As organizations continue to change at an unprecedented pace, the role of finance also continues to expand and transform. The function must do more than just reporting results and provide forward-looking analysis that supports strategic decision-making processes and enhances business performance. This increased pressure on CFOs to be more business partners and strategic partners is renewing the call for finance to embrace and be at the forefront of data analytics to guide smarter decision making.
CFOs Must Cultivate a Data-Driven Culture
Businesses are operating in an economy that is more technologically driven and data-centric. Digitization, increased globalization, changing business models, increased volatility and a changing regulatory environment continue to pose challenges on businesses, especially with regards to decision-making.Unfortunately, data alone is not enough to make smarter decisions.
Making smarter decisions requires organizations to develop capabilities that enable them to quickly and easily transform this raw data into useful insights. These insights must be available to management in real-time otherwise they will end up working with a lot of “Dead Data.”
Finance is already used to dealing with large amounts of data and because the function is centrally positioned within the business to oversee various key decisions, CFOs should work more closely with business teams in driving their analytics agenda. For example, they can:
- Ask business leaders critical questions they expect data analytics to answer. The more CFOs and their analytical teams continue to probe, the better the insights generated. In a constantly volatile environment, management must be able to model various what-if-scenarios and their outcomes.
- Provide data-driven insights in the areas of pricing, inventory management, supply chain optimization, customer profitability and M&A, thereby demonstrating the value brought to the business by analytics.
- Deploy dashboards that not only show financial metrics, but also operational, customer and process metrics and allow business leaders to drill down to the specifics themselves and make improved decisions.
Expand CFO Influence Outside the Finance Function
Traditional financial data from legacy ERP systems is no longer the main driver of decisions. Today’s businesses have more data (Structured and Unstructured) than in the past, and the rate at which this data is being produced continues to increase at alarming levels. The predicted growth in data is exponential, with some experts predicting a 4,300 percent increase in annual data production by 2020.
It is not a case of collecting data and leaving it to become obsolete and irrelevant before it can be used for the purpose it was collected for. Decision makers are depending more on insights derived from data to make better decisions. In the fight against cyber crime, companies are using predictive analytics to identify anomalies within their systems, assess vulnerabilities, predict attacks and automatically resolve. No longer are companies relying solely on threat signatures to fight cyber crime.
In the retailing industry, companies are using analytics to understand customer preferences, segment customers, create market differentiation and improve margins. In other organizations, analytics are being applied to improve and strengthen operations. IoT devices are helping companies assess, monitor and enhance machine performance.
This above examples alone show how data has become a strategic asset. By owning and driving analytics initiatives within their businesses, CFOs can continue to expand their strategic leadership role, strengthen their ties throughout the organization, expand their influence outside the finance function and become strategic business partners.
Adopt Modern Analytical Systems
Advancement in technologies and the growth in Shared Services business models has reduced the amount of time finance executives spend on transactional and routine activities. Today, much of the CFO’s time is spend on strategic issues, for example, helping the CEO and other business leaders execute strategy, identifying M&A opportunities, purchasing and implementing IT systems, creating shareholder value, assessing and monitoring risks, and driving business performance.
In order to continue delivering on the above, CFOs must reduce their reliance on disconnected analytical data processes and legacy analytical systems, and invest in analytical capabilities that enable them to execute strategy more effectively, reduce processing cycle times, improve financial productivity and reduce finance operating costs.
Spreadsheets have their role in analytics but it is important to note that upon reaching a certain level, they become limited. As the business grows and the amount of data produced increases, it is worth investing in a data analytics system that is suited to your business needs and helps you achieve your strategic objectives. This is not just about replacing spreadsheets and the old software with the new system and tools. Instead, it is about understanding the fact that the new system is just an enabler and not your lottery ticket to riches.
By becoming an analytics powerhouse, the finance function will be able to model various what-if-scenarios and provide the foresight to predict future outcomes, the insight to make real-time strategic decisions, and the hindsight to analyze and improve historical performance. Overall, the organization will have an advantage over its competitors.
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