Gartner defines “financial data management” as “a set of processes and policies — usually assisted by specialized software — that enable an organization to consolidate its financial information, maintain compliance with accounting rules and laws, and produce detailed financial reports. Financial data management maintains a logic-driven data structure (such as a chart of accounts) to provide different snapshots of financial data.”
Broken down into more simple terms: financial data management (FDM) provides stakeholders access to a single source of financial truth that is continuously updated and accurate (nothing stale, missing, or incorrect — and all compliant). This paradigm results in greater accuracy, real-time insights, and more actionable outcomes.
The need for financial data management solutions in this digital world is obvious: the volumes and forms of financial data are growing so exponentially and unwieldy that rigid ERP systems can’t keep up by themselves. In other words, ERPs can’t handle the demands of today’s finance operation alone. Managing today’s finance operations with yesteryear’s approach doesn’t work — there is just too much data, too many disparate, siloed applications, and too much complexity boggling finance teams down.
And that’s why financial data management is now a hot topic. So, how does it work?
Centralize your financial data into one single source of truth
Financial data management consolidates data from your existing financial systems to centralize into one single source of truth. FDMs have pre-built APIs that pinpoint and pull data from specific financial accounting endpoints, drastically reducing finance reliance on engineering teams.
Turn your financial data into a transaction story you can trust
Connected financial data serve as the foundation for better insights, faster results, and more actionable outcomes. But to connect financial data, you must normalize your various data models.
FDMs enable that by providing a consistent graph data model which allows separate data sets to be combined and normalized. The benefits of normalization are immeasurable when it comes to making sense of data extracted from different financial systems.
Think of “normalization” as each financial system speaking a unique “data language”: French, German, Chinese. A financial data management solution is fluent in all of these languages, and can adapt to learn more. Each financial system tells a different part of the story of a transaction – from invoicing to payment – so FDMs can piece together the entire story of your transaction without missing any parts.
A graph data model creates and tracks the entire journey of a financial transaction. To properly tell the story of a financial transaction, CFOs need to understand the financial data and the underlying business events. A graph data model tells the whole story of a financial transaction without any gaps.
According to Gartner, by 2025, data stories will be the most widespread way of consuming analytics. Augmented analytics techniques will automatically generate 75% of those stories. But, for your data to tell you a trusted story, it all needs to speak the same language – that’s where FDM’s normalization capabilities shine.
Powerful financial accounting rule engine and reporting
Every FDM solution has an embedded financial accounting rule engine in which you can apply accounting policies in pre-built templates to generate transaction-level journal entries. Solutions must have the capability of decomposing transaction scenarios into a series of journal entries and provide rules at the event level. In addition, FDM solutions must have the capability of re-ordering the rules dynamically, depending on the transaction scenario.
Ultimately, a FDMs are designed to enable timely and accurate reporting. Summarized journal entries can be posted to your ERP on a daily basis. Your resulting cleaned financial data is accessible to your ERP, BI tool, and data warehouse.
Proof points for next-generation financial data management
More companies are realizing that a next-generation financial data management solution makes all the difference in the digital world.
The live event ticket platform company SeatGeek recently selected a financial data management solution because it was the only one with a revenue subledger supported with a layer of business logic and intelligence. This offered the company the ability to track the entire journey of a transaction. The ability to capture transaction data with a graph data model that continuously monitored the various business events associated with the transaction itself was a game changer to supplement the rigid relational data models of ERP systems.
Canva, an online visual communication and collaboration tool company, also chose a next-generation FDM. The company needed easy access to a single source of truth for revenue data with pre-built integrations with Apple, Google, and payment providers. With a custom API integration with Canva’s internal billing system, the team can proactively address problems before month-end at any time, any day.
Next-generation financial data management solutions turn data into a strategic resource by eliminating data silos and unifying information from all areas of a company’s business activities. Next-generation FDMs enable economies of scale in a digital world. They meet the challenge of today’s scaling data volume and variety and manage it with veracity. The future of financial data management is here — now.