into the effects of their PR efforts. Key value propositions of social media analyzer is as follows:

Identify Customer segmentation Define or improve Marketing message Improve SEO Measure Campaign impact Market and product research Sentiment analysis Generate Leads Innovate Products Improve Customer support performance Gain Competitive Intelligence Protect your brand Efficient eFluencer marketing Manage crisis Manage and report on compliance and regulatory requirement adherence.

Competitive Intelligence
Do you want to know how customers feel about your brand? What do they think of your competition? We can easily gather, analyze and report on specific competitors within an

industry. Sentiment analysis can help you understand how the market perceives you and your competitors products and services. We can analyze user sentiment toward your brand compared to your competitors. Understand positive and negative sentiment trends and how it compares to the competition. Here are some of the criteria we can help you evaluate:

Compare user sentiment toward your company vs. competitors of your companys product vs. products of your competitors. Measure social media chatter by comparing share of voice. Share of voice is the total buzz, or discussion, about a company, product, or topic. Activities of your competitors by business areas such as corporate governance, financial issue, legal issue etc. Analyze the impact of these actions by competitors. Tag cloud and trends analysis over time. Find data patterns by filtering data over 20 dimensions. SWOT (Strength, weakness, opportunities and threat) report Monitoring competitors activities. We can search for discussion about your competitors hiring actions and predict other competitive moves.

Campaign analysis
To succeed in todays connected world, you need to build a community around your company, brand, and products. Over the last decade, social media monitoring has become a primary form of business intelligence, used to identify, predict, and respond to consumer behavior. Listening to what your customers, competitors, critics, and supporters are saying about you is key to getting great results from your social media campaigns. There are countless social media monitoring tools out there, offering many ways to analyze, measure, display, and create reports about your engagement efforts. Use these platforms to manage, measure, and analyze your social media marketing initiatives. Campaign tracking will allow you to compare different mediums (for example, Twitter vs Facebook) and the quality of traffic they drive. By categorizing posts into different content groups, you can analyze how different types of posts drive traffic and behavior, and even look at how visitors driven from one particular post behave. This includes looking at whether these visitors leave your site, stay and engage, how many page views they see, how much time they spend, and whether they convert into a lead or a sale. Campaign tracking can help in the calculation and optimization. If you know the time that is spent on social media efforts, and the actual sales driven by traffic through those posts, you can calculate that return on investment. We can help you leverage real-time reporting and analysis to help evaluate the effectiveness of your social media investment. We can help you measure the impact of your social media campaigns both Online and Offline. Here are examples of some of the metrics we can measure and analyze:

Share of Voice Change in Customer sentiments over time

Change in brand positioning Impact of competitors campaign Changes in brand association with time

Product Analysis
Social Media Analyzer allows users to not only examine specific products, but it provides the ability to look deeper to online discussion about individual features of each product. For example, instead of simply looking at discussions about a particular brand of mobile phone, we could focus instead on discussions about the battery life of that specific phone, or how the battery compares to another similar competing phone.

Customer Analysis
Industries like communications, financial services, and retail are discovering the power of social networks. Social media is a communication enabler. Companies looking into the power of social networks should be less concerned with how to access and parse social media data and more focused on using analytics to map the network and identify the social influencers that spread your message or generate sales for your organization. We can help to uncover key insights into customer and prospect perceptions, behavior patterns, online relationships, identities and profiles across multiple channels, and other key indicators that offer critical insight for decision making. Customer analysis can help to:

Identify efluencers and engage them in efluencer marketing. Identify efluencers lifestyle characteristics, such as their political viewpoints, preferences for entertainment, music, sports etc. Marketing managers can use this information to define their advertising strategy. Generate leads. For example, companies can increase their customer base by locating unhappy customers of their competitors to determine what deficiencies exist in the products or services of their competition.

Marketers can improve customer retention, as well as finding opportunities to cross-sell and upsell by identifying relationships between customers, measuring and segmenting customers based on social influence.

Name Perceptual Map


Perceptual maps analyze how consumers feel about your products compared to your competition. Social media sentiment analysis can help us evaluate how consumer sentiment is changing overtime, based on the opinions users convey in their online postings. Perceptual mapping is a technique allowing you to identify holes where new products can profitably be developed. Perceptual maps can help us find out how consumers rate your products compared to the products of your competitors. Perceptual maps help us compare products based on characteristics that are important to customers.

Brand Association (Trends / Impact Over Time)

Our Product can help identify who is associated with your brand over a period of time. This information allows you to not only protect your brand but also to determine the impact of your campaign compared to your competition.

Engagement module (Define communication strategy, divide tasks, message back, log communication)
There is no use of insight if you cannot take action on it. Engagement module allows you to take proactive and reactive actions needed to manage brand reputation. Its key features are as follows:

Add companys social network accounts and send messages to customers/prospects via companys social network accounts. Define business rules to send bulk messages. Business rules are used by social media analyzer to select target customers and send user-defined messages. Our product uses machine learning algorithms to improve results, in the event that they wish to send auto-generated messages, however users can always opt to approve messages before they are sent to customers. Track sent messages by date and by user. Engage Fan (a custom solution to reply back to customers automatically using machine learning algorithms) Manage workflow. User can assign the feed/comment to the right employee for appropriate action.

Alerts
User can create alerts when social media postings about specific topics reach significant numbers, or when online sentiment changes. Here are some examples of the types of alerts you can set up:

Notify about a change in online sentiment about specific topics Notify about a change in the share of voice (The percentage of all online content and conversations about your company, compared to your competitors)

Workflow Features
Workflow features allow your organization to execute your marketing strategy efficiently. Product comes with following features:

Assigning tasks, and emails including user/group management gives full control to admin. Track feed and alert assignment empowers the manager to handle exceptions. Engagement modules workflow allows user to post bulk messages fast. Reports can be saved for multi-user environment.

Ad-hoc Reports
Product offers full range of reporting options. You can create a variety of reports, including pie charts, line chart, or a combination. All of these options can be viewed in one easy to use ad-hoc report screen. Once reports are configured, they can be easily saved and reused in the future.

Concepts Search
A user searching for outdoor tennis courts in a certain geographic area may also be interested in finding tennis rackets, clothing and tennis balls, as well. Our software allows users to create a concept that has similar search terms and the ability to apply multiple concepts helps create better ad-hoc reporting and to transfer business knowledge from one employee to another.

Correlation Analysis
We can help you find relationships inside your data. You can use this feature to graph the correlation between stock prices, social media sentiments, and perhaps another external data feed, such as lunar phases, weather fluctuations, or changes in womens hemline in the fashion world. Let us know what data you want to compare and we can help model it graphically.

Why CFOs Shouldnt Ignore Big Data


Jan 9, 2014

Big data is all the rage. It has been for a couple of years now as tech giants and consulting firms have truly embraced the term and use it to persuade companies that they need to harness all the information they have at their fingerprints but dont have the wherewithal to fully process it and make sense of it all. As more companies do become capable of catching up to the technology that is available and can put resources behind the effort, the results can be transformative, according to Virginia Rometty, chief executive at IBM. In a recent column for The Economist, she predicted 2014 will be the year of the smarter enterprise, where such companies will make decisions by capturing data and applying predictive analytics, rather than just relying on past experience.

For finance chiefs who largely have had to rely on past experience to make the type of forecasts and budgeting decisions on which their business is run, this concept can certainly catch ones attention. However, its sometimes easier to do nothing when either a new concept is misunderstood, is interpreted as just another buzzword, or seems too new. James Flaws, CFO of Corning, for example, told the Wall Street Journal the high-tech conglomerate is holding back from investing in big data for its own business strategy for now. Maybe the next CFO of Corning will be much younger and more aggressive about doing this, he said. As it is, a quarter of CIOs in the U.K. by Computer Services Corp. claimed their CFO doesnt even know what big data is (although the CFOs in the survey disputed the finding, with only 3 percent admitting they are fuzzy on the term). And some CFOs are leaving the big data strategy to others in the organization; they are rarely the driving force behind such an effort, according to a study done earlier this year by the IBM Institute for Business Value. Those CFOs who consider how their company can improve their data analytics do stand to potentially improve their own departments performance as well as raise their prominence within their company. Its good to be skeptical about the sometimes overblown statements you get from vendors and technology advocates, but theres a large kernel of truth to most of the positives, says Robert Kugel, senior vice president and research director at advisory services firm Ventana Research, who will be speaking at ProformaTECH, Proformatives corporate finance technology conference, on February 13, 2014, in Las Vegas. Big Data Can Lead to Big Changes For an easy example, consider the fact that the retail industry is sitting on a massive supply of data that just keeps growing by the minute, from all the social media posts, loyalty cards, website shopping carts, browsing activities on mobile devices, and every other customer touch point that exists. Every transaction even those that dont result in a purchase give some data nugget that could be used as part of a pattern-finding mission to figure out how certain segments of customers will behave during certain times of the year and under certain conditions. But the potential of big data does not just lie with the marketing department tasked with providing the right coupon at the right moment. The finance department can take advantage of the information as well. In a recent blog post, Kugel wrote that finance teams can lean on big data analytics to improve their forecasting and give themselves alerts when possible problems occur. Accounts receivable, for instance, could set up triggers for when a customer that normally follows a particular payment pattern is behind and provide the company with an alert to look into the matter, or on a larger scale, pinpoint clients that keep missing their payments. It can be used to create more timely alerts when issues or opportunities arise,

Kugel told Proformative.com. So, rather than waiting until a month-end review happens, the company can begin to address a problem weeks ahead of when they would be doing it today. Another potential benefit of, at the very least, thinking about big data is CFOs can actually get better numbers at their disposal than they have now, which could greatly improve the finance departments ability to forecast accurately and improve their scenario planning, according to Drew Carter, a managing director in the applied analytics groups at advisory firm AlixPartners. A frequent issue that arises at companies is that no one is stepping back and looking at the business overall data strategy. The marketing department may have its own separate database of valuable customer information, for example, that no one else knows about or the company may lack the analytics expertise to do much with it. Even large companies that can afford to staff up on data analysts may not be structured to have those analysts working together, sharing information, and collaborating, so potential realizations that could lead to cost savings do get lost. Operating in a data-driven role to begin with, CFOs could in some respects move their company in the right direction by questioning whether someone or a particular department should fill in the gaps. In the short term, at least, they should wonder whether their own department should take a new approach. The CFOs perspective could be, how can I take forward-thinking analytics to drive better decision-making, Carter suggests, such as with acquisitions, real estate transactions, and the like. Ask the Right Questions Heres the part about big data that vendors tend to leave out: Just because youre sitting on a mountain of data doesnt mean its all worth something. But it is worth questioning. [The concept of] big data is very valuable, and I dont think any financial or business person ought to ignore it, says James Lin, a 2014 ProformaTECH speaker and CFO of GuideStar, which provides information on nonprofits to foundations and consultants. While finance chiefs should be paying attention, as the tools and techniques for sifting through information continue to evolve around big data, they also need to be careful in their approach. Dont conduct analysis just to do analysis youll just end up with more data. The point is not to pursue all big data but pursue more data that in general is more valuable, Lin says.

Small Data
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Whats Small Data?


While Small Data is different from Big Data, it is anchored there. Think of Small Data as a sub-set of Big Data. It is the everyday, critical life-blood data that a business depends upon. It is the familiar data that a user manipulates and stores in a wide array of business applications. This is data that data owners look to for exact answers to the questions they need to run their business. How is this different from Big Data? While the financial data stored in an accounting system could be part of a Big Data data set, a business would certainly not need to support the expense of that Big Data infrastructure to answer questions like how much cash is tied up in accounts receivable right now? Thats a Small Data question. Big Data works by crunching through massive dispersed data sets of varying quality. It provides insights in general ways. Big Data finds Patterns, Anomalies, Relationships, Correlations, Causation and Assumptions*1. Creating insights into Big Data results requires high salaried analytic experts that can extract its value. Small Data is the clean data that is well organized into the relational databases that back the business applications. Professionals utilize this data everyday. The questions they ask must be answered exactly and the analysis of the data must provide beneficial results immediately. An example would be a report that ranks a your clients by payment history (revenue & time in accounts receivable). This demonstrates the critical analysis needed instantly by a business in order to make good decisions everyday. Expense You wouldnt rent the space shuttle for your family vacation to the sea; youd try an RV. You dont need a mammoth Big Data deployment to gain incredible value from your data. Do you have 300 terabytes of data? If you do, then a Big Data solution will cost you upwards of $1.05M to install and operate for 3 years.*2 Youll also need a trained Big Data expert on staff to administer your solution. Currently salaries for these professionals are around $125K. Big Data is amazing and the results are very cool, but it is not meant for every analytic scenario. What is the Small Data Revolution?

The Revolution is about providing the self-service tools that Empower the Data Owner to find the opportunities that are hidden in their everyday, mission critical data. The Revolution is about inspiring corporate innovation. The Revolution is about removing the IT bottleneck.

We believe that if a business user can experiment with data in an intuitive way, they will find value that was previously hidden. These insights can then be shared in a social way that will

benefit them, their customers and the bottom line.

How Small Data is inspiring data owners to innovate


- See more at: http://www.atomictower.com/about-us/small-data/#sthash.SvN1xQiF.dpuf

Can CFOs really use big data for financial analytics? Some say yes Occasionally someone tries to funnel some of the hype and hope surrounding big data analytics into the drier realms of bean counters, budgeters and forecasters. But the information that the typical CFO handles on most days just doesn't seem "big" enough to merit big data. Little data is more like it. Even in the face of ready anecdotes about 10,000-cell Microsoft Excel spreadsheets, skepticism seems in order.

Yet recent chats with a prominent service provider and an industry analyst suggest that for the finance office, the truly big data will be all the information that companies collect internally during their normal business processes. By turning the lens of analytics toward workflows spiffed up with time stamps and airtight integration, CFOs can spot the places where resources leak out and opportunities for new revenue go unnoticed. Eric Simonson, managing partner for research at Dallas-based Everest Group, a consulting firm that specializes in business services, agrees that analytics tools in CFO offices are typically used for more basic purposes than the hype suggests. But he sees "significant movement in this direction" and believes it is only a matter of time until most sophisticated organizations apply them to big data. One reason for the lag, according to Simonson, is that for finance, the big data analytics opportunity is less about traditional financial and ERP systems -- which suffer from numerous limitations -- and more about processes where operations and finance intersect and generate lots of data, or can be appended with external data to generate insights. Inside big data With rare exceptions, until now the closest that big data has come to the CFO's office has been the well-publicized examples involving the enormous consumer databases of credit card vendors such as American Express, who use them to identify -- and sell data on -- buying patterns and credit worthiness, among other things. The typical finance department encounters nothing that approaches the size of those terabyte-scale databases when closing the books, preparing budgets and forecasting revenues. Simonson nonetheless sees similar fraud-detection and "risk/credit" applications eventually picking up among early adopters in corporate finance departments.

"The promise of big data and analytics for CFOs is first being seen in scrubbing financial transactions which are already cleanly captured and benefit from more advanced analysis to find oddities and patterns," Simonson wrote in an email interview. "For example, although individual payment transactions may each appear appropriate, advanced analytics can help identify areas that may represent fraud, which can then be investigated further. Similarly, credit risk can be better predicted by looking at large amounts of data, and more efficient analysis tools can help audit more transactions and even use unstructured data to identify potential outliers." There's good reason to believe the know-how will come mostly from outside. That's certainly the contention of Tom Dobis, the global lead for the business process outsourcing (BPO) practice at Hewlett-Packard Co. Dobis, based in Geneva, Switzerland, sells BPO services for finance and accounting (F&A). Like many other advocates for financial analytics, Dobis says you don't have to bring analytics expertise in-house, with all its hiring and training pressures. That's what outsourcing services like HP's are for. An outside firm that also has a strong history as a system integrator can provide the integration and workflow that ERP systems often lack, especially on the financial side, he said. But isn't this mostly a luxury of well-heeled buyers? While it is true that the few early adopters have been large companies with more money to spend in-house, outsourcing makes such projects possible for smaller companies, Dobis claims. "A lot of midmarkets don't ask for it, and they could." HP's business process management, workflow and document management engines, especially its AutoFlow tool, are the key, and they have been the focus of significant investment by the company, Dobis said. With the end-to-end, time-stamped workflows that these engines enable, companies can spot the root causes of operational glitches that cut into the bottom line -- for example, sales managers who are taking too long to approve deals, or invoices that stagnate in accounts receivable queues. One workflow that HP has designed for customers is a dispute-resolution system that can help identify valid claims and make sure that customer service resolves them quickly so the most valuable relationships remain in good standing. Dobis said some people use payment disputes as a money-saving ploy, and a good analytics-enabled workflow can help spot such abusers, shutting them off before resources are wasted on them. Collections are another early application, and price-analysis tools that HP uses internally are also available to customers of its services wing.
More on financial analytics

Read a definition of financial analytics Understand the analytical potential of XBRL Learn about an Oracle financial BI application Dobis swears this is all real, citing completed or pending projects at four customers who are using analytics for fraud detection, cash forecasting for working capital management, or payment recovery. Sixty more companies are keenly interested. And almost all of the 15 to 20 CFOs of major companies that Dobis met with recently named analyticsas their immediate priority. HP competitors like KPMG and Deloitte are "all on to the analytics stuff," too, he said.

While these early successes hint at a promising future, the old hurdles remain, according to Simonson. "The ability of finance organizations to leverage analytics varies significantly based upon their investments to date in building large data sets and developing business intelligence tools," he said. David Essex is executive editor of TechTarget's business application websites. You can reach him at dessex@techtarget.com and on Twitter @dessexTT.

For strategic CPM, finance must make itself relevant to operations

David Essex

For several years, analysts and software vendors have argued that finance has an essential role in strategic planning. But that potential is still largely theoretical, with CFOs remaining mired in the details and deadlines of financial disclosure and budgeting. Technical and cultural factors are apparently to blame. Corporate performance management (CPM) software was supposed to be the platform that could unite accounting with the operations that consume financial resources, ultimately determining profit and loss. But most CFOs fail to take advantage of such strategic CPM practices, according to the Gartnerresearch firm. That's due in large part to finance remaining in its green-eyeshade silo, its dollars and cents only now starting to mingle with the sales quotas and materials resource planning data of the people who sell and make things. Meanwhile, financial analytics, arguably the true enabling technology of all this, is only spottily understood even in the biggest organizations. Many people aren't even sure what analytics means, despite its persistent status as a buzzword. The cultural and knowledge gaps were evident at a cozy gathering of several dozen finance managers that IBM held this week at the New England Aquarium in Boston. Part of a multi-city tour, the event's very name, Creating an Analytics Culture, shows that IBM recognizes the problem. Why can't CFOs be more strategic? Before the event, SearchFinancialApplications editors sat down with the main keynote speaker, Steve Player, program director of the Beyond Budgeting Roundtable and managing partner of The Player Group, a Dallas-based consultancy. For years, Player has been trying to wean CFOs off quarterly reports and budgets and get them focused on the future by advocating rolling, or

continuous forecasts in books including 2010's Future Ready: How to Master Business Forecasting, which he co-wrote with Steve Morlidge. I had read of Player's Texas roots before meeting him, and he didn't disappoint. He's a big guy with a Texas-sized personality: outgoing, opinionated and generous with on-the-fly hospitality 1,500 miles from home. First question: Is the meaning of analytics as vague as it seems to this observer? Player, gesturing back toward the finance managers starting to gather, nodded in the affirmative. "They're unclear, too. Everybody's unclear about analytics." The persistence of old-school budgeting doesn't help, though he admitted that shifting from batch-oriented, start-stop modes of financial reporting is hard for most people. But it also often puts them at odds with sales and operations managers whose livelihoods depend on much more timely metrics. "Finance suffers increasingly from looking at lagging indicators," Player said. "We're seen as irrelevant bean counters. An operations guy is making daily decisions; he isn't waiting."
More on corporate performance management

Read a CPM software guide Understand the role of Microsoft Excel in CPM Learn about the latest CPM trends Player is fond of nautical analogies. (Later, in a small function room with high glass windows overlooking pleasure boats in Boston Harbor, he showed a cartoonish slide of an ocean tanker heading toward rocks and a lighthouse.) With their current emphasis on budgeting and financial disclosure based on past events, he said, CFOs are standing in the back of the boat reporting on the size of the wake and the ship's apparent direction. Instead, by standing in the front of the boat and looking far into the distance, they'll be able to spot hazards and offer guidance on changing course. "Everything is about moving to some early warning system," he said. To pull this off, finance must go beyond its usual forecasting of financial results -- including the quarterly guidance that most public companies give Wall Street analysts -- to better predict the drivers of those results. That's where financial analytics come in. Rather than rolling up sales forecasts into revenue projections, CFOs should try to analyze what causes a sale -- say, a sales call -- then go back further to find which marketing methods lead most often to sales calls. "I've now moved away from financial metrics to a whole bunch of physical metrics," Player said. He teaches an eight-hour forecasting course that covers the predictive logic diagrams that help to make those connections. In one sense, this view of analytics is as old as management consulting, which reaches far back into the last century. "You understand a business by understanding what's behind the figures," he continued, citing an early book by Arthur Andersen, founder of the eponymous accounting firm where Player once worked. "That's what analytics is trying to get back to." But Player agreed that technical integration between operations and finance systems is another major prerequisite. "The toughest challenge for finance is not to build a system that has to link to existing systems," he said. "Most of the data is already there. When the data is already there, somebody is monitoring it," and that means the data is probably clean enough to analyze.

In search of financial analytics experts Analytics vendors are likewise scrambling to help customers close the finance-operations gap and realize the potential of strategic CPM software. Cloud technology is improving the prognosis, Player said, by lowering barriers to entry and letting innovators in. The cloud also makes it possible to centralize much of the math-heavy expertise in outsourced services that specialize in analytics so companies don't have to hire such pricey talent in-house. Before Player's keynote, Jim Collins, IBM's financial performance management strategy executive, gave his view of the gap between old-style finance and the strategic kind -- even while pushing IBM's impressive portfolio of strategic CPM and analytics tools, notably Cognos Insight. In its own March 2010 survey of CFOs, IBM found that 46% of companies -- many of them large ones -- were still managing multi-billion-dollar budgets on spreadsheets. More recent, mid-2012 numbers from the Corporate Executive Board (CEB), found 71% admitted they sometimes or never have the ability to derive insight from data, leaving only 29% saying they could do so consistently. As an example of finance linking to operations, Collins showed how forecasts in Cognos Insight link back to the goals for a specific salesperson stored in IBM's sales compensation management tool. It definitely looked more like strategic CPM than the older, disclosure-oriented style of tactical CPM. That's how Gartner describes the divide, naming SAP, Oracle and IBM to its leaders quadrant, and giving IBM high marks for the strong analytics technology into its CPM products. The cocktail hour and post-keynote Q&A suggested the gap still holds strong, however. A finance director from a local insurance company said he only used a specialized riskmanagement tool along with Microsoft Excel; another, from a small startup, intended to stick with Intuit's QuickBooks. And people raised their hands to complain about corporate pressure to revise time-consuming budgets and close the books faster. David Essex is executive editor of TechTarget's business application websites. You can reach him at dessex@techtarget.com and on Twitter @dessexTT.

CFOs advised to exploit BI, rethink ROI to optimize IT budget


Emma Snider Published: 06 Mar 2013

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ORLANDO, Fla. -- Even though CFOs at many businesses control the purse strings of their IT organizations, they're often unsure whether their IT budget is being spent wisely. According to a study by CFO Research and AlixPartners, a consultancy based in Southfield, Mich., 57% of the 153 finance executives surveyed said their company was only fair or poor at ensuring discretionary IT projects yielded the expected financial return. In addition, 71% said they felt their company's access to information was subpar considering its investments in technology. During the conference session, "How to Get the Most out of Your IT Spending" at this week's CFO Rising East 2013, Celina Rogers, editorial director for CFO Research, said this uncertainty could put a damper on CFOs' willingness to invest in IT. "That ability to measure the performance of past projects can set the conditions for investment in the future, and without that, skepticism starts to rise up about whether these projects are really worthwhile," she said. So how can finance managers quell their doubts? Consultants from AlixPartners offered a few tips that could help CFOs both optimize their IT budget and gain confidence that IT projects will achieve their goals. Divide the IT budget into two categories and rethink ROI The survey distinguished between "keep it running IT" and "transform the business IT." Items in the first category included investments in servers and data centers, and maintenance of existing systems, while the latter was defined as discretionary IT spending, typically in new systems and technologies. While survey respondents recognized the distinction between the two categories, 66% said they didn't separate them in the budget.
More on financial management software

Discover the top five reasons to trust SaaS financial software Find out why some IT organizations are blocking adoption of cloud financials Read about one company's transition from Excel to cloud financial software Meade Monger, global co-leader for IT and applied analytics at AlixPartners, said this is a mistake. He recommended that CFOs analyze the IT budget for the two types of spending separately and strive to keep costs as low as possible on the "keeping it running" side. But what amount should a company allocate for transformative projects? Bruce Myers, managing director at AlixPartners, said it depends on technology business cases presented by business unit leaders. Ultimately, it's up to finance and IT to determine which projects to fund. Monger also offered advice for how CFOs should approach the ROI of transformative IT projects. "The ROI analysis must include a financial and a feasibility analysis," he said. "Will this new technology really work? Will the business embrace change? Making that assessment up front is important because if you just do the financial analysis and don't make sure it will execute properly, it's a waste of money." Don't solve a small problem with a big solution Large technology projects such as ERP implementations can sometimes fall prey to "scope creep." Continually expanding the goals of a project can make it difficult to determine whether it

was successful, and contributes to finance executives' uncertainty about IT investments, according to Myers. He said large projects are not only more likely to fail, but they can be too big a solution for what could be a small problem. "With a lot of smaller projects you can get 90% of the benefits with a tenth of the risk," he said. "We suggest that finance question every big ERP [project] and try to look at it in a more targeted [way]." As an example, Myers explained that one of his clients decided to undertake a large ERP project to remedy a forecastingproblem. However, two weeks in, Myers realized the problem was actually a process snag and that the organization had all the necessary data in its legacy systems. After the problem was solved, the client was able to call off the ERP project. Prioritize BI and analytics in the IT budget As for which "transform the business" IT projects should be on CFOs' radar, both Myers and Monger stressed the importance of business intelligence (BI) and analytics. "BI is critical, but what is it? Very simply, it's key information that you need to have at your fingertips to operate most successfully," Myers said. "So, what's selling? Who's buying? Is it profitable?" Myers said CFOs should start by identifying the questions they would like to have answered with the help of BI before implementing a particular tool. After the questions have been defined, he said the most challenging step is aligning the relevant data. "I promise you, 99% of the time the information is there, [but] pulling that information together into a data warehouse oftentimes requires making things consistent," he said. "But once you have all the data you need in that box, then you can easily answer all these questions." And the sooner CFOs can start investigating BI, the better. "We would suggest that if you're not starting to do that, you should," Myers said. "Your competitors are." Emma Snider is associate site editor of SearchFinancialApplications.com. Follow her on Twitter @emmajs24.

Data visualization tools bring finance data into focus for operations A picture may be worth a thousand words, but data visualization is worth much, much more, experts say. With the use of advanced data visualization tools, finance leaders are now able to translate broad and deep sets of data into easily digested, actionable intelligence for the entire company. "The big benefit for finance is that it puts the story right in front of everyone's eyes," saidElissa Fink, chief marketing officer at the Seattle-based data visualization software vendor Tableau Software. Finance departments are awash with data, she continued. "It's all over the place: in spreadsheets, in databases, in data warehouses, in reports from various systems cost systems, budgeting systems," Fink said. "But if they can really see the data rather than looking at endless rows and columns of numbers, they begin to comprehend what's going on much faster."

Tableau Software screenshot Traditional graphics like bar and pie charts have been around for years, but new technology has enabled the use of more dynamic visualization, such as dashboards that can be updated in real time and interactive charts and graphs that can be drilled into for deeper discovery. Vendors such as Tableau Software, SAS, TIBCO Spotfire and Oracle rank among leaders in the field of visual discovery, according to a 2012 Forrester Wave report. Microsoft, Actuate and QlikTech, among others, were close behind. The power of data visualization now goes beyond the adage, "a picture is worth a thousand words," said Boris Evelson, vice president and principal analyst of business intelligence at Cambridge, Mass.-based Forrester Research Inc., and co-author of the 2012 Advanced Data Visualization Platforms report. "It can now tell us things that we can't see by just looking at the numbers." Data visualization tools bring finance data to the masses For finance leaders, data visualization is a critical tool for communicating across operational departments and helping all areas of an organization quickly grasp actionable insights. After all, not everyone is fluent in the language of finance. "It creates a nice common framework of understanding between finance and other teams," Fink said. "And that has benefits for the teams, and benefits back to finance. There are fewer surprises and more predictability." What's more, this two-way communication, aided by data visualization tools, can help an organization develop metrics that support a business strategy because operational data can be

easily linked with financial data, said Leo Sadovy, the manufacturing industry market manager at SAS Institute Inc. in Cary, N.C. "If I'm going to help business decision makers, I have to understand -- though we [in finance] think in terms of dollars -- it's really dollars per something or something per dollars."
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Dashboards and visualizations: A natural fit for BI Read why visualizations are key to the success of big data projects Find out how storytelling skills factor into a data visualization initiative For example, Sadovy said, "I can start combining financial data with call center data to understand cost per call [or] cost per minute. I can start looking at production data and get yields and costs in that area. I can bring in head count data to get cost per person in different categories of the business." Then a company can drill down into one of those categories -- using any number of graphical representations, including geographical maps, heat maps, paths and scatter graphs -- to gather information that will help their leaders make decisions. Do they need to allocate resources differently? Do they need to establish a cost-cutting initiative or a productivity improvement initiative? Also, the ability to explore and play with the data allows organizations to employ "inductive reasoning," Sadovy said. He defined inductive reasoning as the ability to pull a wide range of data from many different sources and find new meaning. "You can start putting three or four things up on the screen and making correlations between them," Sadovy said. "The brain is good at that; the eyes are good at that." Data visualization tools provide real-time insight Jerry Pellizzon, long-time chief financial officer at multinational technical ceramics manufacturer Ceradyne Inc., understands the power of good data visualization tools. For 10 years -- until the company was sold to 3M in 2012 -- Pellizzon presided over the finance department during a time of exponential growth. As a result of such robust growth, Ceradyne, headquartered in Costa Mesa, Calif., needed to update its operation systems. Part of that upgrade included the installation of Tableau Software data visualization platform, beginning in 2010. "We wanted to improve the speed, consistency and quality of information that our decision makers were receiving so we could analyze problems quicker and with the proper data and the proper view of the data get to better decisions throughout the organization," Pellizzon said.

Tableau Software Worldwide GDP visualization Staying on budget for such a large manufacturing company meant keeping an eye on approximately 300 departments that all had their own budgets. "And we wanted to know right away the trends within all these departments," he said. An important component of Ceradyne's operation was the allocation and use of labor and the manufacturing overhead associated with that labor. "There's a lot of heavy equipment being used. If we're running it too long, that adds up. It destroys our profitability," Pellizzon explained. Dashboards and performance graphs created using Tableau were positioned on monitors on the production floor and in the managerial offices of the plant that could show when there might be an imminent bottleneck in the production process. With these visuals in constant sight, the company could quickly reallocate people and resources to avoid a costly slow down. "We got the right data in front of the right people," Pellizzon said. He added that Tableau enabled the company to present data quickly and intuitively, in such a way that a wide range of people with varying skills could understand what was going on and what needed to be changed. The visualizations that the team at Ceradyne saw were multidimensional and full of color, Pellizzon said. "They weren't inundated with a lot of numbers and a lot of detail. They got the bigger picture, but specific to what they needed to be looking at." With data visualization, your mind doesn't have to recalculate numbers into intelligence, he added. "Your mind, instead, can analyze the data right away. You don't have to go do extra work. Most people prefer that."

According to Pellizzon, they eliminated scrap, increased yield and boosted labor productivity, partly due to the ability to cull actionable data from otherwise murky sets of numbers. And this might be the most important benefit of all in the ever-expanding world of big data. How does a business make sense of the torrent of data that's constantly at its fingertips? And how do they use it to make their business run better? "Data sets can go very deep," said Evelson of Forrester. "If we have billions of rows of information that we want to analyze, there's no way anyone is going to look at a million-page report. It's just not going to make any sense." But if you can look at the data together, among departments, "and be interactive with it, understand patterns, and find outliers and find mistakes," Fink of Tableau said, "it creates a common language that makes digesting and acting on it so much easier."