The Reality of Real-Time Reporting

Delivering real-time performance and financial information to front-line managers has become a prerequisite for finance executives. If you’re still closing the books monthly and providing numbers five or 10 days later, your company will be trounced by competitors.

In the past, most companies were content to report their performance and financial information five or 10 days after they closed their books each month. Today, however, waiting that long is like managing in the dark. Minor internal problems can fester and develop into crises before anyone recognizes problems. Businesses that produce management reports quickly are acting on that information and making inroads into their competitors’ customer bases while hamstrung managers at less efficient companies wait for their numbers to arrive.

In this information-intensive business environment, shifting strategic direction and gaining a competitive advantage hinges on having the latest information about your company’s strengths and weaknesses as quickly as possible. As a result, there’s never been greater urgency to produce real-time information that can be acted on before opportunities disappear. Companies are scrambling for ways to speed up their ability to collect and disseminate critical company data to front-line managers.

One response to the demand for reporting urgency is the "virtual close," or the ability to close the books any time. "To achieve a virtual close, all business transactions from end to end, have to be continuously posted," says Richard T. Roth, managing director of Hackett Benchmarking Solutions in Hudson, Ohio. "Unfortunately, most companies aren’t organized to support rolling up the books more often than once a month."

Notable exceptions include the likes of Federal Express Corp., Dell Computer Corp. and Cisco Systems Inc., all of which have achieved virtual close status. "Cisco leverages Internet technology to close their books on one hour’s notice," says Roth. "The company’s CEO, John Chambers, reports that 40 percent of the visits to his company are by chief executive officers and chief financial officers asking how to do a virtual close."

Perhaps the greatest advantage of the virtual close is capturing information for proactive decision-making concerning strategies, plans and forecasts.

"Dell, for instance, is using the technology of the virtual close to make real-time decisions on resource allocations and forecasts about margins and growth rates of different products," says Chris Bogan, president and CEO of Best Practices LLC in Chapel Hill, N.C. "That includes not just financial data but also operational systems information."

Internet-oriented companies generally are better positioned to reduce the time it takes to close their books and report than companies without a strong e-business orientation. That’s because they tend to have rapid reporting built right into their business models, according to Bogan. But there’s more to it than that.

"Being able to produce reports at a faster pace is about developing a business model that’s taken lots of overhead and non-value processes out of the system," Bogan says. "Of course, you can still end up gathering real-time data on information that’s nonessential, so it’s important to be able to prioritize the right kinds of data, that is, information that’s most directly aligned with the company’s objectives and strategies." He adds that Federal Express, for example, focuses on what the company calls its SQI — Service Quality Indicators, which are the 12 metrics the company looks at daily.

Creating a leaner enterprise is a prerequisite for turning around important information more quickly than before. However, performance reporting at most companies gets slowed down by information that’s no longer useful for running the business but continues to be cranked out anyway.

"In the past, a company may have needed to look at interest rate trends for a particular project, or at currency fluctuations for a new product roll-out, all of which may no longer be an issue, but no one thinks about stopping these kinds of reports," says Roth. "Another impediment to improving turnaround time on reports is dealing with ad hoc reporting requests from senior managers who want to see special information. That usually comes from lack of agreement at the top level about what the company should be focusing on in terms of its key metrics."