As any accountant knows, closing the books is synonymous with late nights, and frantic panics to meet the deadlines. And while technology should have helped automate this process, the size and complexity of modern organisations, combined with an increasingly burdensome regulatory environment, has made the task of weaving together a coherent set of financial reports increasingly difficult.

The rise and subsequent mass adoption of enterprise resource planning (ERP) systems has gone some way into improving the accountants’ lot. The integration of modules – such as those for the general ledger, accounts payable or accounts receivable, for example – that mirror business operations, has allowed organisations to position its ledger accounts as the single point of reference for financial data. But while these systems are extremely efficient at high-volume transaction processing, they are less adept at producing the necessary management reports.

As Richard Stark, director of solutions marketing at business intelligence vendor Actuate, says, the reporting from these systems has always been rudimentary, lacking sufficient detail for financial analysis, management or statutory reporting.

Consequently, there has been a proliferation of tools intended to fill this gap, particularly business intelligence systems that extracts data from transaction systems and loads it into analytical data cubes or data warehouses where the information can be further ‘sliced and diced’ as needed.

Integrated data models

This ‘dual-data model’ has worked well, providing a wide range of users with analytical tools needed to make both operational and strategic decisions that affect the performance of the organisation.

But for the specific needs of accountants at month-end, the disconnect between operational and analytical data can make reconciling ledger accounts difficult; journal entries may take time to be updated in the BI systems.

One solution is to copy information from the ‘live’ system and paste it, together with data taken from the ‘out-of-date’ business intelligence system, into a spreadsheet where it can be further manipulated. Such an approach makes it possible for companies to produce a coherent set of financial results, says Jeremy Roche, CEO of financial management software vendor Coda. But, he warns: “the basis for your intelligence is potentially flawed data.”

The separation between transactional and business intelligence systems means that results from the BI system may differ from those in the ERP system if an identical account structure is not used. For example, financial controls that are put in place to ensure reports are accurate are common in general ledger systems, says Michael Thompson, principal research analyst at Butler Group. “There is an inherent reliance on the fact that the controls are reflected in the reports produced.” However, problems arise when the companies want to use reports that are not built into the ERP system, he warns.

For companies such as investment bank, Investec, this results in spending significant time maintaining account structures in its Hyperion BI system. “These structures are independent of the [ERP] coding structure,” says Tim Stannard, financial accounting systems manager at Investec.

For other organisations, it is becoming increasingly more difficult to link together critical information that resides in applications across numerous repositories, including ERP and BI systems, as well as spreadsheets saved to the company’s server or individual user’s desktops. According to a survey conducted by analyst group Forrester Research, improving integration between applications is one of the top priorities for CIO’s in 2006.

To address these shortcomings, many business intelligence vendors are starting to offer so-called real-time financial analytical systems, allowing organisations instant access to data on their production or transactions systems, without having to wait for the data to load into the data warehouse for analysis at a later stage.

Actuate is one such vendor. The old extract, transform, load (ETL) procedure is an error prone process, says Actuate’s Stark. It has to occur at a specific point in time and also typically involves taking only summary information because it is impossible to take everything from the general ledger to another system, he says.

Other vendors, such as Business Objects, Hyperion and Cognos are following suite, offering products that allow organisations real-time access to the transactional data.

But there remains debate within the wider business intelligence community as to what constitutes real-time business intelligence and indeed whether vendors can offer organisations a way to “bring back accuracy to the accounting function” that has been lost from financial reporting, says Nick Gomersall, senior vice president, sales and marketing at financial software vendor The GL Company.

He paints a bleak picture for those involved in verifying the validity of the financial figures when taking figures from existing business intelligence systems: “I think that the auditing profession has a big problem because they cannot go from summary information to detailed transactions and it’s questionable if the figures that are coming from the general ledger are accurate.”

Time lags

There is wide-spread agreement that a move towards real-time business intelligence presents its own unique problems. Frank Buytendijk, vice president of corporate strategy at business intelligence vendor Hyperion, says that many companies are in contravention of generally accepted accounting practices by using the current ETL model to upload from transaction systems to business intelligence. “There are projects that have been killed because they have been revealed to be too insightful,” he says. And, he adds, the scenario is even worse when real-time projects are replacing spreadsheet-style ‘BI’ systems.

For many organisations, the concept of real-time financial analytics is relative to what their requirements are and new real-time financial analytical products are viewed as being complementary, rather than a replacement to current BI systems. BI used to be regarded as a ‘parallel universe’ to the operational systems, says Andy Hirst, director of worldwide financial industry marketing at Business Objects. “Now we have the notion of operational BI where customers can intertwine BI throughout their operational systems.”

One such organisation is investment bank UBS, a Business Objects customer. A recent project involved the integration of the bank’s separate systems for financial and management accounting. The new system had to serve internal clients, product and profit centre level reporting and meet certain legal requirements. Yet the system is not quite real-time – each evening nearly 170 different data sources transfers up to 30 million entries into a central data warehouse which then processes reports ready for the next business day.

For many other organisations, this lag between passing entries into the general ledger system and the subsequent load later on into the BI system later is unacceptable, especially at month-end. “During the day people are putting journals into our JD Edwards [GL] system or interfacing into it from other systems,” says Investec’s Stannard. “So we find [The GL Company’s] GL Enquiry allows us to get into the JD Edwards system and produce flash numbers, rather than wait for the full structure reporting to emerge from our business intelligence system several hours later.”

Without a move to real-time reporting, the principles inherent in the double-entry system of accounting remain at risk given the current method of working at month-end, warns The GL Company’s Gomersall. “As things stand today, financial information was more accurate 20 years ago when accountants and auditors used to audit the general ledger, because it had everything in it,” he says.

Further reading

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