Share this post:
Over the past few years, finance departments have evolved to real value-adding powerhouses, driving strategic planning and implementation. To spur this development, it is essential that finance gains more and more insights, not only into their own organization, but also in the broader sector, the market and into trends that are likely to shape the future business environment. One key means to this end is the implementation of planning analytics – having lots of data at your disposal can never hurt, but it’s only with the right analytics that you can really harness that data to your benefit.
Think ahead to stay ahead
It was CFO.com that recently emphasized the importance of forecasting analytics as an essential tool for the future-oriented CFO to meet the goal of adding strategic value to the business. They note that “If data analysis and forecasting are integral to strategic planning, more powerful software tools for those purposes should help finance chiefs contribute more strategic value to their companies.” Achieving profitable growth through financial data analysis remains one of the primary goals spurring the finance department to implement planning analytics.
Four key takeaways for a future-proof finance department
A recent whitepaper by IBM, “Finance analytics: Seven hows and millions of whys“, reported on a study for which nearly 1,000 CFO’s and senior finance professionals were surveyed. One of the revelations: leaders in analytics implementation also tend to lead in key business metrics such as profitability and revenue growth. The survey revealed four key takeaways for CFOs and finance professionals to help lead a successful finance department.
A strong focus on common data definitions is a crucial starting point. As anyone who works across departments in an organization knows, it’s essential to speak the same language, to have everyone on the same wavelength. Leaders who used analytics were 154% more likely than their peers to use common finance data definitions, and 62% were more likely to use a standard chart of accounts. Common data definitions help set the stage for broad, deep use of analytics across departments and throughout the enterprise.
Next, advanced predictive and prescriptive analytics is where the real value-adding is at. Top finance leaders were 28% more likely to use forward-looking predictive and prescriptive solutions than their average counterparts. One potential area of application is the improvement of revenue collection. This is made possible through customer segmentation based on risk profiles created with statistical data modeling and historic trends for payment behavior and disputes.
Thirdly, integrating financial and operational information ensures a better understanding of how different aspects of the business are interconnecting and working together. Areas of improvement can be identified much more accurately. Certain operational objectives might be at odds with financial goals. Also, financial goals might impede operational growth, if both are based on rough, non-optimal estimates. Analytics can help you discover where there are conflicts, and offer alternative models that map out courses of action for resolving those conflicts.
Finally, implementing analytics is a great way to develop talent and share experiences; particularly in the hands of people with the right skills and knowledge. In fact, top leaders in finance cultivate talent for analytics to 3 times as great a degree as their peers. They also establish centers of excellence, centralizing and sharing expertise 5 times more often than their peers.
Surely, we can talk the finance talk, but it’s up to you to walk the finance walk. A good place to start is the following white paper “Finance analytics: Seven hows and millions of whys“, providing more in-depth insights from IBM’s surveys of over 1,000 CFO’s and finance professionals.