Usage of Authentication and User Management Interfaces

MicroStrategy Financial Reporting and Analysis A white paper on financial reporting and analysis with MicroStrategy 7TM

Copyright MicroStrategy Inc. 2002. 06/19/02 4:13 PM

MicroStrategy Financial Reporting

Contents

1. ANALYTICAL DOMAIN................................................................................................................................................................1 1.1 OVERVIEW.................................................................................................................................................................................1 1.2 BUSINESS AND TECHNICAL CHALLENGES ................................................................................................................................1

2. TECHNICAL OVERVIEW OF THE MICROSTRATEGY 7 PLATFORM............................................................................2 2.1 RELATIONAL OLAP (ROLAP) APPROACH ..............................................................................................................................2 2.2 DATABASE ACCESS ...................................................................................................................................................................2 2.3 COMPONENT-BASED ARCHITECTURE .......................................................................................................................................2 2.4 CACHING ...................................................................................................................................................................................3 2.5 INTEGRATED METADATA REPOSITORY ....................................................................................................................................3 2.6 ANALYTICAL CAPABILITIES......................................................................................................................................................3 2.7 SECURITY ..................................................................................................................................................................................4

3. ANALYTICAL SOLUTION WITH MICROSTRATEGY FINANCIAL REPORTING MODULE.....................................4 3.1 OBJECTIVE.................................................................................................................................................................................4

4. KEY AREAS OF ANALYSIS .........................................................................................................................................................5 4.1 ACCOUNTS PAYABLE AND ACCOUNTS RECEIVABLE ...............................................................................................................6

4.1.1 Key Business Questions .......................................................................................................................................................6 4.1.2 Key Attributes.......................................................................................................................................................................6 4

4.2 BALANCE SHEET .......................................................................................................................................................................6 .1.3 Additional Information ........................................................................................................................................................6

4.2.1 Key Business Questions .......................................................................................................................................................6 4.2.2 Key Attributes and Metrics ..................................................................................................................................................7 4

4.3 COSTS/EXPENSES ......................................................................................................................................................................7 .2.3 Additional Information ........................................................................................................................................................7


4.4 FORECASTS................................................................................................................................................................................7 .3.3 Additional Information ........................................................................................................................................................7


4.5 INVOICED SALES .......................................................................................................................................................................8 .4.3 Additional Information ........................................................................................................................................................8


4.6 ORGANIZATION AND ACCOUNTING STRUCTURE......................................................................................................................8 .5.3 Additional Information ........................................................................................................................................................8

4.6.1 Key Business Questions .......................................................................................................................................................9 4.6.2 Key Attributes.......................................................................................................................................................................9 4

4.7 PROFIT AND LOSS STATEMENTS ...............................................................................................................................................9 .6.3 Additional Information ........................................................................................................................................................9

4.7.1 Key Business Questions .......................................................................................................................................................9 4.7.2 Key Attributes and Metrics ..................................................................................................................................................9 4.7.3 Additional Information ........................................................................................................................................................9

5. GLOSSARY OF TERMS...............................................................................................................................................................10

Copyright MicroStrategy Inc. 2001. 06/19/02 4:13 PM


1. ANALYTICAL DOMAIN

1.1 OVERVIEW Financial reporting is a critical function for any business, both externally, to satisfy public accounting requirements, and internally, to analyze its own business revenues, costs, profits, cash flow, and the like. A typical midsize or large corporation will use an accounting software package from one of the leading vendors, such as JD Edwards, SAP, or Lawson. Often, the built-in reporting functionality in some of those applications, while satisfying external reporting requirements, does not lend itself to detailed internal analysis of financial data.

1.2 BUSINESS AND TECHNICAL CHALLENGES

Difficult economic times and pressure from competitors force businesses to work especially hard to optimize productivity and maximize their return on investment (ROI). The benefits of business intelligence in helping companies to achieve these goals in hard times and in good have long been appreciated by organizations of all sizes. Perhaps the most fundamental set of data that can be analyzed via business intelligence is a company’s financial data. Without the ability to perform detailed reporting and analysis on its own financial performance, a company faces difficulty making informed business decisions that will help them to succeed. Commercial financial accounting systems, such as those provided by JD Edwards, are architected to optimize the day-to-day accounting operations of the finance and accounting departments of an organization. Although most vendors provide rudimentary reporting from their systems, it is of a limited nature that does not easily support detailed analysis. Furthermore, for employees not trained in using these systems and understanding the reports they offer, there is little business benefit to be gained from using them. Extracting meaningful financial data out of these systems requires extensive and careful manipulation of the data into a format that lends itself to online analytical processing (OLAP). Once the data is extracted, the reporting and analysis tool must be powerful enough to achieve the precision required by financial accounting standards. The system must be scalable enough to handle a corporation’s entire financial data set, which may include inputs as varied as organizational databases, sales force analysis, excel inputs and more. The system must be flexible enough to enable various types of analysis as determined by the company’s business needs. In addition, the reporting tool must be able to support report distribution, ad hoc reporting, and highly customized reports for business units located locally or around the world. MicroStrategy 7 satisfies all of these requirements.

Figure 1: Multiple data sources can feed into the MicroStrategy Financial Reporting Module.

OperationalData Store

Forecast Actuals

Excel Inputs

Sales Commissions

General Ledger

Financial Reporting

© MicroStrategy Inc. 2002. Page 1


2. TECHNICAL OVERVIEW OF THE MICROSTRATEGY 7 PLATFORM

2.1 RELATIONAL OLAP (ROLAP) APPROACH Unlike our competitors in the business intelligence marketplace, MicroStrategy is a ROLAP solution which means that we leverage the backend relational database for the bulk of query processing requested by end users, and return only result sets back to the end user desktop or browser. With this approach, there are no requirements for intermediate storage of data, for example in proprietary cubes, to facilitate end user access to information. Our ROLAP architecture ensures that there are no limits on the volume of data that is accessible for analysis.

2.2 DATABASE ACCESS MicroStrategy connects to any relational database using ODBC. This ODBC connection is used only to pass SQL that is generated by MicroStrategy’s engine to the database and to fetch results. MicroStrategy ships VLDB (Very Large Database) drivers to optimize the SQL that is generated for each database. VLDB drivers allow MicroStrategy to dynamically adapt to and capitalize on the inherent strengths of each database, while allowing administrators to tune SQL generation as needed. Any scalable system must take advantage of the strength of each component of the application; VLDB drivers ensure that the customers leverage the investment made in the chosen RDBMS platform.

2.3 COMPONENT-BASED ARCHITECTURE While the database offers a significant pool of resources, MicroStrategy provides engines to manage the query, perform analytical capabilities, and manage the data returned by the database. These engines reside on MicroStrategy’s Intelligence Server and MicroStrategy’s Web Server. Through the use of a component-based, parallel processing architecture, MicroStrategy makes full use of processor and computing resources, reallocating them based on the nature of the analytical problem at hand. For example, if the task is computationally intensive, the analytical engine required to handle computation receives more resources. A component based, parallel architecture helps boost performance in three ways. First, the tasks assigned to specific processing units can be dynamically modified. Similar to an assembly line, processing units in the Intelligence Server can be re-assigned to tasks that are in more demand at any given time. Second, a component-based architecture allows the dynamic adjustment of the number of processing units. If a particular process is becoming the bottleneck, we can dynamically assign additional processing units to this task to speed it up. Third, this architecture allows the sequence of tasks for a specific processing unit to be uniquely defined. For instance, if it is noticed that data is being manipulating in two separate ways by two different processing units, a processing unit can be defined to perform both tasks without requiring the data to be placed back on the pipeline between the tasks.



2.4 CACHING MicroStrategy provides a comprehensive, robust, multi-level caching architecture that drives throughput, optimizes query performance, and reduces end user response time. MicroStrategy retains caches on the Intelligence Server, on disk and in memory. • In-memory caches enable the user to slice and dice a result set on the fly with very fast

response times, and enables the page by, pivoting, sub-totaling and sorting features to be very quick. The Intelligence Server uses caching to improve response time for metadata object requests, lookup table element requests, and report execution requests.

• If a report cache is created or requested by an XML client, the cache will also be stored in

XML format. If another XML client requests the same data set but requires the data in a different XML format (for example, the client has a different number of elements per page for incremental fetch), the original binary cache will be hit and a new XML cache will be created.

2.5 INTEGRATED METADATA REPOSITORY MicroStrategy’s entire architecture is based upon a comprehensive object model stored in its Metadata. This Metadata is a set of relational tables in a relational database. The object model consists of schema objects that map the database schema to a multi-dimensional model of the database, and an application object model that focuses on objects pertinent to the end-user interface. The purpose of the MicroStrategy metadata is to enable a platform of interfaces such that developers can build an object once and deploy it anywhere.

2.6 ANALYTICAL CAPABILITIES Once the metadata abstraction layer has been established to allow business users access to the physical data, MicroStrategy provides a robust analytical engine to allow users to easily ask complex questions that yield deep insight. The MicroStrategy platform collaborates with the RDBMS to perform rich analytics on massive amounts of data. Businesses can obtain answers to questions that were quite literally impossible to answer using other analytical approaches - answers that drive business efficiency and deeper customer relationships. MicroStrategy enables standard database functions such as SUM, AVG, COUNT, and others as well as rankings such as Top N, Bottom M%, etc. In addition, MicroStrategy enables a library of over 150 functions including financial and statistical functions. The architecture is also built to support custom plug-ins of analytical functions that are specific or proprietary to your business. With such sophisticated analytical capabilities, it is a requirement to execute the appropriate calculations where they make the most sense and only pass data back and forth when absolutely necessary. MicroStrategy does this through its use of multi-pass SQL on the database and movement of data outside the database when necessary. The Intelligence Server and the RDBMS cooperate for collaborative analysis. Because some calculations are best done in the database, while others are only available in our analytical engine, a report requiring both types of calculations will need to be resolved using collaborative analysis. The Intelligence Server determines which types of calculations need to be performed for the report, as well as the order in which they need to be performed.



2.7 SECURITY Any enterprise business intelligence platform must offer the most sophisticated forms of security in order to be widely accepted. This security must also integrate with existing security systems in order to fit within an enterprise. MicroStrategy integrates with common standards such as NT Security and https. MicroStrategy also offers, through its security API, the ability to synchronize security profiles with other existing security architectures. Within the product, MicroStrategy enables three layers of security. • Application Security • Object Security • Data Security The combination of the multiple security layers determines what information from the data warehouse to which each user has access, as well as provide analysis options and unique interfaces based upon the user profile, presenting personalized content to each user.

3. ANALYTICAL SOLUTION WITH MICROSTRATEGY FINANCIAL REPORTING MODULE

3.1 OBJECTIVE MicroStrategy’s Financial Reporting Module*, built on the MicroStrategy 7 platform, provides the power, scalability and sophistication to analyze terabytes of financial data. The module ships with a collection of packaged reports that allow dozens of analytical variations. The Financial Reporting Module*, which queries financial data optimized for OLAP reporting and analysis, is built on top of a company’s existing financial accounting system, regardless of what it may be. From the Financial Reporting Module*, an organization can extract GAAP-compliant reports that can replace those typically produced manually by finance or accounting departments directly from the accounting system. However, an organization can also obtain additional numerous business reports that allow managers at all levels to focus on the performance of their organization, drill down to a transactional detail level, view trends, and extract intelligence not otherwise evident. The module can be easily modified and extended to meet additional reporting and data requirements. The Financial Reporting Module* is potentially useful for any business that is not able to perform satisfactory detailed analysis on the entire breadth of their financial data using the built-in reporting functionality of their existing accounting system. If a company’s finance department is burdened with manual work because the reporting functionality of their accounting system is not capable of producing the reports requested by management, the MicroStrategy Financial Reporting Module* can cut costs significantly by greatly reducing manual effort. In addition, any employee within the organization can use the MicroStrategy Financial Reporting Module*. Because of the MicroStrategy security model, employees will only have access to the data relevant to them, yet they will be able to access any of the reports they need in order to minimize costs and maximize ROI.

* Available Q2 2002



Finance

Collecti

ons

Account E

xecu

tives

Accountin

g

Busines

s Unit O

wners

CXOsExte

rnal Inve

stors

Expen

se Audito

rs

Project M

anag

ers

Genera

l Man

agers

Regional

Execu

tives

Sales M

anag

ers

Human Res

ources

Payroll

Billing

Accounts Payable and Accounts ReceivableBalance SheetCosts/ExpensesForecastsInvoiced SalesOrganization and Accounting StructureProfit and Loss

Figure 2: Sample users of reports from the MicroStrategy Financial Reporting Module.

4. KEY AREAS OF ANALYSIS

The Financial Reporting Module is designed to be modular. It provides both summary and detailed reports, broken into several categories, namely:

Accounts Payable and Accounts Receivable • • • • • • •

Balance Sheet Costs/Expenses Forecasts Invoiced Sales Organization and Accounting Structure Profit and Loss Statements

All of the above categories have associated with them a number of relevant reports. These reports are comprised of attributes and metrics that have been pre-built on the MicroStrategy 7 platform. The analytics have been designed to provide a broad and extended view of the business.

Although the pre-packaged reports are themselves extremely useful, the same data, when sliced and viewed from additional perspectives, can shed significant additional insight into a company’s financial health and performance. The fundamental attributes and metrics that comprise the reports can also be combined in any sensible variation to produce many more analytics beyond the existing packaged reports. It should be emphasized that a significant value in the Financial Reporting Module, perhaps greater than that of the packaged reports themselves, is indeed the collection of building blocks with which reports of very extended utility can be constructed. In fact, although the most valuable reports for your organization may not have been pre-built, by using the Financial Reporting Module as your foundation, you can quickly and easily extend the functionality of the application to perform any analysis you desire. The following sections provide a very elementary overview of the primary analytical categories in the Financial Reporting Module. The discussion assumes a rudimentary understanding of financial accounting and reporting. It does not discuss every pre-packaged report that exists in the



Financial Reporting Module, and does not even begin to touch upon the variations that can be constructed.

4.1 ACCOUNTS PAYABLE AND ACCOUNTS RECEIVABLE

Accounts Payable (A/P) and Receivable (A/R) reports summarize the well understood A/P and A/R accounts, broken down by invoice age ranges (e.g. 0-30 days, 31-60 days, etc…greater than 360 days). A/P can be summarized by any business organizational structure, or by vendor. By using MicroStrategy, not only can these reports be viewed, but also the analysis can extend outside of the typical financial infrastructure to identify the key personnel involved with each transaction.

4.1.1 Key Business Questions What is the aging distribution of our A/R? How much money are we owed that we have not collected?

•

• What is the aging distribution of our A/P? To which vendors do which business units owe money, and by when do they need to pay?

•

•

•

Are there any customers we have had trouble collecting A/R from? If so, which Account Executives need to be notified to assist in the collection process?

4.1.2 Key Attributes Attributes: Vendors, customers, business organizational structure.

4.1.3 Additional Information Typical consumers: Finance and collections departments, account executives.

4.2 BALANCE SHEET

The Balance Sheet, along with the Cash Flow Statement and the Income Statement, is one of the three fundamental reports of corporate accounting. GAAP standards govern the appearance and format of “official” corporate balance sheets. The Financial Reporting Module includes reports that mimic a company’s GAAP-formatted balance sheet, but that allow drilling for improved, interactive analysis. In addition, the Financial Reporting Module allows users to create their own combination of accounts to provide meaningful custom reports on a specific business process.

4.2.1 Key Business Questions What are the values of the assets of the company on a certain date? •

• • •

What are the values of the liabilities of the company on a certain date? What is the total owners’ equity of the company on a certain date? Does the balance sheet “balance”? If it doesn’t, you have serious accounting problems.



4.2.2 Key Attributes and Metrics Attributes: Account class (Asset, Liability, Equity), Account Type, Date, Corporation. •

•

4.2.3 Additional Information Typical consumers: CXOs, finance and accounting departments, business unit owners,

directors, external investors.

4.3 COSTS/EXPENSES

Controlling costs is key to any business’s profit margin. Reports in the Costs/Expenses category include expense summaries and details, measurements of most “free-spending” employees, rankings of vendors by amount spent, and analysis into the most costly expenditures. Furthermore, these costs can be traced back to specific vendors allowing corporations to negotiate company-wide deals on price.

4.3.1 Key Business Questions Which employees or business units are spending the most money on travel & expenses? •

• • •

• •

•

Which vendors did we spend the most money on in a given period? How much money did we spend on a particular vendor last year? Which field employees’ cell phone bills are out of control?

4.3.2 Key Attributes and Metrics Attributes: Employee, Vendor, Account Type, Quarter. Metrics: Amount spent, top 10%, top 25.

4.3.3 Additional Information Typical consumers: Expense auditors, finance departments, general managers, project managers, account executives, and regional executives.

4.4 FORECASTS In order to accurately make business decisions about the future of the company, executives need to forecast, as accurately as possible, all future revenues, broken down by business unit and revenue type. The Financial Reporting Module includes forecast reports that allow detailed analysis of each region or district’s expected revenues. Forecasts may be based on a variety of different measures across the organization, which are often tracked in separate systems such as statistics, plan entries in a database, or an accounts pipeline. Regardless of the source of the data, users can obtain an accurate forecast from the MicroStrategy Financial Reporting Module, and even feed that information back into their data source to track achievement of their set goals. Business decisions rest on the distribution of various types of revenue, so the reports differentiate forecasted revenue by type, e.g. Product Revenue vs. Professional Services Revenue vs. Maintenance Revenue, for example.



4.4.1 Key Business Questions How much revenue, of each type, does each region or district or business unit expect to earn in the coming quarter, month, or other time period?

•

•

•

• •

•

How has the forecast changed recently? Does one unit now predict significantly more or less revenue than they did last week? Why? What changed that led to the new estimate? Which regions forecasts’ are above and below corporate expectations?

4.4.2 Key Attributes and Metrics Attributes: Organizational structure, Time, Revenue Type. Metrics: Forecasted revenues

4.4.3 Additional Information Typical consumers: CXOs, general managers, regional executives, finance departments.

4.5 INVOICED SALES Without detailed executive insight into the sales performance of the company, very little executive direction can intelligently be given to the sales force. Invoiced Sales reports allow summarized sales data to be presented intelligently, and allow detailed sales data to be viewed, manipulated, and analyzed by all interested and authorized parties.

4.5.1 Key Business Questions What types of products are selling well? What types are selling poorly? •

• • •

• •

•

Which products account for the largest percentage of sales? Which corporations or business units are doing well, and which are struggling? Have sales changed from quarter to quarter or month to month?

4.5.2 Key Attributes and Metrics Attributes: Customer, Product Type, Product, Account Executive, Quarter Metrics: Invoiced revenue.

4.5.3 Additional Information Typical consumers: CXOs, general managers, regional executives, finance departments, account executives, sales managers.

4.6 ORGANIZATION AND ACCOUNTING STRUCTURE Even CFOs need an easily accessible and constantly updated reference to the structure of the financial accounts in which the company keeps its books. Reports like “Chart of Accounts” nicely summarize a company’s accounting structure and allow drill-down to sub-account, an excellent reference for finance departments. Organizational structure reports in this category summarize the human resources of any company or business unit within the company.



4.6.1 Key Business Questions What is our company’s official chart of accounts? What sub-accounts comprise a particular account? What accounts group to form an account type category?

•

• What is the headcount of every business unit and organizational structure in the company? •

•

•

What organizational structure does a given employee fall into?

4.6.2 Key Attributes Attributes: Account Type, Account, Sub-Account, Employee, Business Unit, organizational structure.

4.6.3 Additional Information Typical consumers: Finance departments, human resources, payroll, collections, billing.

4.7 PROFIT AND LOSS STATEMENTS The profit and loss (P&L) statement for a given organizational or business unit is perhaps the key measurement of a business unit owner’s bottom line performance. With accurate P&Ls, executives can enforce the business accountability of their management team. By comparing actual P&L results with budgeted amounts and forecasts, executives can continually gauge the progress of each business unit or geographic region against margin targets and budgets. Perhaps of even greater importance, business unit owners themselves have access to a constantly updated and accurate picture of their own bottom-line measurement gauge – precisely the same picture that the executives have access to, thus avoiding any ambiguity.

4.7.1 Key Business Questions What is the actual profit margin of each business unit and/or geographical region? How have those margins changed month-to-month over the past year?

•

•

• •

• •

•

Which business units are hitting their margin targets? Which are falling short? What are the reasons that they are not reaching their goals? Which units or regions are over budget? Which are successfully controlling costs? Have any units or regions recently strayed from their targets (budget, revenues, or margins)? Was their failure due to an anomalous month, or is there a larger trend?

4.7.2 Key Attributes and Metrics Attributes: Revenue Accounts, Expense Accounts, organizational structure, time. Metrics: Actual Revenue, Actual Expenses, Budgeted Revenue, Budgeted Expenses, Actual Margin, Target Margin.

4.7.3 Additional Information Typical consumers: Executives, business unit owners, finance department.



5. GLOSSARY OF TERMS Accounts - The different effects of a company’s business transactions are recorded and categorized such that they can be sorted and combined when financial reports are prepared. These categories in the accounting system are called Accounts. Account Type - Accounts are further classified based on the nature of the business transaction. Each of these sub-classes is referred to as an Account Type. Actual - This refers to the cost incurred or revenue generated by the company for conducting its business activities. Typically a company calculates this amount for a fiscal year. A/P - This is the abbreviated version of Accounts Payable. This refers to the amounts that a company owes to creditors for goods or services bought on credit, e.g.: salaries to employees. A/R - This is the abbreviated version of Accounts Receivable. This refers to cash and amounts owed by customers to a company for goods and services sold to them on credit, e.g.: money from software sales. Attribute - An attribute is a description of some aspect of a company’s business that is being measured. Billable - Any cost or expense incurred by a company employee or third party while performing services on behalf of the company for which they can claim reimbursement. Budget Holder - Employees at the company who are entrusted with funds to develop the company’s business. Compensation - This refers to salary, bonus and commissions that a company employee earns in return for his services to the company. Contribution - Contribution is the difference between total revenue and total cost. Contribution Margin - This is the dollar amount that the sale of goods and services contributes towards the recovery of fixed costs and profits. Costs - See Expenses. Cross Charges - This refers to the reallocation of costs between business units for the purposes of measuring business unit level profit margins, e.g.: A Mid-Atlantic consultant used on a project belonging to New York would have his costs absorbed by New York instead of Mid-Atlantic. Depreciation - All items of plant and equipment, except for land, eventually wear out or lose their usefulness and hence diminish in value. Therefore, the costs of these assets are charged off to expense over their useful lives. This process of allocating the cost of these items to expense is called Depreciation. Document Object - Document Objects are objects in MicroStrategy Web that display multiple



reports on the same page. The reports are displayed on MicroStrategy Web using customized stylesheets, which, combined with the reports, produce the HTML needed for display on the web. Expense - Expenses are outflows of assets by the company as a result of the major or central operations of their business. Filter - In MicroStrategy 7, a filter is used to identify a subset of data. This is usually pre-defined by selecting from a list of attributes and/or metrics. GAAP - This is the abbreviation for Generally Accepted Accounting Principles. These are broad rules adopted by the accounting profession as guides in measuring, recording, and reporting the financial affairs and activities of a business. Geographic Unit - See Franchise. Headcount Allocations - This refers to the company’s process of determining the number of full-time employees (FTEs) in each business unit (BU). Line Managers - See Budget Holders. Margin - See Contribution. Metric - A metric is a quantitative measure of an aspect of the company’s business. It is associated with an attribute. MTD - Month-To-Date. Object Accounts - These are further sub-divisions of Account Type. One or many Object Accounts make up an Account Type. For instance, an Account Type called Product License Revenue is made of Object Accounts product License revenue and Product License Write-off. Overheads - This refers to the BUs within the company that are pure cost centers. These BUs do not generate revenue directly. Plan - This is the expected costs and/or revenues for the company for a fiscal year. This is a forecasted amount. Plant and Equipment - Tangible, long-lived assets that are held for use in the production or sale of other assets or services are called plant and equipment. P&L - This refers to the Profit & Loss statement of the company or a business unit. Prompt - In MicroStrategy 7, a prompt is a filter except that it is not pre-defined. A prompt is presented to the user at the time of running a report. QTD - Quarter-To-Date. Report - A report consists of attributes, filters and metrics and presents analyzed data about a company’s business. Revenue - Revenues are an inflow of assets received by the company in exchange for goods or



services provided to customers as part of the major or central operations of their business. Revenues may take the form of a decrease in liabilities as well as an increase in assets. T&E - Travel and Expenses. Territory - See Franchise. Variance - In revenue calculations, variance is defined as the difference between the Actual and Plan amounts. In cost calculations, variance is defined as the difference between the Plan and Actual amounts. Worldwide Management - See Budget Holders. YTD - Year-To-Date.


Usage of Authentication and User Management Interfaces

Documents

Transcript of Usage of Authentication and User Management Interfaces