HOW FUND MANAGERS CAN USE DYNAMIC FINANCIAL DATA TO IMPROVE THEIR MONTHLY REPORTS

Fund managers are accustomed to dealing with complex financial data when analyzing potential investments. However, keeping track of the monthly financial situation in portfolio companies is a tough task. Reconciliation processes often require dozens of manpower hours, which can delay reporting for weeks, each and every month.

Delayed financial reporting has a cascading effect in that companies cannot accurately budget or project future revenues. Fund managers therefore often have to rely on approximated numbers when analyzing the status of their portfolio companies.

Thanks to improvements in technology, fund managers can now use dynamic data to eliminate the hurdles inherent in monthly reporting processes. Here are three benefits to integrating dynamic data in these workflows.

Faster Monthly Closes

Monthly closes are the most challenging financial process companies face. Collecting the financial statements of subsidiaries and rolling them into a single statement takes time. Typically, subsidiary companies and departments submit approximate data ahead of time so that the parent company can start the process early.

However, approximations add another step to the process. All these data have to be reconciled and verified for accuracy. Given the disparate data sources these numbers come from, it’s safe to say this task is anything but easy.

Most companies use Excel sheets instead of an FP&A solution, and this leads to employees manually copy-pasting data and using clunky VLookups to transfer them. Automating the consolidation process is the best way to eliminate potential errors.

Automated processes can also conduct intercompany eliminations, thereby removing the need for manual calculations and errors. As a result, employees spend more time performing value-add tasks, and fund managers can rely on their numbers with greater confidence.

Reporting also becomes a breeze thanks to monthly managerial report templates that use pre-populated data. All of these benefits result in faster monthly closes that lead to better financial projection.

Real-Time Analytics

Fund managers rely on a wide variety of reports to make decisions. P&L, balance sheets, and cash flow reports are all critical. However, each of these reports relies on monthly close reports and other periodical financial data that change over time.

They’re also tough to create and update, simply because of the large number of data sources they rely on. Building these reports with real-time data helps fund managers receive an accurate picture of their investments. Thanks to advanced integration capabilities, reporting platforms can plug into any source of data and seamlessly combine all of them onto a single platform for manual review.

Automating data collection and reporting allows employees to drill into the data they’re receiving and identify patterns within them. For instance, a department within a portfolio company might be spending more money than needed against its cost-cutting objective.

By spending time analyzing the cause of this overspend, fund managers can make better decisions instead of defaulting to curtailing spend at all times. Managers can also drill deeper into financial data and examine the impact of pricing changes and upcoming events.

Real-time data collection and analysis make it simpler to analyze important metrics like capex and COGS, which helps managers make better capital allocation decisions. Seasonal swings in sales and revenues become easier to analyze and predict.

Fund managers can therefore set realistic goals for their portfolio companies and enforce them intelligently should they choose. By gaining insight into data such as actuals versus budget, incentivizing and rectifying company behaviour becomes simpler.

Transparent Audit Trails

Financial data are subject to intense regulatory scrutiny. As a result, financial departments need to track changes at the most granular level. When entering data manually into a spreadsheet, this task becomes close to impossible.

Different companies and departments report their numbers in different formats and from varied sources. The result is that numbers in a spreadsheet are changed by various users and change tracking is almost impossible. Even worse, different versions of the file might exist, since there are so many hands changing its data.

An automated platform that supports real-time data changes can eliminate these problems and give fund managers a single source of truth to rely on. Today’s better software platforms now integrate with Excel, and this means that employees can run file comparisons to quickly identify the sources of errors between versions and their root causes. Thus, establishing cell-level data history is simple, and fund managers can gain greater confidence in their numbers.

Managers can even run deep analyses from within Excel, which eliminates the need to learn new software or install new workflows. The result is that audit reporting and error analysis become simple.

Better Reporting, Better Decisions

Fund managers have access to various data points about their portfolio companies these days. However, analyzing these data and using them to arrive at decisions is a tough task. Real-time data backed by dynamic data analysis can help managers make better decisions and react to changing trends faster.

As a result, improving portfolio performance is easier, thanks to greater insight into the numbers that drive company performance.