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Blog by: Bart De Kempe
Big data analytics: deeper insights-driven financial performance
CFOs all used to rely on excel spreadsheets and past budgets in order to plan, budget and forecast. Answering questions such as: will customers pay on time; have we got too much stock; will production costs increase?
Today, CFOs face challenges that no spreadsheet can overcome. In a fast-paced, global and heavily competitive market place, they need to make more decisions, faster. A warm winter can break a clothing retailer’s profits. An increase in unemployment rates in one country can significantly impact the profits of a company in another country. CFOs need to anticipate changing market trends in order to guarantee profitability. For that reason, they require deeper insights into financial performance than ever. Analytics can offer real competitive advantage in this regard by transforming a company’s planning, budgeting, forecasting, reporting and analysis processes into more dynamic, efficient and connected experiences. The excel spreadsheet has become obsolete.
Gut feeling vs. predictive analytics
And yet IBM’s most recent CFO study showed that 52% of CFOs still use spreadsheets to forecast future billings. 14% even base their financial planning on gut feeling. It is time for a sweeping change. Apart from being vulnerable to errors and inaccuracies such as broken formulas, cut-and-paste errors and unstable macros, the major disadvantage of spreadsheets lies in the fact that it they can take 80% of a CFO’s time to juggle them. Time that could be better spent analyzing complex yet accurate business data to predict and shape future business success.
So how can analytics aid the CFO? Predictive analytics tools can help today’s finance professional anticipate and predict an enterprise’s
financial future based on real-time data from a variety of sources, such as internal databases, employment rates, weather forecasts and competitive analyses. Meanwhile, adding collaboration and deep, automated financial analysis to strategic planning and corporate budget development enables organizations to adapt quicker to change with more frequent, rolling forecasts.
In addition, analytics lets organizations examine profitability in order find the most viable products, customers and sales channels. With powerful what-if scenario modeling, they can evaluate strategies, test assumptions and compare current performance with historical actuals and external benchmarks. End result? Forward-looking financial analysis helps guide sales, marketing and supply chain functions to optimally deploy resources towards the most profitable opportunities.
The CFO’s holy grail!