Common Misconceptions About Financial Master Data Management

Master data management (MDM) is a business discipline designed to consolidate scattered, disconnected, and unstructured data into a single, consistent source of truth that can be applied to business processes and decision-making across an organization.

In today’s data-dependant business environments, MDM helps protect data integrity and accuracy in several key ways:

• Reduces errors
• Improves visibility into the data ecosystem
• Standardizes data across processes, applications, and systems
• Increases data accessibility
• Automates data governance

Although MDM is critical for all master data types, the stakes are significantly higher for mismanaged financial master data, potentially resulting in financial losses, reputational damage, and regulatory penalties.

Despite the importance of financial MDM, many people outside of finance organizations don’t understand how financial MDM is different from standard MDM—or why it matters.

Let’s break down five common misconceptions about financial MDM and take a closer look at how understanding the differences between MDM and financial MDM can help improve the quality of your data.

5 Common Misconceptions About Financial Master Data Management

MDM and financial MDM are two distinct disciplines with very different functions within an organization, though the intended outcome—delivering high-quality, consistent, and trusted data—is the same.

Here, we dispel five myths and explore key differentiators that illustrate why your organization needs both.

MDM is the same as financial MDM.

When most people talk about master data management, they are referring to the processes and practices associated with managing the standard types of master data found in an organization, such as customer data, product data, and employee data.

However, financial master data isn’t like other types of master data. Financial MDM focuses on finance-specific master data, such as charts of accounts, general ledger codes, financial hierarchies, and financial reporting structures.

Financial MDM is only used by finance departments.

Although finance departments are the primary users of financial MDM, other business functions, such as operations, procurement, and sales, also rely on financial data for various business processes.

Financial MDM also ensures financial data is consistent and accurate across the entire organization, which helps ensure that stakeholders and decision-makers have access to trustworthy business intelligence and analytics.

MDM is about data quality; financial MDM is about compliance.

Both MDM and financial MDM address data quality, consistency, accuracy, and compliance with regulatory requirements; however, the disciplines emphasize different aspects of the business. Many finance applications consume elements like Products, Locations, and Employees. Enriching this master data in a finance specific platform reduces errors and increases accuracy of reporting across disparate systems. 

For example, standard master data management focuses on managing and maintaining quality and compliance for core business data related to:

• Customers
• Products
• Suppliers
• Employees
• Locations
• Company assets
• Reference data
• General financial data

Meanwhile, financial MDM targets quality and compliance specifically for: 

• Financial instrument data
• Risk management data
• Financial reporting and accounting standards
• Transaction data management

Financial MDM is only relevant for large enterprises with complex financial structures.

This is a dangerous misconception, as businesses of every size rely on accurate and accessible financial data to drive decision-making and monitor performance.

Although enterprise-level businesses do have more complex financial structures to manage, small- and medium-sized businesses benefit from having a financial MDM strategy in place that can scale with the business’s financial structure as it grows.

MDM tools can handle financial data without specific financial MDM features.

Although general-purpose MDM tools can manage various types of master data, they may lack specific features and functionalities required for managing financial master data effectively.

Financial MDM solutions often include features tailored to the unique requirements of financial data management, such as support for financial hierarchies, financial validation rules, and financial reporting capabilities which require heavy customization to manage in a general purpose MDM platform.

EPMware Takes the Guesswork Out of MDM and Financial MDM

Master data management and financial master data management work together to ensure your organization has accurate, accessible, and consistent master data across your organization—from your core business systems to your highly specialized financial technology solutions.

EPMware is designed with the features and functionality to manage and govern financial, customer, product, and supplier master data across all applications, providing your organization with a single source of actionable truth in one unified platform.

Schedule a conversation with the EPMware team to learn how EPMware can seamlessly bridge financial and standard master data management needs across your organization.