4 Major Financial Visibility Challenges and How to Overcome Them
Blog Credit: Scott Beaver, January 16, 2023 (4 Major Financial Visibility Challenges and How to Overcome Them | NetSuite)
Every business needs to know how much cash it has available, how much it owes to suppliers, and how much it’s due from customers. Keeping track of these details is the bare minimum, however. As companies evolve past cash-basis accounting, they need to maintain more detailed financial records — especially if they want to secure a loan, raise venture capital, or go public.
As important as detailed recordkeeping is, however, it’s only the first step. Just having data doesn’t give business leaders the insights they need to improve performance, identify opportunities, and strategize for future growth. That requires the kind of financial visibility that static reports don’t provide.
Obstacles to Financial Visibility
Despite collecting massive amounts of data, companies can struggle to achieve financial visibility for several reasons, including:
Fragmented data. Data is often stored in many different places. Most financial data will be in the accounting system, but some details may be managed in Excel. Sales data will be in the CRM, inventory data in another system. Project tracking details may be stored on individual laptops. Assembling data from these sources can be tedious. And even if systems are integrated, only some of the data may be shared. Exporting records, converting them to a standard format, and normalizing structure and naming conventions is extremely difficult and time-consuming, even for experts. By the time data is pulled together and normalized, it’s often out of date, making it difficult to provide timely, actionable insights.
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Data errors. Having bad data is worse than having no data. Inaccuracies result in flawed analysis, mistaken conclusions, and bad decisions. While errors most often occur during data collection or entry, they can also be caused by decay — the natural tendency of certain types of information to become out of date. Incomplete or inconsistent data, where information exists for some records but not others, is also a concern because it can lead to invalid conclusions.
Insufficient resources. Today’s accounting teams are overworked and understaffed. With a tight labor market and declining interest in studying accounting, finding qualified people to fill open positions is challenging. And when people are available, they tend to be snapped up quickly, even if they lack some of the skills a job requires. Or, a new hire may have analytical skills, but not enough industry experience to contribute quickly. So even if high-quality data is available, companies may not be able to take advantage of it.
Ineffective analytical tools. Of all the obstacles to financial visibility, not having effective tools should be the easiest to overcome, yet it can be maddeningly difficult. There are two possible reasons a company may encounter this obstacle. Using the wrong tools is the most common. While almost all accounting systems can generate financial statements, they don’t always provide flexible reporting. They may include a few standard reports that are difficult to modify. Or they may not offer custom reporting. Both issues are common with entry-level software. These limitations mean companies resort to spreadsheets for financial analysis. Applications like Microsoft Excel are extremely useful, but they lack important capabilities, like advanced visualizations, and only work with static data. This limits their usefulness for detailed analysis.
Complex business intelligence suites are at the opposite end of the spectrum. While BI tools offer powerful analytics features, they’re difficult to use without specialized training. These systems were intended for large companies with staff dedicated to producing reports for use throughout the business. The time and expense incurred to acquire, configure, and use these tools make them a nonstarter for midsize firms.
Improve Financial Visibility with NetSuite
NetSuite improves financial visibility with real-time data and embedded business intelligence tools that allow you to analyze performance in greater detail. A unified data model eliminates fragmentation by storing financial, operational, and statistical data in a centralized database, improving accuracy by standardizing data formats and minimizing duplicate data entry. Accuracy is further improved by automating data capture and other core accounting processes. Automation also increases productivity, giving accounting staff more time to focus on financial performance while reducing the need for additional headcount.
NetSuite’s powerful reporting and analytics capabilities help you make informed decisions that lead to better results. Track KPIs in real time with role-based dashboards. Easy-to-configure dashboards keep team members focused on the objectives that matter most. Gain new insights by creating multidimensional reports combining financial, operational, and other data, such as stats on lease expenses based on each department’s headcount or how much square footage they occupy. Hundreds of standard and industry-specific reports can be customized to track unique business performance metrics.