Getting more from an ERP investment: A financial analytics application can make a huge difference in justifying the expense of an ERP system and improving the ROI, as well as the value of information to users. (ROI of Technology).

Most businesspeople would agree that increased financial visibility is a good thing, implying that it's easier to understand a business's financial position, performance and prospects. It allows companies to monitor business conditions on an ongoing basis and respond to new opportunities and challenges in order to improve their overall performance.

Financial visibility is critical, not only to the inner workings of a company: It is also important to a company's stakeholders and the marketplace in which it operates. But if you ask how much a company should invest in financial analytics to achieve greater visibility and how much return it can expect from its investment, the answers start to get fuzzy.

Most mid-size to large businesses already have spent astonishing amounts of money on enterprise resource planning (ERP) systems with little or no understanding of what the return on investment (ROI) is or should be.

Too often, little scrutiny is given to ERP expenditures. The decision to buy and implement the technology is often based on necessity rather than calculated benefit. After going through a long and involved implementation process, businesses often find that their performance has not noticeably improved and that there is little to no increase in financial visibility for key stakeholders. So, when companies turn to an existing report writer or a bandaged-together set of spreadsheets, they often find that they have piles of data but no tangible way to make sense of it.

Other problems created by a more traditional approach to financial visibility include wasted time and a higher potential for error when gathering, inputting and cleaning up financial data across disparate systems. Also, access to the information "an be complicated and cumbersome to control and monitor. And, ensuring that this sensitive information is shared with adequate security is a top priority.

Increase ROI With a New Approach

Perhaps it's time to take a different approach -- beginning with financial analytics. By putting a greater emphasis on financial analytics, a company can use its existing ERP investment to achieve financial visibility. That leads to significant labor savings, more time for planning and analysis, better decision-making and, ultimately, a measurable increase in ROI.

Let's begin by defining "financial visibility." Financial indicates a financial content or context to the data or information. This means the data originates in a financial system, such as a general ledger found within an ERP system, or from any other system that can act as a source of financial information.

Visibility indicates that information is exposed in a way that makes it clear and understandable. Visibility is achieved by having the right financial analytic systems in place to pull data from the appropriate financial systems. It provides meaningful, timely and accurate insight into the financial health of the organization to employees, stakeholders and business leaders -- in the time frame and in the format they require.

Financial visibility, then, means having a clear and understandable view into a company's financial health. It means opening a business to objective scrutiny, allowing a business and its stakeholders -- internal and external -- to better uncover threats and opportunities. This exposure shouldn't go so far as to create an advantage to competitors; it's about achieving an appropriate level of visibility while maintaining a certain amount of integrity from a competitive standpoint.

Seven Types of Visibility Spurring ROI

When a business implements a financial analytics system, seven components of financial visibility emerge. Each carries its own measurable form of ROI.

1. Stakeholder visibility. The financial analytics system should support information needs of individuals rather than the other way around. For example, the marketing team is interested in how it performs against a budget, while the manufacturing manager is likely more interested in inventory and raw materials. The information needs of shareholders, investors and board members are different from the needs of internal stakeholders. With stakeholder visibility, information unique to a wide a range of internal and external stakeholders is possible.

ROI benefit: Information is distributed at a fraction of the cost of customizing reports manually. Communications costs typically are not considered in the financial reporting and budgeting processes, but costs associated with customizing, printing and delivering reports can be significant.

2. Personalized visibility. Providing information to stakeholders when and how they want it is known as personalized visibility. Some people want financial data on a weekly basis, while others prefer it daily or monthly. And some opt for the Web over email. The right financial analytics system can accommodate personal preferences -- and save a business time and money by automating a cumbersome manual task.

ROI benefit: Valuable information technology (IT) resources traditionally have been tied up providing extensive support to a wide community of users for financial analytics and reporting. A financial analytics system simplifies reporting to multiple users by enabling customized views of information that are automatically distributed, based on individual user preferences.

3. Controlled visibility. Businesses need to be extremely careful about how they share financial data. Having controlled visibility helps ensure that information is shared appropriately with different stakeholders. Using the right financial analytics system, businesses can predetermine what information goes to whom, based on individual roles and responsibilities.

ROI benefit: There are really two ROI scenarios here: improved communications and reduced IT support needs. A financial analytics system helps protect the integrity and security of the data with little IT involvement, and helps ensure the right information is delivered to the right individuals.

4. Active visibility. Active visibility takes businesses out of a reactive mode and puts them in charge of financial issues. A financial analytics system that enables active visibility notifies the appropriate stakeholder of changes in any kind of key financial or performance ratio, such as debt or cash position, using automated alerts and notifications.

ROI benefit: Active visibility permits faster decision-making, which results in quicker execution of revenue-generating decisions or cost-cutting decisions -- both impacting profitability.

5. Information visibility. Traditionally, information gets stuck in disparate applications and is not easily shared. That makes it difficult -- and expensive -- to exploit the rich amount of data an organization has across many different systems. When a company achieves information visibility, that all changes. Information from many systems -- data from customer interactions, for example, or human resources or the supply chain -- are shared, eliminating data redundancy and improving system efficiency.

ROI benefit: When data is available across business systems, it has more context and increased value. That translates into better data usage for more informed, cost-effective decisions.

6. Forward visibility. The ability to take historical information and use it as the basis for what's being done in the future is critical for planning. As business and competitive environments continue to change, being able to anticipate and plan for these changes in the financial forecasts can mean the difference between winning and losing.

ROI benefit: Financial planning is more detailed, resulting in greater profitability due to increased understanding of an organization's financial health. Forward visibility can benefit an organization by enabling it to use data to create "what-if" scenarios and to build accurate road maps and forecasts, based on past performance.

7. Process visibility. Process visibility is the exposure of certain key processes that are fundamental to the delivery of financial visibility in a way that makes them more transparent and easier for users to work with.

ROI benefit: The reduction of time and effort for users to access the necessary information to do their job leads to an increase in accuracy and reduction of costly errors caused by missing or limited information.

Financial analytics applications offer visibility into the financial health of a company, providing complete financial information, visible to a wide range of information consumers in a controlled and timely manner. The bottom line: Ease of access to relevant and current information leads to improved decision-making and increased ROT that takes the form of better expense control or increased revenue opportunity.

Chris Scherpenseel is President of FRx Software Corp., in Denver, Cob., a part of Microsoft Business Solutions. He can be reached at 303.741.8000 or cscher [e-mail].