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Elevating the Impact of Analytics and Reporting in Finance

Elevating the Impact of Analytics and Reporting in Finance

When it comes to analytics and reporting, the big question has always been, how can CFOs and finance organizations improve the relevance and value of their financial reporting and the analytics that might drive it? To begin with, it starts with getting away from financial reporting as solely a compliance exercise and migrating towards more of an informing and guiding activity. Taking it even a step further, regaining relevance in financial reporting starts with establishing the goal of financial reporting as a strategic advantage. In other words, the goal of every organization should be about driving thoughtful decisions and executing on strategy through transparent, timely, and relevant financial insight.

Let’s Talk Data and Analytics

When talking about analytics, the need for relevant and timely financial data has always been at the top of every CFO’s wish list given how much economies, industries, and markets change so viscerally (and rapidly). Look no further than what happened in 2020. Last year was the wakeup call for the speed of impacts to organizations from what is happening on the world stage. The next paradigm shift may not even be driven by pathogens, but could be disturbances from technological disruptions, massive regulatory changes, cultural shifts, or even macroeconomic events. Organizations do not exist in a vacuum of their own operations. And yet, organizations are generating more and more data that is ripe for analytic self-reflection.

In fact, last year, according to a survey by FSN, it was reported that only 14% of finance organizations were successfully harnessing the large volumes of data being generated by transactional systems in order to extract valuable business insights. There are many factors as to why the number is so, or was so low, but chances are, the reasons probably were a mix of the following:

  • 2020 was a Black Swan event in our history, given the pandemic
  • They don’t have the time, techniques, or resources to do anything more than simple ad-hoc reporting and analysis
  • Siloed/departmental constraints
  • Data resides in an impenetrable black box and accessing is too difficult
  • Data is overwhelming the organization-“You’re going to need a bigger boat”
  • The lack of the right systems and tools is preventing the analysis of the data

Thus, the challenge for most CFO’s is always going to swirl around extracting as much information as they can with reporting and analytics. Holistically speaking, reporting is the process of summarizing data to monitor how the business is performing. Analytics is the process of exploring the reports, and the data, (including additional data not considered before) that’s where the meaningful insights come from that drive the ‘A’Ha’ moments that standard reporting typically doesn’t invoke.

What We Have Learned

If 2020 taught us anything, it’s that having accurate and apropos data and analytics along with near real-time reporting, could have been the difference maker between survival and extinction. So, let’s peel back the onion to discover ways in which analytics and reporting can be that beacon on the hill of brilliant light illuminating the way for the modern CFO in 2021.

First, it’s no mystery that every CFO would like to know how and where their company can improve. Every CFO wants to perform better against their own historic performance, against their direct competitors, and even against their industry. It is all about measurable progress against a NorthStar.  Having a solid financial analytics foundation should not only provide real-time data on the health of the business but it needs to seamlessly integrate customer information and patterns in order to analyze, plan and forecast future trends. In addition, analytics that support measuring Key Performance Indicators can facilitate massive progress towards the most important Value Drivers. Without an integration of analytics with KPIs, measurement becomes siloed, clunky, and manual.

Given that finance departments are evolving and transforming into strategic business partners, teams that were once focused on simply reporting historic measurements of financial performance using static statements such as P&L, Balance Sheet, and Cash flow – are now deeply embedded in supporting the decisions and executions of real operational and financial options. This includes M&A activity, new product lines, organizational changes, penetration into new markets, major capital decisions, and other decisions that create distinctive advantages.

In 2021, it’s now imperative that finance teams work to not only adhere to changing business models but they also need to simultaneously be able to translate and interpret data insights and turn that into decisions that add value to the business. Quickly, if need be.

In addition, if 2020 has taught the CFO anything, it’s that the better the analytics, the easier it might be to implement time-saving and cost-effective solutions that can ease the stress of unforeseen cataclysmic events.

To say that financial reporting for the most recent quarter was challenging for many is an understatement. Fortunately, prior to 2020, technology had been enabling more and more finance teams to focus on value-driven reporting. Unfortunately, not all organizations have or had the systems and people in place to do so.

As we pointed out earlier, organizations are compiling more data than ever before, thanks to increases in computer processing power, ever-growing connectivity, additional data captures along all of the transactional, people, and supply chain, coupled with the cloud and its massive storage capacity but… many finance and reporting teams are overwhelmed by the volume and variety of that data. So, reporting can be a challenge.

What Can The CFO Do About That?

To turn data into truly value-driven information that drives the best possible reporting, finance teams should focus on utilizing technological advances in areas such as high data storage capacity, automation, and evolving artificial intelligence (AI). By automating certain manual and tedious tasks, finance teams can pivot and have more time to focus on data-driven reporting insight, thus turning data into more of a strategic asset. In fact, data is quickly becoming one of the most underutilized economic asset that organizations possess. It’s akin to the metaphor of owning a factory but being unsure how to operate it to create output.

With AI and machine learning, Finance leaders can use them to uncover underlying patterns in data (such as trends, correlations, and seasonality) to predict scenarios and improve outcomes. In fact, according to a recent EY survey, almost three-quarters of finance leaders say that AI will have a significant impact on the way finance drives data-driven insight, and that it will be the critical technology for the finance function in the future.

There’s no doubt that the way that accountants carry out reporting is changing worldwide. In fact, an argument could be made that a trend is underway towards more ancillary or non-financial reporting being the way of the future. With that being said, one thing is clear, CFO’s and their finance teams need to go beyond the financials of an organization. They need to understand the full spectrum of the business model and how it creates shareholder wealth. They need to take the lead in adopting integrated thinking and also act as the transformation agent to the organization they work for and with.

In conclusion, Financial Analytics is no doubt an important tool that should be used by small as well as large business owners to manage and measure the progress and health of the business. Not only will it help the business to adapt to the trends affecting their operations but it will also provide more reliable and timely financial reports which is the main factor for measuring the success of a company from the perspective of multiple stakeholders.




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