The Financial Executives Research Foundation, in partnership with Workiva, has released a research project focusing on the trends, opportunities and challenges private and public companies face in enhancing performance management.
In this video, FERF speaks with John Van Decker, Vice President Research, Gartner, Inc., about performance management, the benefits companies hope to capture and implementation challenges many organizations face. A transcript appears under the video.
FERF: How does Gartner define performance management?
John Van Decker: Financial Corporate Performance Management is a very big topic in our research at Gartner today. It consists of a number of pillars of functionality, if you will, that include financial consolidation, financial management reporting, close management reconciliations management, and journal entry.
I'm not going to go through each of them, but essentially the focus is on improving the financial close — making it more effective and more efficient, and providing better assurance that the numbers are correct. It's something that I think every organization should be evaluating, and trying to leverage these new technologies.
FERF: What are some of the benefits companies hope to capture?
Van Decker: The benefits are making finance more efficient and, ultimately to reduce the amount of time that it takes to close the books. I have companies that are my clients that take two weeks after the accounting cycle is complete to get their results out. For a quarter it could take three weeks.
What financial corporate performance management provides in many cases are standards, and more visibility into the processes so that you can manage them better. And a focus on having a more complete experience, a more effective experience.
Today, for instance, many organizations just track where they are on the close on a spreadsheet, and there's one official spreadsheet that maybe some people can access. But it doesn't, provide the approval processes, and it doesn't have the routing process.
You don't know really where the bottlenecks are until it all comes together in the spreadsheet, which could be too late. It really gives you that visibility from a close perspective. But I think it depends upon where the pain points are. For an organization that, let's say, does financial consolidation in a tool that is essentially Excel, they could probably benefit from having more of an enterprise business application.
FERF: Do companies face common implementation challenges?
Van Decker: Many times, organizations will buy the technology and not do the appropriate process work. So, again, process first, then technology. If you haven't thought about how you want to improve the close and just buy a solution, you're not going to have the thought leadership that's going to make your project effective.
FERF: Do companies typically have data quality challenges?
Van Decker: The FEI study that Gartner does year shows that data quality is definitely an issue for organizations. If you can improve the data quality, you're going to improve your reporting capability. Its garbage in, garbage out, so absolutely it will improve the data.
FERF: Can the technology enable process improvements?
Van Decker: Yes, these products can enable process improvements. Again, we’ve got to remember they’re process projects first, not technology projects. But, essentially, being able to leverage this technology gives you access to the work flow and gives you access to the approval structures and insights that you might not be getting today.
FERF: Can the technology reduce reporting costs?
Van Decker: Yes, by having reporting with numbers that are proven, having standardization and not having everyone create their own reports. And not being able to audit changes potentially. So, yes, it can definitely improve the efficiency.
FERF: Can these tools help companies enhance their controls?
Van Decker: It’s very important for a company to improve their controls, the reason being is that it improves the numbers and the accuracy. It reduces the needs for restatements because you may have missed something. When we look at controls, there's a variety of GRC applications. When we look specifically, there's some GRC functionality in financial corporate performance management, like journal entry routing, reconciliations and ensuring all your reconciliations are done during the month and showing proof that it's done. So, I think financial corporate performance management definitely enhances an organization's controls.
FERF: Are we seeing adoption more in certain industries?
Van Decker: With FCPM it really crosses industries. I would tend to say I see it in CPG companies. I see it in services organizations. I wouldn't say there's one area over another. Perhaps a bit more in the private sector versus the public sector.
FERF: How do you see the technology evolving in the next two to three years?
Van Decker: I think it's going to be exciting in that many of the vendors are bringing innovation to their products because their end users are finding new ways to use the systems. So you see more and more templates and blueprints and ways of, let's say, handling chart of account changes. You're seeing a lot of innovation within the user bases, and I think that in order for the vendors to stay on top they just can't say, ‘well, we do this.’ They need to have a platform that can expand across the environment and be used for innovation by the end users.