What Type of Master Data is Managed by Finance & Accounting?
Financial master data is the reference data organized in complex hierarchies that supports all financial and reporting activities across the enterprise. This includes general ledger accounts, account structures and a wide range of organizational data such as: cost centers, profit centers, business units, business groups, geographies, legal entities, assets, territories and other information used for performance analysis and business intelligence.
Key attributes of financial master data are its hierarchical structure, usually multi-dimensional, and the fact that this data is shared between teams and systems. All financial and reporting systems consume and generally produce financial master data. This includes functions such as Enterprise Resource Planning (core accounting, cash and treasury), Enterprise Performance Management (financial close and reporting, budgeting and forecasting, cost management) and Business Intelligence.
Finance & Accounting MDM Requirements
» Ability to model sophisticated hierarchies (balanced, unbalanced, ragged)
» Ability to model any objects and attributes
» Ability to define complex relationships between entities with conditional rules
» Ability to define complex validation rules |
Why is MDM a Critical Solution for Finance & Accounting Teams?
As companies manage complex systems, comply with new standards and regulations and address the need for reporting at global and local levels, a single point for the governance of all financial master data is key to their success.
Global vs local
While companies try to achieve a centralized standard for finance and accounting, maintaining the balance between central control and regional or local control is often a challenge. Companies want the flexibility to adapt financial master data to various legal entities, geographies and departments in order to meet specialized business or regulatory requirements. But typically, the need for regional or departmental specialization results in data duplication which often drives inconsistencies in the use of financial master data. For example, the same account or organization unit may be defined in multiple places and attached to different hierarchies. The disparity between global and local control can result in financial reporting inconsistencies and difficult month, quarter or year-end close processes.
Finance & Accounting MDM Requirements
» Ability to define inheritance between global and local data sets
» Ability to define access rights at attribute level for local teams
» Ability to maintain multi-dimensional hierarchies
» Ability to define approval workflow between local and global teams |
Speed of Change
As companies increase their flexibility in the face of ongoing market changes, Finance & Accounting departments must also be able to quickly adapt. For example, organizational hierarchies which may have previously remained static for quarters or even years may now be changing on timescales measured in weeks and months. A flexible MDM solution maintains consistent financial master data while supporting rapid collaborative governance processes and the modeling of proposed organizational changes. It enables faster financial reconciliation and close windows to keep pace with the company's fluid organizational changes.
Finance & Accounting MDM requirements
» Ability to manage past, present and future hierarchies concurrently
» Ability to compare and merge hierarchies when re-organizations happen
» Ability to keep track of "as of" versions |
Mergers and Acquisitions
Financial master data management becomes even more complex when companies merge or acquire others. While the financial systems may merge over time, it is necessary to manage the transition by maintaining multiple hierarchies such as account structures or organization charts.
Finance & Accounting MDM Requirements
» Ability to manage concurrent versions during transition periods
» Ability to compare and merge versions
» Ability to maintain cross-references
» Ability to import and manage data in staging areas |
Data Shared by all Financial Systems
Many financial entities are shared across multiple systems; General Ledger (GL) accounts are a good example. A single account is shared by a very large number of systems, from core accounting to reporting. While an account is a fairly simple entity, it is usually organized in many different hierarchies to support the requirements of each system. Without the right MDM solution Finance & Accounting teams will struggle to maintain those hierarchies and more importantly the mappings between structures.
Finance & Accounting MDM Requirements
» Ability to maintain different hierarchies for the same entity
» Ability to define cross-references between systems
» Ability to define data lineage with source and target systems |
Standards and Regulations
Finance & Accounting departments face increasing pressure to comply with accounting standards such as GAAP and IFRS and regulations such as Solvency II, Basel II or Sarbanes-Oxley. Effective management of financial master data enables compliance with these standards and regulations, provides the ability to maintain multiple concurrent accounting structures, facilitates enforcement of complex validation rules, allows continuous fine-grained auditing on all changes and maintains historical point-in-time views of master data.
Finance & Accounting MDM Requirements
» Ability to define fine-grained access rights
» Ability to view and query audit trail ("Who did what?")
» Ability to view record-level history
» Ability to roll-back in past "as of" versions |
Access from Inside and Outside (Auditors) of the Enterprise
Financial master data must be available to a wide range of users including: non-finance collaborators, executives and external users (i.e., auditors). With many diverse users, it is imperative that financial hierarchies are easily accessible, without significant training, to people who are not typically tasked with maintaining financial master data. Auditors are a great example of a group that requires simplified access to information. They often need "on demand" access to "as-of" versions of financial hierarchies. Eliminating the complex request process and lessening the need for data extractions makes it easier for them to gain the information they require.
Finance & Accounting MDM Requirements
» Ability to expose master data in "read-only" mode
» Ability to provide a zero training user interface for any user
» Ability to export hierarchies in various formats |
Enterprise-wide Data Governance
Finance & Accounting departments collaborate and share master data with the entire enterprise. For instance, new products introduced by Sales & Marketing will be linked to accounting structures or a new cost center will be attached to a Human Resources geographical hierarchy. Each example illustrates why the Finance & Accounting teams must be part of an enterprise-wide data governance initiative with comprehensive change management and cascading approval processes.
Finance & Accounting MDM Requirements
» Ability to configure change management and cascading approval workflow
» Ability to provide any end-user with a simple workflow user interface (UI) without training
» Ability to define fine-grained access rights
» Ability to define relationships and integrity checks between data domains |
What Solutions are Available for Financial MDM?
Companies have historically struggled to manage their financial master data across teams and systems. Generally, the solutions marketed by well-known technology brand names have been limited and only address part of the increasingly sophisticated needs of the Finance & Accounting function.
Spreadsheets
Unfortunately, spreadsheets are still the most widely used solution for managing financial master data. While flexible enough for end users, they lack critical data governance features such as: collaboration, validation controls, security or sharing. Even when coupled with an enterprise portal, the duplication and manual governance processes inherent in the use of spreadsheets inevitably cause extensive inconsistencies and errors in financial systems.
Custom Developed Solutions
Recently, many companies have invested in their own custom solutions for financial master data management, primarily because off-the-shelf software may not sufficiently address their needs. While custom development enables a company's specific requirements to be met, it usually results in a rigid and costly solution. Generally, custom solutions have difficulty managing flexible data models and business rules. They rarely include sophisticated features such as version control or workflow or offer the flexibility to grow to meet enterprise-wide data governance requirements.
Other Specialized Software Solutions
Solutions such as Oracle DRM have been available for many years. These solutions, originally developed as hierarchy management tools for reporting systems, have not evolved enough to provide a true data governance platform. Tools like DRM are usually reserved for a limited group of power users because of their technical user interface. Typically, they don't address enterprise-wide data management and lack core capabilities such as built-in workflow (a third-party Business Process Management solution is required) and a full web-based user experience. In addition, they become complex to adapt when there is a need to address other master data domains such as products or HR.
Introducing Orchestra Networks EBX5 Solution
Orchestra Networks™ EBX5 is the first Master Data Management software to provide Finance & Accounting teams with all the features they need for true data governance in one single software solution. The product offers a 100% web-based user interface and enables Finance & Accounting teams to build a single point of governance for all financial master data.
Discover The Top 5 Benefits EBX5 Delivers to Finance & Accounting Organizations |
Download our Solution Overview