FI or financial analytics – what, where, when?

What where When?

IT – consulting in most cases is associated with the construction of storage, visualization and data analysis systems, but today we will get acquainted with another GlowByte team – GlowByte FI.

The FI team builds systems for financial accounting, budgeting, planning, forecasting and cost allocation – many buzzwords, which we will explain below.
The article will discuss the importance of financial accounting systems for business, types of information systems and the benefits of their acquisition and use in a company.

My own game

So, in the world of the upcoming digitalization, everyone understands why you need to know such business indicators as: average buyer’s check, conversion, ARPU (average income per user), LTV (income per user for the entire time of the service user), cost of attracting a customer, etc. … The basis for this is a financial plan.
Homeland begins with a picture in an ABC book, and the success and profit of a company begins with a well-thought-out business plan, budgeting and its execution.
What is a budget? Why does the company need it?

To understand the need for budgeting and planning, let us give a simple life example: a 30-year-old man lives in Russia, goes to work and receives a salary; lives from paycheck to paycheck until the state, for example, adopts a new law that says about the abolition of pension savings. At such a moment, the realization comes that the retirement age is close, only some 30 – 35 years will pass, and no savings. What to do? What steps should our hero take on the way to creating pension capital?

Step one: Record all income and expenses.
Step two: After the appearance of certain statistics of income and expenses, identifying mandatory and optional spending – this is called (adult independent life) financial analysis.
Step three: Form a budget for the year. The budgeting process is based on statistics of income and expenses, laying a certain percentage for unforeseen expenses, as well as taking into account short-term financial goals on the horizon up to or just over a year.
Step four: To achieve the ultimate goal – pension capital – our hero needs to master tools such as forecasting and strategic planning. The difference between these two processes from budgeting lies in the planning horizon (the budget is usually built for a year) and certain assumptions, since not all situations in the next 5-10-15 years can be predicted. Only when making a forecast, taking into account his strategic plans (mortgage, children, travel), our hero can calculate what accumulation tools he can use in order to live comfortably.
This example from a person’s life differs from the life cycle of a company in one way – in scale.
Let’s take a look at how such processes occur in stages in a company?

Where is the logic?

At the initial stage of creating a business, almost any budget and business plan is created in Excel – this is the easiest and cheapest way. The first IS (hereinafter: IS – information system) in a company is an accounting system. Further, systems of personnel, marketing and commercial accounting (for example, CRM) may appear. Separately, all these systems are important and necessary, but in order to make a strategically correct business decision, it is necessary to see the whole picture, and for this it is necessary to collect all the available puzzles.
Historically, reporting collection started with a large number of Excel files and has disadvantages:
The process of collecting data from different source systems is laborious and error-prone;
Reporting on important business indicators may not be provided in a timely manner and “eat up” more resources than necessary (search for an actual file, the file weighs “oh my God” more than 50MB, there is no way to make corrections to the file simultaneously for several users);
Excel files as a type of reporting are not provided with a good level of security. The loss or unauthorized access to such an unprotected system threatens the business with serious consequences;
The coordination and approval of financial indicators is carried out mainly by mail, which reduces the speed and accuracy of important decisions, and also does not allow storing their history.
Most of these factors are human. And it is automation that allows you to manage this kind of risk.

Field of Dreams

The next important stage in the development of company management is the integration of various information systems into an integrated IS: the Organization Performance Management System (CPM – Corporate Performance Management), which is a complex of interrelated processes, methodologies and subsystems. CPM solutions cover all business challenges in strategy and finance.
Which CPM solution should you choose? What should you pay attention to?
The “Gartner Magic Quadrant” comes to the rescue – this is a report necessary for assessing and choosing the most suitable automated system for a company.
Gartner (Gartner) is a consulting and analytical company that specializes in IT: researching vendors that provide infrastructure IT solutions for companies.

How to read this “magic quadrant” and what does it all mean? Let’s figure it out.

By quadrant:
Leaders are leading solutions in a given market (the market is indicated in the very title of the table). A well-proven, complete solution that meets the needs of the vast majority of customers and has an understandable future development.
Niche players are not very widespread solutions in this market. As a rule, they are sharpened to solve certain or very specific (narrow in relation to this entire market) tasks.
Challengers are complete holistic solutions that are quite widespread in the market, but do not show clear trends for future development. Solutions that work well now, but it is not clear how they will interact with new components that are constantly being added to the infrastructure, and the manufacturer does not say anything specific about this.
Visionaries or Visionaries – these companies are not well represented in the market, but aggressively talk about the prospects for their development in the future. Newbies often appear with a ready-made and fast-growing product.

What you need to pay attention to when analyzing the “quadrant” and choosing an infrastructure:
The name of the quadrant – it defines the market for solutions, which is considered in this quadrant;
Release date. Given that high-tech markets are rapidly evolving and changing, quadrants over 2 years old are meaningless. Such quadrants can only be considered as representing the historical development of a given market segment;
Scale of assessment: “Maturity now” (Ability to execute) and “Perspective in the future” (Completeness of vision). Any product or solution is evaluated based on the readiness and possibility of product development in the future;
Ratings and market performance ratios: Niche Players, Challengers, Visionaries, and Leaders.
The very fact of getting into a quadrant, into any category, already suggests that the solution of this vendor deserves attention. Focus on the quadrant, but in the final choice of the purchased solution, you must also take into account other factors that correspond to the goals and capabilities of the company itself.

Super prize

What do we get in the end? The conclusion is disappointing: automation at a certain stage of the company’s development is inevitable, and this process is not easy, but the result, which will create new opportunities for the company – increased profits, reduced labor costs – are worth it all. Both the choice of infrastructure and automation in general must be approached carefully and after doing preliminary work. In the next article, we will tell you how to start the automation process and not give up, what factors you need to rely on when choosing a CPM solution. Stay tuned!

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