Using data analytics is key to running a successful business, whether you are a CFO or any other financial professional. However, the rise of digital transformation and the increasing expectations from board members and executive management requires a new approach that focuses on using advanced data analytics. The Future Office of the CFO will need to become comfortable using these advanced methods to help further boost the bottom line of their business.
Embracing Advanced Data Analytics
The need for advanced data analytics continues to gain traction as the impact of the pandemic further accelerated its use across businesses in numerous industries. CFOs using data analytics is critical in maintaining resiliency and optimal performance during these challenging times.
Using advanced supply chain analytics makes it possible for a company to quickly pivot to alternate markets and suppliers if they encounter any disruptions or sudden shifts in the market. Supply chain leaders can easily view cost, efficiency, and profit analyses with numerous sourcing scenarios that can be used if a potential disruption in the supply chain becomes a reality.
Additionally, smartphones make it possible to access critical data in real-time, regardless of the time or location. CFOs can easily stay connected to this data, whether they need to check on invoices, working capital, accounts receivable, or other traditional metrics. Enhanced analytics related to services, products, marketplace conditions, and trends provide much-needed insight in today’s ever-changing market.
Despite going through unprecedented disruptions from the last year, CFOs have played a key role in helping their companies work together with suppliers and logistic providers while going through numerous alternative-sourcing scenarios. Restocking depleted warehouse and store shelves, reshuffling rations, and transforming production lines to manufacture in-demand goods were just a few examples of the many challenges of the pandemic.
In the last few years, research has shown the importance of finance functions to create and integrate highly advanced data analytics within the digital operating models of businesses. The impact of the pandemic only further highlighted the importance of accelerating this transition throughout all types of businesses.
Keeping Internal Customers Happy and the Increasing Expectations of Real-Time Metrics
Typically, the data analytic activities for finances primarily focused on tactical accounting processes. These metrics centered around speed, cost, and any other performance opportunities. Finance teams often use these analytics to increase cycle times further, reduce costs, and enhance the performance of financial activities and any other processes across the organization.
Many finance analytics view past performances and historical data to gain a better understanding of performance metrics. Looking at various metrics makes it easier to find ways to improve upon these activities for the future. More companies are operating digitally, as data is becoming more accessible to allow CFOs to report this information in real-time due to these changes.
Now reports from CFOs require much more detailed information involving financial data, whether for a specific client or at a regional level. Meeting these demands for reporting expectations requires finance teams to access much more extensive and varied data sets in real-time.
Finance leaders must also work with other departments to provide accurate and timely information, whether sales, human resources, operating divisions, or long-term customers. Even new clients of an organization often require access to advanced financial analytics. For example, strategy officers need access to real-time data involving sales by product type, geography, and other information. Gaining an assessment of risks with external data involving the marketplace’s volatility is also crucial to success.
Three Ways to Improve Analytics
Understanding how to access and analyze internal and external information while maintaining accuracy is a significant challenge. This process’s difficult and strategic nature is one of the main reasons why many CFOs rather keep this capability in-house while managing it in a more centralized manner.
While using this structure is essential for laying a solid foundation for advanced analytics success, CFOs can also take several steps to improve their efforts further. Following these three strategies can improve the entire process.
Getting More Comfortable With Data Uncertainty
CFOs are often focused on using data sets with the most accurate reporting capabilities. This often influences finance executives to only use data set tools that they are very familiar with, limiting their ability to use advanced analytics. On the other hand, many of the advanced analytics needed for finance customers require the data to expand by 10, 20, or even larger numbers. All of this data fluidity makes it challenging to maintain control and accuracy, which is often problematic to the traditional mindset. Luckily, the reluctance to use larger data lakes within an organization can often be overcome by implementing the right skills, tech tools, and governance structures.
Leveraging Data Governance
Maintaining effective data governance is an essential strategy that helps establish control and provide oversight for using data within the organization. While the CFO isn’t in charge of data governance, the finance group still has a role in ensuring that a data governance program is working while also following data governance processes and policies. Doing this allows a CFO to trust the data being used during the analyses while also implementing controls for maintaining security, integrity, and quality of the data storage, sharing, usage, and reporting process.
Closing the Skills Gap
CFOs need to continue to find ways to overcome the digital skills gap with their employees by developing innovative solutions. This ongoing effort requires the financial backing of upskilling and retraining programs while creating a more flexible work model. Improving advanced analytics across the financial organization requires a better understanding of what constitutes these unique skill sets. For example, digital proficiency needs to focus more on future perspectives instead of historical reporting. All of this requires a detailed understanding of the data within the organization, which also demands extensive knowledge of the company and any challenges faced by either internal or external stakeholders while also including a strong relationship with the IT team. Core financial analysis and planning skills are a necessity for using advanced technology, whether it’s automation or artificial intelligence.
Closing Thoughts
CFOs need to understand that continual improvement with analytics impacts everyone within an organization, whether the CEOs, board of directors, executive management, or internal customers. Many boards and executive teams remain committed to investing a lot of money in advanced data analytics. The pandemic only continued to highlight the importance of resiliency and the immediate return of investment that this technology often provided. Now is the time for CFOs to get comfortable with this new era of advanced data analytics in finance.
