Recapture the Value of Finance Analytics

By Sonia Johnson on Sep 24, 2019

Recapture the Value of Finance Analytics

Analytics spending has doubled in the last few years, while finance analytics reporting and support account for almost one third of finance function spend according to a Gartner Finance Leader Analytics poll.  But the research also found that finance data is not suited to modern decision making and managers lack the knowledge to use it correctly. A misuse of finance analytics can cost organisations as much as 1% of revenue per decision according to Gartner, which can have a dramatic business impact over time. So how do we improve and recapture the value of finance analytics?

To be an effective business partner, finance teams need to get faster in the areas that matter to the wider business that they support.  With businesses now moving at a faster pace due to increased competition, changes in consumer preferences and increased market volatility, finance teams need to keep up and ahead of these changes.  However, many organisations find it difficult to introduce the technology needed to generate forward-looking insights. Often impeded by multiple ERP systems, legacy applications and non-integrated architecture. According to Gartner research, poor data and inaccuracies result in finance teams reporting slow execution specifically in performing board level reporting, corporate level reporting, setting and adjusting yearly targets, performing business level reporting and tracking and reporting performance against plans. 

Finance teams unfortunately can waste up to 50% of their time hunting for data and identifying and correcting errors. The key is to help these teams to shift away from low-value activities and embrace a modern approach to data and analytics.  Here we explore how to turn finance teams into business partners that are decision experts while reducing the huge cost of poor operational decisions.

Position Finance Business Partners As Decision Experts

Have a think about the number of operational decisions that midlevel managers make each day across your enterprise. Decisions that determine when and by how much to discount prices, which IT vendors to select, how much and which inventory to hold, how much equipment overtime to run, or what types of marketing campaigns to use. Operational decisions are increasing in speed, volume and complexity — creating a challenge for finance, whose job it is to make sure those decisions are financially sound. Operational decisions can materially impact profitability as business managers can make these decisions in a vacuum not taking into account the organisation’s broader strategic and financial objectives.

The imperative here is to optimise decision making using analytics. If finance teams want to maximise their ability to drive financially sound operational decisions, they need to improve the financial aptitude of operational decision makers and instill more finance information and analysis into those outcomes. Redefining finance business partner teams’ roles to specialise by decision types such as a specific category of operational decisions (eg. pricing, inventory, renewals analysis) can also assist in this.

Management & Performance Reporting

The ability to turn around insightful analysis in a timely manner is key to being seen as a trusted business partner. In an environment of constant disruption, analysis must keep pace with queries that will change midstream and anticipate questions that have yet to be asked, but should be. This necessitates that business analytics platforms should enable a more flexible, collaborative approach with business partners. 

Relatively immature FP&A functions routinely struggle with answering the “why” behind the numbers. In these departments, spreadsheet-based deliverables often focus solely on accounting numbers, and lack many (or any) outside inputs and analytics, making it difficult to generate any insight.

More mature performance reporting takes a holistic approach to answering the “why” behind financial results. Key to this is the ability to capture and integrate a wide variety of data from different sources — from enterprise resource planning systems to operational systems and to the many Excel files that float around various departments.

Mature reporting processes move beyond simple “board books” toward a more comprehensive “playbook” that incorporates a variety of data, builds a narrative around it and ultimately generates actionable insights.

Shifting finance analytics from passive, standardised reporting to more engaging, relevant guidance that encourages dialogue and discussion by:

  • Improving the ability to predict outcomes and manage strategic risk through scenario analysis and forecasting
  • Better understanding the financial impact of key strategic and operational decisions
  • Providing better and faster information to key stakeholders, from investors to supervisory boards
  • Improving insight by combining financial and non-financial data
  • Building more commentary and opinion into finance analytics reports
  • Making finance analytics reports & dashboards more accessible & interactive to transactional level detail with just one click to encourage collaboration

Forecasting & Modelling

Less mature FP&A capabilities typically rely on traditional planning and budgeting tools for forecasting and modelling capabilities. These tools tend to be static and can’t cope with highly complex business environments.

Greater maturity in these areas is marked by the ability to provide faster and more predictive analytics, adjustments “on the fly,” and an emphasis on high performance through leveraging in-memory computing, the cloud and advanced analytics. 

Integrated Financial Planning

Most finance departments are just beginning on the path to maturity in integrated financial planning (IFP). Finance departments that struggle to generate business insights in a timely and accurate manner from high-level financial data can rarely support an IFP program.  

By contrast, higher levels of maturity in IFP translate into increased collaboration with other business domains — and greater business influence. For example, a mature IFP program can target specific financial-planning objectives in outside business areas and generate fresh insights for its sales team.

The Future of Tax Management

Tax teams are already required to pull together and distribute significant amounts of data.  Compliance demands by tax authorities are on the rise, in some countries even requiring that data in real-time.  Many organistions are not ready for this change and are still relying heavily on spreadsheets that are manual and fraught with inaccuracies.  Tax teams should automate the collection of data and establish a robust data management and analysis process for tax information.

Make Way For Advanced Financial Analytics

Gartner research shows that the number of finance departments deploying advanced analytics will double within the next three years. Expanding their data analytics capabilities to include predictive and prescriptive analytics to help them deliver smarter insights, from price optimisation to margin analysis to new product forecasting.  This is interesting given most finance departments aren’t even half-way on the scale of analytical maturity, meaning they aren’t beyond the basics of supporting business partner requests.  This poses potential upside for finance teams as they invest in business analytics platforms that help deliver better information and insights with more advanced and predictive modelling and analysis to guide business decisions.

CFO’s need to navigate how they can use sophisticated forward-looking analytics to enhance performance.  Such as deploying big data platforms that use machine learning to analyse massive data sets to make predictions such as how an asset on a balance sheet will behave, or combining structured and unstructured data (such as social media and web data) to identify patterns and trends and mitigate risks such as fraud and cyber breaches.

Value-add is in real-time data and real-time analytics.  It’s about how things are trending in the business right now and in generating insights so businesses can respond to changing consumer preferences without waiting for accountants to pull together historical financials.

Reaching Your Analytics Potential

Analytics and reporting will continue to play an increasingly significant role in executing many traditional finance tasks while at the same time generating greater insight. Moving to more advanced data analytics and forecasting.  While at the same time finance teams will continue to support the wider organisation as decision experts to assist in making operational decisions in support of the business strategy.

In the future finance function, inflexible and costly IT infrastructure will be replaced by scalable and innovative IT such as in-memory computing and cloud deployments. Systems and tools should encourage sharing of information to make connected data-driven decisions and introduce state-of-the-art automation to take care of the transactional components of finance.

As data and analytics specialists, Inside Info has a strong, proven track record of success working with the office of Finance to improve business transparency through better analytics and reporting. Uniting real-time data to drive short term decision making with historical data & predictive analytics to drive long term planning & forecasting. 

sonia's picture

Written by

Sonia Johnson

Sonia Johnson heads Inside Info's Marketing team, as an experienced B2B marketer, having launched and built the Qlik brand in the Australian market. Sonia has 20 years' experience working within the IT and telco industries, having worked for IBM and Vodafone, the last ten years have been focused within the business intelligence and corporate performance management sectors.

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