Digital Financial Reporting

It looks like there is road work ahead for the "last mile of finance". In an FSN article, "Tagetik goes head to head with Oracle and Clarity (now IBM) in the ‘Last Mile’ of Finance" the IBM acquisition of Clarity is hailed as a wake up call:

The IBM deal is a wakeup call to the market – expect to see much activity in this space over the coming year.

I am hearing terms that I have never heard before: Disclosure Management and Collaborative Disclosure Management (CDM). This seems to be a new class of software.

While business intelligence (BI) software was generally used for consuming information, this new class of software is for creating information. Enterprise Performance Management (EPM) seems to be the buzz word for consuming financial information.

As I mentioned in a blog post several months ago, Oracle Hyperion Disclosure Management and Oracle Hyperion Financial Close Management work in conjunction with other Oracle EPM applications such as Hyperion Financial Management or can be deployed directly with ERP General Ledger systems.  SAP has its offerings for reporting. IBM with their acquisition of Clarity means they are in the game.

Those names I have heard before. It seems like every day I get the name of another software product that either can be used to create financial information or consume financial information.  Here are some: Information Builders, Tagetik, Quantrix, WebFilings, Trintech and Longview Solutions.  There are likely many others.

In 2008 Gartner and Ventana Research white papers described ineffecient corporate reporting process which they predicted would change. (See Gartner's XBRL Will Enhance Corporate Disclosure and Corporate Performance Management and Ventana's Selecting the Right XBRL Solution: Addressing Compliance Requirements and Automating the External Reporting Process.) This is Ventana's description of the process:

Thus, the current close-to-file process is structurally prone to error. It poses a risk that mistakes and misstatements will occur.  Most companies deal with this potential for errors and the risks they pose with a brute-force approach, using well-paid professionals (who could be doing more productive things) to check and double-check the documents.  This might be a workable approach today, but it becomes increasingly difficult and costly as the amount of required tagging increases.

These large number of spreadsheets and word processing documents and the highly manual, time consuming and error prone process they require is the approach of today.  It is like a dirt road. The tools of the future will be more like an interstate freeway.

While external financial reporting and regulatory reporting are paving the way, the change which will occur will impact all business reporting, not just financial reporting.

XBRL is only part of the change, I guess I would call it a trend.  I am hearing the term "model based reporting" come up.  This is a new way to think about business reporting. The electronic spreadsheet was a significant improvement over the paper-based spreadsheet. These new tools will be an improvement to the electronic spreadsheet.

So get your hard hats. Road work ahead.