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How to redesign finance data with a finance information model

Mastering data for finance transformation

The core of controllership, and an entire finance organisation, is the finance data model or Finance Information Model (FIM), and establishing a well-structured FIM is an integral step in achieving finance transformation. First, we define and understand the components of a well-designed finance data model. From there, we identify common challenges in the current model and design a new FIM that can address these challenges; improve efficiency; enhance insights; and offer sound governance, compliance, accuracy, and controls.

The core of controllership, and an entire finance organisation, is finance data. Chart of accounts, finance data, managerial data, and operating data, and the structure around that data, is the foundation for an organisation's desired capabilities as part of its finance journey. This finance data, referred to here as the Finance Information Model (FIM), supports an organisation's regulatory, transactional, management, tax and financial reporting requirements if the structure of the model is well-designed and organised.

Establishing a well-structured FIM is an integral step in achieving finance transformation outcomes by providing a single source of financial truth in real-time with sufficient granularity. This model enables more accuracy, timeliness, predictability, transparency, and flexibility in financial data, all of which are the main drivers of quality in financial information— a core consideration of a new FIM model. Given the rapid transformation in finance, it is also essential to develop a model for sustainability into future technologies, such as in-memory and cloud computing, to increase the potential for finance data to drive more value across the enterprise.

Developing a better finance data model is possible, but organisations often encounter challenges when transforming their finance data model to align with the current and transformative finance environment. What are these challenges? What does a well-designed finance data model look like? How can companies design a better FIM that sustains finance data now and in the future?

To answer these questions, we need to first define and understand the components of a well-designed finance data model. From there, we can identify common challenges in the current model and design a new FIM that can address these challenges; improve efficiency; enhance insights; and offer sound governance, compliance, accuracy, and controls.

During our webinar on 20th October, we covered the above topics, with guest speakers providing lessons they learnt while recently redesigning their FIMs. During the webinar, we asked our audience polling questions, allowing us to understand how they view their FIMs and the key challenges that they have faced in making it work for their organisations. The results make for interesting reading and are referenced throughout this blog.

Define and understand the importance of a well-designed finance data model

Within the Controllership function, a “Finance Information Model (FIM)” provides the foundation on which all accounting processes and reporting are built—including financial, statutory, management, and tax reporting.

- Simon Atherton, Digital Controllership leader, Deloitte LLP
 

A FIM can be defined as the data elements required to plan, record, report, and measure performance consistently across the enterprise. In scope, it covers a broad range of systems such as transactional systems, enterprise resource planning (ERP), and analytical systems—and it ties that together through a common set of business definitions, hierarchies, and relationships.

When asked to define the maturity of their FIM, the majority of our webinar attendees felt their data model was not well defined enough to enable the creation of financial and operational reporting to a sufficient detail. This is something that we see and hear regularly from our clients and the purpose of this webinar was to highlight key considerations when looking to improve the maturing of a FIM.

Financial information quality is a core component of a well-designed data model

The question is, what defines the quality of information? There are some considerations and potential starting definitions of attributes that can help define what quality data and information may look like in a well-designed FIM.

Accuracy: data represents a true picture of performance in accordance with UK GAAP / IFRS and information is consistently classified and presented across the organisation.

Timeliness: internal requests are met with a quick turnaround and there is a rapid response time to external filings after each period ends.

Predictability: performance aligns with stated expectations, while continuous forecasting allows for updated expectations when there are changes with key drivers.

Transparency: information is simplified and standardised, making it easy to understand across the enterprise and giving management a direct line of sight to business drivers and their impact.

Flexibility: underlying information that can be easily organised in different ways to meet requests and also be reorganised based on business changes and transformation across the enterprise.

Common challenges organisations may face with the structure of their data model

Organisations often face several recurring issues caused by a FIM design that fails to meet the financial and non-financial stakeholders' needs. Some of the common challenges include a FIM that is out-of-date and no longer relevant due to acquisitions and changes to business operations; multiple technology platforms with inconsistent data definitions and rules; and manual and time-consuming processes that are designed based on past system constraints, and often fail to accommodate a myriad of new data sources, including data from information maintained outside of source systems.

Governance issues also offer many challenges to data models, including a lack of data governance structure, a failure to understand data impacts across the organisation, and reconciliation issues between finance-controlled data and reporting and operational reporting outside the jurisdiction of finance. This often leads to new Chief Data Officer roles in finance and accounting—one of the solutions to data governance emerging from transformation.

When asked what the primary area that their finance organisation needed to improve upon, most of our webinar attendees believed that increasing efficiency and automation should be the primary objective. This is important for many of our clients, who would like finance to be able to spend more time providing insight to the business and driving decision making, rather than performing time consuming and manual tasks.

How to plan and think through the redesign of your data model

The first step when thinking through a redesign of your FIM involves getting to the core of what an organisation needs to enable the finance vision, including requirements to sustain that vision in the future.

This step in the new FIM journey will require addressing some specific questions across the organisation.

Answering tough questions such as:

  • How do we want to look at the business, generate insights, and increase the quality of reporting around decisions?
  • What is the level of data required to support our desired capabilities and finance vision?
  • How do we develop in a way to facilitate sustainability into an increasingly unpredictable future?
  • How will we drive and enforce common data standards across the organisation? 
  • What will be our ERP optimisation strategy? 
  • Who are the sets of stakeholders we need to consider as part of the design process?
     

Design principles for a new FIM

Once you have thought through each of these questions, a set of design principles for a well-constructed FIM can serve as a rulebook through each stage of the redesign. Developing a set of design principles before developing a new FIM facilitates a model that adheres to these principles from the ground up. Some design principles that may assist a redesign include:

Design principle #1: Granular
Include a sufficient level of detail to make decisions and manage the business, including financial, operational, and management reporting. Granular FIMs can enhance internal processes, enable automation, and limit reconciliation.

Design principle #2: Unique
Each data element should have a single unique definition and purpose. This includes definitions with multiple uses, which the FIM should avoid mixing into a single field (e.g. cost centre representing both function and geography).

Design principle #3: Flexible
Enable a future-proof FIM with flexibility to accommodate reorganisations, acquisitions, and business changes. Maintain a more agile model by addressing current reporting and analysis needs while attempting to anticipate future requirements.

Design principle #4: Integrated
New information models should support financial, management, local statutory, and tax reporting requirements with a structure that is fully integrated across finance. Integrated FIMs are driven by a cross-functional design, which includes corporate accounting, external reporting, FP&A, business finance, local accounting, and tax accounting.

Design principle #5: Consistent
Being consistent across all regions, divisions, and subsidiaries with data maintains financial consolidation and comparative analysis. Eliminating mapping (where possible) with consistent master data across the enterprise and organisation may further maintain consistent data across all systems.

Design principle #6: Governed
Provide clear definitions, documentation, and training, and better safeguard the proper use of data and tools in the information model. To further enable a well-governed FIM, organise processes, tools, and data governance to manage additions and changes that may occur in the future.

Based on the information above, we asked our attendees how prepared their organisation was to develop a Finance Information Model aligned to the needs of their organisation. It was clear from the responses that while some had a mature FIM or were prepared to implement one, a number of organisations were struggling to gain buy-in or were in need of further guidance. Below, we provide some key considerations when developing your FIM .

Key considerations for developing a new sustainable data model

Some considerations and takeaways for developing a sustainable FIM include:

  • Build for the future: Protect your FIM redesign from old ways of thinking. Consider how your system landscape will change over time, particularly from mergers and acquisitions or reorganisations.
  • Keep the FIM clean: Determine that data elements have a single unique definition and purpose and avoid mixing multiple uses of data in a single field.
  • Meet reporting requirements: Design your FIM to support an organisation's financial, management, local statutory, and tax reporting requirements.
  • Develop your workforce: Cultivate a workforce to manage the new model by establishing roles and responsibilities, organisation structure, and clear ownership for data management practices.
  • Establish governance: Develop guidelines and principles for enforcing master data and management standards, which outline how data is created, modified, and maintained, and also includes processes and governance designed for business insights and outside decision-making.

Establishing data governance can be particularly challenging, and the responses below from our attendees show that organisations struggle across people, processes and technology to manage their data. However, by considering the principles we have covered within this blog, organisations can start to establish governance that is capable of driving business insights and facilitating decision-making.

At the end of our webinar, we asked our attendees the priority the FIM has for their organisation moving forward, particularly given the current economic climate. This produced a fairly even split between those that would increase their level of prioritisation and those that would keep it the same. It is clear from the responses that a well-structured FIM is high on the agenda of a number of our clients, and rightly so based on the discussion had on the webinar.

To dive deeper into finance data as a new Finance Information Model, listen to our webinar on demand: Mastering finance data: the digital controllership series.

Conclusions and contact information

The finance information model (FIM), supports an organisation's regulatory, transactional, management, tax and financial reporting requirements if the structure of the model is well-designed and organised. Establishing a well-structured FIM is an integral step in achieving finance transformation outcomes and for ensuring a data model that is capable of meeting current and future reporting needs. This is becoming increasingly important for a large number of organisations, who require improved efficiency and automation, business insights and governance and controls.

If you have any questions relating to the content of this blog or the webinar, then please feel free to contact one of the team below, who will be happy to assist.

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