The role of Finance is changing. In an ever more disrupted world, the traditional Board Financials pack has become a redundant report - too high-level to really provide useful intel about performance, spend anomalies, and other fiscal deviations, and tied to budget data that is often out of date the day it was set.
As is commonly observed, budget data is already out of date from the first day of the plan.
It’s an inescapable fact that without dynamic budgeting and forecasting processes, you can’t provide actionable insights from data. If you don’t have a good data infrastructure that incorporates planning processes, how insightful is having just a good visualisation layer?
So, how can a dashboard provide actionable insights that allow the organisation to understand not just what has happened, but why? And then offer crucial guidance to what actions you can take? (Typically provided in the form of variance analysis).
You need to consider if a variance to plan is a permanent and valid difference - or just a timing difference.
To assist with this consideration, your dashboard should not only hold monthly results, it should also include:
1. Year to date
2. Full-year forecast
3. ‘Accumulated variance to date’
These three drivers provide a great way of focusing on whether you need to act. And they’ll also enable you to understand if a monthly performance will cause an impact from the whole year perspective.
This example shows how to deliver actionable insights by linking driver data and finance data.
Case: A Profit & Loss report for February for an Aged Care service provider shows they have significant variance in salary costs for one of their care services facility.
Why is this?
To uncover the answer, we first need access to the business drivers in the facility’s time recording system and financial data from the finance system.
1. The typical working shift and penalty rate patterns at this facility
2. The number of hours expected to be delivered for care
3. The actual hours and financial salary cost to deliver services
With this information added to the mix, you can now see the impact of each variable on the overall financial outcome. You can report on the time expended from the timesheet system, the average cost from finance General Ledger, the mix of shift types (timesheet data) for both actual and budgeted values.
Each added driver breaks down and highlights the actual underlying reasons for the P&L salary variance that we see in a typical report.
This level of actionable insight may seem unavailable to you at the moment. But the good news is that the best modern cloud planning applications such as Workday Adaptive Planning have made a huge difference by enabling SMB companies to benefit from tools which used to only be available to the biggest companies.