QueBIT Blog: Five Benefits of an Integrated Financial Model

Nobody intends to create a cumbersome labyrinth of financial modeling systems, yet it happens to even the best of organizations. As the business adds new departments, software, and leadership, financial models are pasted together to meet growing needs. Each team uses data from ERP, HR, General Ledger, and other systems in order to create reports and make decisions. Unfortunately, the larger the organization grows, the more disconnected the models can become.

This disconnection leads to lost productivity, decreased accuracy, and slow decision-making. Each department operates from different assumptions and understandings about the organization’s position, leading to poor collaboration. Finance becomes unable to provide departments with timely budget updates, changes, and what-if scenarios. Analysis and decision-making becomes increasingly hampered.

Many organizations continue to limp along despite these limitations because integrating and streamlining financial models can be time-consuming. Yet, for growth-oriented and forward-thinking organizations, an integrated financial model is a critical necessity. Unifying the financial models results in a full view of the company, yielding significant competitive advantage. If you’re thinking of investing the time and resources to integrate your organization’s financial models, here are five reasons to start today.

1. Save Time

One of the major barriers to streamlining financial models is the upfront investment of time. In order to do it right, it’s critical that all stakeholders work together. This can be time-consuming, and many organizations understandably resist the investment. However, once the work is done, the savings in time quickly outstrips the time spent.

• No Rekeying of Data. Once all financial models are pulling directly from the same data sources, rekeying becomes a thing of the past.
• Rolling Forecasts. Integrated data enables rolling forecasts, making manual forecasting obsolete.
• Dashboards Replace Reports. Many teams spend dozens or hundreds of hours per quarter assembling reports to deliver to leadership teams. With integrated dashboards, reporting becomes as simple as logging in and grabbing the information you need.

2. Establish a Single Source of Truth

One unfortunate side effect of the traditional, siloed approach to finance models is that nobody can agree on the exact state of the organization. It’s tough to coordinate compensation, headcount, inventory, and sales and marketing activity when everyone’s story is different. An integrated financial model, on the other hand, provides a single source of truth so that everyone can operate from the same view of the company. A well-integrated system can:

• Link HR with financials with revenue with general ledger to provide a clear picture of head count and related expenses.
• Connect ERP with financials to offer a clear picture of real-time inventory, expenses, and revenue.
• Link General Ledger reporting for Income Statement, Balance Sheet, and Cash Flow.
• Integrate revenue forecasting with Sales Force for an accurate view of the company’s near future.

3. Be Nimble

Today’s marketplaces call for fast decision-making and the ability to adapt to rapid change. Siloed financial reporting leads to slow reporting and sluggish decision-making, meaning that organizations can end up making adjustments as much as six months behind the market. Such delays can quickly leave even the most innovative companies behind.

A streamlined financial model, on the contrary, enables timely budget updates and rolling forecasts that provide leadership with the tools to make ongoing, up-to-date decisions based on real-time market and organizational data.

4. Drill Down

Traditional reporting often requires leaders to choose between making quick decisions on partial information, or slow decisions that may miss opportunities. An integrated financial model, by contrast, provides instant drill-down capability to provide a complete, targeted view of the required information. For example, financial models can be designed to allow:

• Capital expense forecasting by project
• Revenue analysis by project and customer and product
• Detailed transaction analysis
• Product line P&Ls
• Profitability by Product

5. Make Better Decisions

Bottom line: Integrated financial models enable better, faster decision-making. The variety, timeliness, accuracy, depth, and flexibility of reporting, combined with superior analysis capability, gives leaders and managers the tools they need to move the needle.

• Full view of the company. For top-level leaders, integrated financial models provide a real-time, 30,000-foot view of the organization that is continually updated and provides accurate insights at any time.
• What-if scenario modeling. Assess risks, model opportunities, and consider the short- and long-term impact of head count, inventory, capital expenditure, and other decisions by creating and analyzing flexible what-if scenarios.
• Real-time insight. By integrating financial data with the company’s systems and modeling it across all levels, your streamlined financial model provides real-time insights for real-time decision-making.
• Targeted analysis. Drill down past the top-level view to analyze data by product line, timing, marketplace, service line, and other factors to identify top performers, high profit margins, excessive costs, and other factors that impact your company’s top-line view.
• Manage to the plan. Integrated models incorporate all levels of the plan—strategic, forecasting, and planning—so decisions can be made at all levels to adjust to current conditions and keep the company on plan at every step of the way.
• Measure and Improve. By providing insight into cost structures, timing, head count, and other factors, an integrated financial model continuously measures performance and enables constant course corrections for continual improvement.

With so many benefits, it’s easy to see why growth-oriented companies invest in aligning their financial models.