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Financial benchmarking helped by CPM, XBRL

Companies can benchmark financial results against those of competitors by integrating external data into corporate performance management systems. XBRL will help the cause -- eventually.

Competitive context is critical for financial data.

A company's revenues and costs have new meaning when stacked up against its competitors' numbers. So for years, organizations have benchmarked performance by manually comparing financial results with those of competitors to get a sense of where they stand in their industry. At Conshohocken, Penn.-based medical technology maker Viasys Healthcare Inc., the finance department does this by reviewing competitors' public statements for key metrics and building spreadsheets, explained Mathew Gualtieri, assistant controller.

"It's offline. You pick your hot spots and key indicators, you plop those into a spreadsheet and you do a competitive analysis," Gualtieri said. "It can't be incorporated into every [financial] close; you just pick your key points to track quarter to quarter."

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That's set to change. Ultimately, Viasys plans to automate the benchmarking process by upgrading its corporate performance management (CPM) system from Norwalk, Conn.-based Cartesis Inc. The Cartesis 10 CPM suite, released in April, includes integration with the U.S. Securities and Exchange Commission (SEC)'s Electronic Data Gathering Analysis and Retrieval (EDGAR) Online database of public companies' disclosure documents. That enables companies such as Viasys to pull competitors' financial information directly into a Cartesis CPM system for automated competitive analysis. The prospect is enticing because it will save time and enable regular, detailed, competitive comparisons, Gualtieri said. Rather than looking at a few key areas, the finance department will use the CPM system to compare more granular metrics -- such as debt-to-equity ratio -- across the organization, he said. That will help the company benchmark performance against that of competitors and could affect business decisions.

It's a logical evolution for performance management systems, said Craig Schiff, president and CEO of New York-based BPM Partners, a professional services firm. Very few companies are actually doing formal competitive benchmarking now, however. Most organizations are still analyzing performance relative to past years or plans and haven't yet attempted to automate a benchmarking process with CPM. They should, Schiff said.

"Companies definitely need to get their heads out of the sand and not be so internally focused," Schiff said. "You need to see how your industry is doing and how you stack up."

In fact, most CPM systems could conceivably be set up to automate the benchmarking process, he said. But the partnership between Cartesis and EDGAR Online is definitely a benefit, he added, because it streamlines the process of integrating the competitive data into the CPM system.

XBRL and how it may help

The new Cartesis 10 suite also includes the ability to both publish and consume financial information formatted as "eXtensible Business Reporting Language" (XBRL). Part of the XML family, XBRL is a kind of data-tagging technology that's specifically designed for communicating business and financial data. It enables organizations to share machine-readable financial information regardless of the form or format, which will help the benchmarking process -- eventually.

Financial reporting in XBRL for public companies is still voluntary in the U.S., according to the SEC's Web site. That's in part because the SEC's EDGAR database can't yet utilize the "extra capabilities" of XBRL, according to an SEC press release. However, the commission recently announced new investments in upgrading EDGAR and other systems to handle XBRL reports. Only about two dozen public companies have signed on to be beta testers, according to the SEC, so it's probably not realistic for companies to rely on XBRL reports for competitive benchmarking just yet.

XBRL is, however, poised to help companies with more than just financial reporting and benchmarking, according to Robert D. Kugel, Chartered Financial Analyst (CFA) and senior vice president and research director with San Mateo, Calif.-based Ventana Research.

"Ventana Research expects large corporations will find [XBRL] useful for tracking a range of potential acquisition targets, competitive intelligence, performance benchmarking and other uses. Yet XBRL can (and we think likely will) be used for a variety of shared data. Since the tags are extensible, companies or industry groups may develop their own tags to process Web-based forms and handle data interchange between corporations," Kugel wrote in a recent research note, Spreadsheets Enter the 21st Century (Part Two).

That said, XBRL is still in its infancy, as are the tools and skills that companies will need to adopt the standard, Kugel said in a later interview.

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