Over the past few years, most organizations have realized the real significance of financial analytics and what it can do for their organization beyond offering a set of financial reports every year. The role of finance has transformed and expanded over the last 20 years. Finance is more complicated today and is facing more demands.
Importance of Financial Analytics for your Business
Changing the regulatory environment, continued economic uncertainty, pressures from stakeholders or investors for greater transparency, and increased expectations for efficient partnering are the key factors driving the Chief Financial Officers (CFOs) and their teams in a way towards being more analytical in fulfilling their responsibilities.
The major analytical areas include balancing and prioritizing capital investments, indirect and direct tax management, ongoing performance accountability, regulatory compliance, business risk management, liquidity management and cash forecasting, cost management, value for money analytics, profitability management, and forecasting and setting guidance.
Uncoordinated and makeshift processes and legacy quick fixes present a huge, unmeasured, and ongoing cost that hinders the confidence of the CFO in the data of the company and restricts the modern-day finance function’s effectiveness and efficiency to focus on activities that add value and lead to more effective business partnering, lower risk, and better decisions and business outcomes.
What is Financial Analytics?
Financial analytics is a field that provides different views of the financial data of an organization. You can gain comprehensive knowledge with the help of financial analytics and act on it in a proper way to enhance your business performance. Financial analytics will affect all your business components.
The financial analysis software speeds up the report creation and it can present the data in an executive dashboard. This is a graphical representation that is quite easier to read and interpret when compared with a series of spreadsheets with pivot tables.
Why Financial Analytics?
With the right kind of tools, finance analytics arms CFOs with the ability to make sense of the evolving complex world. By merging operational data and internal financial information with external information like big data, demographics, and social media, financial analytics can answer critical business questions with unparalleled accuracy, speed, and ease.
Some of the questions the financial analytics can help answer include, how can we enhance and streamline our business processes to make them more efficient? How profitable are my services and products across customers and sales channels? How much impact do our business decisions have on our key value drivers? And so on.
To have a more in-depth understanding of why you need Financial Analytics for your business, let’s dig deeper into few significant factors that demonstrate the need for financial analytics.
Financial analytics is the art and science of pulling together data in a logical and meaningful view to support decision-making and compliance with confidence. It is about obtaining governance and control over your analytical processes as that mitigates risk and allows business and finance leaders to reuse critical data instead of wasting time debating or reconciling the numbers. Many companies are struggling at present and will continue to fight until they choose to adopt finance analytics for their business processes.
Modernizing your analytic systems, information standards, financial processes, and maintaining your financial data in a single place will free finance of legacy inefficiencies and allows it to focus on business partnering and value-added analysis. It will increase confidence in accelerating actionable feedback loops and meeting shortening compliance deadlines by providing an on-time response to business demands confidence.
Advancing analysis to incorporate various finance data sources like supply chain, tax, and sales into your finance analytics systems will enhance line-of-sight to significant business issues, minimize business risks associated with inaccurate or lagging information, and bring fact-based context to business decisions.
Modeling your business with the help of practical drivers and advanced visualization or statistical methods can help you alleviate unpleasant surprises and make better decisions regarding strategy and resource allocation. Finance analytics will help companies acquire deeper insight and earlier visibility into cash flow, profitability, cost, revenue and determine the areas that need attention to impact positive business outcomes.
Benefits of Financial Analytics
Financial analytics can be used to enhance the efficiency of the internal financial control environment. These analyses focus on the main process control to offer clear insights into the overall financial control environment and determine the most significant financial processes. Now, let’s have a look at the benefits financial analytics provides for an organization.
Business and Risk Insights
Financial analytics offers real-time monitoring of control traceability and performance on automated controls till the transaction level, augmenting transparency. Financial analytics provides highly valuable insights and helps management make more decisions based on facts.
Financial analytics helps you in identifying anomalies and trends early and minimizes later auditing and validation efforts. It increases confidence in the processes and numbers.
Improved Quality and Efficiency
Financial analytic dashboards can be utilized to access reports on single transactions and controls directly at any time for enhanced oversight by the board and the management.
The application of financial analytics in the automation of internal controls minimizes the costs of control performance with the potential to increase the population controlled simultaneously.
For focused audit and audit planning, financial analytics provides data-supported risk analysis.
Financial analytics is a valuable tool that must be utilized by large as well as small business owners to measure and manage the progress of the business. It helps companies adapt to the trends that have a significant impact on their operations.
It modernizes the finance function with enhanced access to operating, management, treasury, financial, tax, and risk data along with advanced analytical systems and processes, and stronger controls. Financial analytics provides more timely and reliable financial reports which are significant factors in measuring the success of an organization from the perspective of analysts, investors, and bankers.