Automating work creates more controlling work

Increasing volume of data empowers controllers to steer the organization in new directions

Far gone are the days when controllers only reported on profit and loss (P&L) levels and compared actuals to budgets. We all master the elements that make up these amounts. We hopefully have access to quantities and prices by P&L line and can report on volume and price variances. This not only provides insights into sales levels but also has a significant impact on cost elements as more detailed information is available at this level.

For instance, if more volume is sold, production volumes should follow suit, and controllers can analyze why one cost center is following this trend while another is not. Further analysis is then needed to explain this evolution by cost center or by machinery. If certain inefficiencies are the root cause of this negative evolution, measures can be taken.

Mix differences, such as an increase in sales of products that demand more production volume, can influence differences between budget and actual results. Although this will have a positive impact on sold volumes, it will have a negative impact on production variances due to mix differences.

Next to differences on the P&L line, controllers should also explain differences between different reporting formats. Specific P&L items can be posted differently if reported under Belgian GAAP, IFRS, or internal management P&Ls.

Multiple apps create data that needs consolidation

Once there was an idea to manage all processes (finance, purchasing, logistics, warehousing…) by a big ‘moloch ERP’ where everything was linked to a central database or datawarehouse. This idea was never fully realized. Instead, the trend has shifted towards the application industry that provides best of breed applications for almost every possible transaction. All functional departments adopt these applications because they create added value for their specific needs.

As more specialized applications are adopted across different functional departments, the amount of data that needs to be reconciled increases.

But more confusion potentially arises. When using multiple applications, discrepancies can arise between the sales volume reported by sales representatives and the "realized sales" booked by Finance. This discrepancy must be explained. Differences can be caused not only by timing differences between sold and realized (the moment a sale is shipped or booked depending on the INCO terms), but also by delivery to the end customer or passing through a decentralized warehouse.

There is valuable data available in MES (manufacturing execution systems) that can help explain why differences exist between standard and actual costs in Cost of Goods Sold.

Managing movements between different stock levels is also crucial for controlling stock levels. In stocks, a lot of cash is absorbed that should be kept in control by frequently capturing specific data. The introduction of drones to check stocks overnight is a nice example of how IOT applications can enhance insights.

Business controllers can be the linking pin between the business and IT

The examples mentioned above are just a few of many, highlighting the importance of having individuals with sufficient knowledge of the various aspects of this game. You need financial insights to understand the composition of financial statements. 

But controllers should also understand where the data comes from and how it is defined in different systems. They should have knowledge of the different processes to determine where specific information should be gathered to control each step of the process.

Controllers can then serve as a "semantic layer" in this playing field, meaning the layer where all business sense and functional understanding are linked to the technical fields in databases. This allows functional colleagues to comprehend the database structure and translate their requirements into a technical setup, a position unlikely to be replaced by even the most advanced AI systems in the next few decades.

Additionally, controllers should have strong communication skills to align colleagues from business, IT, and finance in running the business, explaining periodic results, and exploring new data and data sources for new projects.

As knowledge increases, more questions arise, driving the desire to steer your company and operations even better. and succeed. This is the human tendency to always improve and win the race.

Controllers, again, should take the lead in this evolution, think proactively with the business and make relevant business cases for improvements. In this field, elaborate decisions should be made, as many opportunities are available, and only the most relevant should be pursued.

Thriving in the age of data

Conclusion: 

Forward-thinking companies take the initiative to become data-driven, giving them a competitive edge in the market. A lot of interesting data is easier to access and to explore. All of this will create added value if well managed.

Controllers have the opportunity to become the linking pin in their organizations and take the lead in these new explorations. Their job will become more interesting. By embracing automation to take recurring tasks out of their daily activities, they can focus on more interesting analytical work, helping their organizations thrive in the age of data.