Today’s CFO has a lot of existing tools and resources within their finance organization that he or she can leverage in order to take control of their organizations’ finance transformation journey. That much we learned in Part l. In Part ll, we discover why the insights from data could be the epicenter of the finance universe and why predictive analytics could be the essential commodity to the CFO and the much-needed fuel to spark their future vision.
As a perfect segue from the previous two sections, Predictive Analytics in its purest, most simple of forms should be looked at as a variety of techniques to make predictions i.e., determining the likelihood of future events, future trends or likely behavior from historical and current data patterns. Often based on time-series analysis, this type of analysis is typically used for determining the “next-best offer, likeliest outcome or worst-case scenario” and then implementing adaptive user interfaces.
Predictive analytics in the finance sector, depending on how you look at it, could be viewed as being part science or part art, and less about “gut.” Taking massive amounts of both sensitive and insensitive data and then finding patterns can enable the CFO and or finance department to more effectively identify strategic business moves and investments. At its most basic level, predictive analytics sets the table for identifying future fields for improvement of services and processes. The opportunities that predictive analytics can provide include focusing on real-time recommendations instead of static data examination, continuous ranking of possible actions and choosing the best action of all, and flexibility through the automation of processes.
Going forward, the most strategic CFOs will focus on the future and not the past, as they should. Those that can collect and analyze data from other parts of the business, such as sales, marketing and operations, will be able to empower finance with precise prognostication. Today’s C-suite would be well served by the CFO who is making more data-driven, long-term plans using available tools like scenario forecasting and predictive analytics that’s based on data from across the organization, versus the CFO who is focused on managing risk rather than opportunity.
In many ways, financial insight is really the culmination of the three practices mentioned above. With the awareness and comprehension gleaned by the finance department by uncovering and deciphering stories behind the numbers, valuable and actionable insight can now be pushed up to the C-suite.
With more tools and technology such as financial analytics software at its disposal, finance can uncover answers to questions the C-suite may not even be asking today, particularly around revenue performance. From the most effective marketing campaigns to the least profitable customers, finance needs to play a leading role in identifying what truly drives their company’s revenues. It’s no secret that customer or client insights are the gateway into understanding how to please and exceed the expectations of your current and future clients. That’s ultimately the reason why finance needs to be collecting, analyzing and putting data into action in the first place.
Shockingly enough, however, even though we collect client data, we rarely use it. Did you know that less than five percent of all data collected globally is analyzed? In fact, according to the Digital Universe report by IDC, approximately 22 percent of all existing data would be useful if it was tagged and analyzed.
In addition, while the promise of actionable insights from the data is attractive, it can also end up being the proverbial carrot on a stick for finance departments that want to drive business outcomes from their data. To be effective, CFOs will need to know when to stop collecting and chasing data and when to start analyzing. Insights are generated by analyzing the information collected and drawing conclusions. Both data and information set the stage for the discovery of financial insights that can then influence decisions and drive change both within the finance department and throughout the organization.
The CFO who can discern the insights that can drive action will typically be more valuable than the one who simply answers a question – especially when those insights give the C-suite an opportunity to rethink and possibly innovate rather than ideate. As more and more data is collected versus analyzed, maximizing the actionable insights finance can receive from its analytics investments can be crucial to its data-driven success going forward.
The modern CFO is fundamentally different from their predecessors in a variety of ways. While traditionally, the CFO’s role was deemed as more of a support function, today they are supposed to bring strategic relevance to any major decision. It is expected that an organizations’ CFO can and should contribute to the direction and success of the organization, and rightly so, given the ever-changing nature of business today. Previously, strategy and decision making were left to the rest of the C-Suite, while the CFO was confined to more of a “sign-off” role than anything else. The times, they have changed. So where does reporting fit in the grand scheme of strategic vision? There’s no doubt that financial reporting is still of fundamental importance. It’s still mission critical, and still falls squarely under the responsibility of the finance team, and consequently, the CFO. But while it is still relevant, it is sometimes taken for granted. This does not mean it is any less important – it’s just that it is now seen as a minimum requirement for finance. Yes, reporting is expected to be flawless, but here is the key difference. What has significantly changed is that today’s CFO must be able to take financial data and use it to influence operational decision making and strategy. They must possess many more skills than just the technical accounting background of the past.
In addition to their finance role, today’s CFO is, for all intents and purposes, an extension of the CEO. They are business partners to the C-Suite who help guide and influence decision making using financial context as an integral driver of choices that can affect all aspects of the business. As such, they still need to manage risk as the business executes on its strategies and initiatives, but they also need to maintain strong internal controls and financial reporting processes, and they must be able to pivot between looking backward and looking forward.
Going forward, there’s no doubt that success will always be determined by access to timely, accurate data as it will be a key enabler to finance productivity and decision support. Automated reporting, and data and analytics will certainly allow more time to be dedicated to forecasting and predictive analysis, but the true determinant of a CFO’s strategic vision will be how they drive growth and expand business globally while simultaneously mitigating risk in a unpredictable environment.
For more information on how FYIsoft might help your finance department achieve new levels of productivity in fast-growing and changing environments. Go here: