Silos, like the ones filled with grain at farm sites and craft breweries, are convenient for storing large quantities of a single good that remains in continual use. For finance, however, silos are problematic, leading to painful inefficiencies and unnecessary manual, repetitive tasks.
A data silo or siloed data occurs when data is stored in a single system, often controlled by a business unit or specific entity, where others (finance) have no means to access it. What might seem like a solid internal security measure has evolved into one of the biggest problems finance faces — quickly unlocking the latest data for use in a structure that lends itself to analysis and forecasting.
Finance is increasingly reliant on data management skills to execute its responsibilities, deliver valuable analysis and strategic guidance for a company. Since Finance is the most cross-functional team in a company, it needs seamless access to systems used by various departments.
The use of cloud and web-based software solutions has revolutionized data warehousing, leading to the potential for much deeper analysis and insight — if you can efficiently retrieve that data. If you're wondering what is the difference between a data lake, data warehouse and data silo, check out blog on FP&A best practices.
Unfortunately, disparate data is siloed in a given system or source of truth, and extraction and transformation can be time-consuming exercises for finance. Hindrances like data silos bottleneck finance workflows, leading to lengthier reporting and forecasting processes — costing you and decision-makers valuable time that otherwise could be spent optimizing performance. Let’s break down how you can overcome these challenges to make your life a little easier and your productivity much greater.
Depending on which stage your finance function is on the maturity curve, you might experience a situation where only some of your departments are leveraging the potential of automations through web-based software. Most companies utilize solutions such as a customer relationship management system (CRM), like Salesforce, which is helpful for sales, marketing and operations teams, and an ERP System, like Netsuite or Quickbooks, with general ledger and transactional purposes for accounting. These systems are your sources of truth for each given data set.
Customer-specific data is siloed in the CRM, separated from your transactional details in the ERP System. This is unfavorable for Finance, which requires that information in a similar structure to develop forecasts, model scenarios and create reports to inform budget owners, executives, investors and other key stakeholders.
Even if you have access to the data in your company’s systems, you still have to manually export file after file from each system, hoping they include the latest data sets. Thankfully, most modern software offers open integrations, so data can be extracted and used in other systems specific to the end-user (in this case, Finance).
Keep in mind, many finance software solutions require developer capacity to initiate and complete integrations with your systems. Pleading your case to your IT department or developers to prioritize your desire for integrating disparate data sources into your analytical tool can be a futile effort. This increases the need for finance tools that require no coding or internal development efforts to implement.
Having a deep understanding of data aggregation and manipulation required skills for Finance in the digital age. At this point, you may have earned your data architecture badge and developed a system to extract the disparate data sources for your analysis and reporting needs, but it’s by no means an efficient workflow.
According to EY’s Digital Disruption in Finance, only 22% of CFOs and finance leaders demonstrate confidence in the completeness and accuracy of data generated by their finance function without significant manual intervention. Translation, you are not alone.
As we mentioned early, direct integrations offer a means to break down data silos and to gather your disparate data from other systems, but that doesn’t solve the need to spend hours, even days, manually organizing the data to ensure your models don’t return an error code. It’s an exhaustive effort that hinders Finance’s ability to focus efforts on what actually matters — providing valuable, actionable insight that drives business decisions.
However, What is missing is a transformation process that automatically stages and structures your ERP and other system data for reporting, analysis and forecasting, without tedious manual efforts. This is where a modern and robust FP&A Platform designed for Finance’s needs comes into play.
By its very nature, Finance is the most cross-functional department in the enterprise, which is advantageous for gaining a better understanding of the underpinnings of each function; however, it also presents some drawbacks. For one, you’re required to gather information from multiple departments and sources at a moment’s notice, which can be a daunting task.
Each budget owner and department head have their own set of responsibilities and schedules, which oftentimes, doesn’t coincide with your needs. This can handcuff Finance’s ability to conduct effective analysis promptly. Instead, you’re at the mercy of your budget owners and when they decide to prioritize updating the metrics.
How many times have you sent an email or message to a budget owner requesting their metric, with no response, forcing you to continue to follow-up with them to provide the necessary data you need. It’s an antiquated process that is cumbersome, counterproductive and prone to error — I'll take things that don’t sit well with Finance for $500.
Additionally, version control nightmares are powerful enough to keep you at your desk (wherever that may be) all night. To avoid these dilemmas, and give you back valuable time in your day (or night), you should consider software solutions to automate certain tasks and consolidate your siloed data, while work in a controlled, familiar interface. With a centralized system, you can restrict user access levels, so budget owners can only update their given metrics and once entered, data is updated throughout the system.
The best way to overcome data silos in Finance is to utilize an FP&A Platform capable of connecting directly to your other systems — automatically. One of the many great features of a centralized FP&A Platform like FutureView is that data sourced from each system can be updated at any point, with the click of a button. Keep in mind, this requires direct integrations with your sources of truth, which isn’t always rapid when considering alternative solutions.
The same way your CRM is your customer data source of truth and ERP is your transactional source of truth, your FP&A Platform should be your Finance source of truth. The quality and accuracy of your analysis are at the mercy of your sourced data, and you should have access to sources of truth without manual intervention.
Imagine an environment where you can simplify reporting, create various forecasts for any number of scenarios and maintain data version control. It might sound like an unattainable Finance Utopia; however, it’s within reach, given the right tools for the job. High-impact Finance Functions require solutions tailored to their needs, the same way an electrician has the correct splicers and pliers to, well, do what electricians do. Workflow improvements like these eliminate inefficient and error-prone processes that hold you back from providing additional value.
If you’re using a combination of ERP Systems like Netsuite or Quickbooks, and Excel or other analytics tools, you’re surely limiting your ability to plan, analyze and forecast, while automating certain reporting requirements from management. All of this is possible without a lengthy implementation process or advanced data warehousing knowledge. Schedule a demo with one of our finance experts to see how we can help transform your finance function.