Analytics the CFO Would Care About

The Finance department of any company, due to its inherent nature, is synonymous with hard data. It is that one department, that is tightly linked to all the other business units. It is evident that the significant technological advances happening in the area of data analytics will affect the functioning of this department in a huge way. It probably won’t be an exaggeration to say that the line separating the responsibilities of a CFO (Chief Finance Officer) and a CDO (Chief Data Officer) is getting more and more blurred with each passing day.

While data has always been accessible to organizations, in the absence of technology, it was unthinkable to analyse the data for decision-making. But with huge strides made in technology, it is now possible. Companies that are exploring data and finding new patterns, conducting analysis on why certain results occur, and using predictive modeling to forecast future results, are the ones who have been able to achieve a strong competitive edge.

Data opens a whole bunch of possibilities for the CFOs. Let’s take a look –

• Financial fraud has been plaguing this sector from time immemorial. Thanks to big data, it is now possible to curb the menace. Advanced analytics can now identify the anomalies and abnormalities. CFOs can reduce their financial losses by detecting fraudulent patterns and spot emerging anomalies in data.
• Many companies face the brunt of customer churn but don’t know the real reasons behind those. The first step to resolve this issue is to get a holistic view of the customer. Then the transaction data can be analyzed with other available historical data about customers who jumped ship can provide hitherto unknown insights about a customer. Once identified, then companies can take appropriate steps to negate the churn.
• The recent financial crisis has given rise to a lot of regulatory compliance reporting to be done by companies worldwide. Basel 3 norms and BCBS 239 compliances are to be followed. Data Management solutions come in handy over here by creating a single source of truth. These tools can bring in a lot of automation. The siloed data is collected and then cleansed deduplicated and transformed. This scrubbed data then can be easily used for regulatory compliance. Data governance at its granularity, keeping a track of its lineage is an embedded part of the solution. This is enabled by creating a metadata repository and cataloging of data.
• Analytics can also help finance team to move up the value chain ladder through data-driven decision-making. Rather than providing the regular financial reports, it can generate insights which can then be leveraged by the C-Suite for taking business decisions. Financial Process Analytics can tell about the impending customer churn, who are the most profitable customer, how are the key business decisions affecting the bottom-line etc. Rather than simply reporting the past, Process Analytics can help businesses create the future they want.
• By gaining powerful insights across all departments, CFOs can take timely decisions to enhance financial operations and reduce operating expenses.
• Another application is DSO analytics or Account receivable analytics. DSO or Day sales outstanding shows the number of days taken by an organization to collect its outstanding payments. By having a clear view, it’s easy to identify the errant customers so that action determined fit can be taken to expedite collections. It can help companies design predictive risk models to prioritize and accelerate collections.
• With accurate, real-time, data-driven reports, CFOs can get valuable insights into the accounting, financial reporting, and governance functions. These data-driven insights can help them in taking quick actions and respond to business demands.

The path to becoming a data-driven CFO is not free of impediments. The financial role has become a mixture of systems knowledge, domain knowledge with a passable understanding of statistics. To empower the CFOs for data-driven decision-making, organizations need to ensure that the data that is available to them is of absolutely high quality. The IT system should be modernized to enable dissemination and analysis of vast amounts of data. Lastly, the top management has to commit to these initiatives. One will have to start small by identifying one use case and then expand into other territories.

The good news is that it is possible, and technology can deliver with a reasonable investment. Rather than just reporting the past, the finance department has started evolving into a department that envisions and creates the future!