Nearly 60 percent of CFOs indicate that investing in analytics and decision-making is their top IT priority, according to a joint 2013 study by Gartner and the Financial Executives Research Foundation. The study also finds that 15 of the top 19 business processes that CFOs have identified as requiring improved support are largely addressed by business intelligence, analytics and performance-management technologies.
CFOs recognize that, going forward, data collection will continue to accelerate and drive decision-making, and that BI no longer resides within the exclusive domain of the CIO. As managing, understanding and using data becomes central to the CFO’s role, it’s important to understand what this means and why it matters. It’s also important to note that this isn’t about gaining access to any data, but accessing accurate, insightful, real-time data. The CFO must drive a big data plan to ensure that investments in data infrastructure, analytics tools, dashboards and personnel yield data that’s easily centralized and understood for it to be actionable. It must also be integrated so that it can be used across the entire organization.
When data is presented in this way, the CFO and the business can benefit by applying the data to business processes with the use of data analytics tools. The benefits include:
Increased Data Accuracy and Data Integrity
Data accuracy is enhanced when CFOs are able to automate manual processes for data management and reporting. According to a study by the Financial Executives Research Foundation, nearly two-thirds of finance departments in the United States and half of those in Canada continue to use manual accounting systems. The study found that the value of data is diminished when it is managed by slow manual processes. Automation reduces the time needed to produce financial statements by nearly 50 percent, while greatly improving the accuracy and integrity of financial audits and statements.
Increased data accuracy and data integrity allow the CFO to deliver detailed, highly accurate quarterly and annual statements, providing the basis for unqualified audits. A data-driven organization can also improve regulatory compliance and better adhere to standards such as the Health Insurance Portability and Accountability Act through superior data protection and security.
Real-Time Business Intelligence
In their report, “CFO and Beyond,” Ernst & Young LLP asserts that the modern finance leader, “has a broad and complex role encompassing strategic contribution, business partnering, internal and external stakeholder management, as well as operational responsibilities far beyond the core technical and financial capabilities that once characterized the role.” Real-time information is critical for the CFO to make sound decisions in this expanded role.
BI, which is now available via up-to-the-minute reports using refined data mining technologies, allows the CFO to identify and remediate issues as they occur; swiftly identify and invest in growth markets, products and other business priorities; and experience valuable real-time insight into complex operational relationships that would otherwise have taken many months or even years to analyze. Investment in big data analytics tools provides the CFO with a greater range and depth of reporting that connects financial data in real-time to functions across the entire enterprise, such as human resources, customer relationship management, regional and overseas operations.
Insights gained from real-time business intelligence are transforming the role of the CFO as well. Because they have direct access to the data that the organization needs to move forward, CFOs operating in a data-driven business culture have the ability to swiftly align operational goals with management’s strategic agenda. According to the 2013 survey and report, “Fostering a data-driven culture,” published by the Economist Intelligence Unit, this expanded analytical capability allows the CFO to “potentiate existing BI environments,” resulting in improved cost efficiencies and “fast deployment of analytics solutions.”
The CFO can apply predictive analytics to existing data (in real-time) in order to project future positions and gauge the trajectory of sales and operations against established targets and goals. In a data-driven business culture, the CFO will have the ability to align operational goals with management’s strategic agenda by utilizing predictive models based on historical data as a highly focused planning tool.
Using data to drive decisions that impact present and future operations, CFOs cement their role in helping the business achieve cost savings and uncover new revenue opportunities. Understanding the correlations between financial data and operational data allows the CFO to maximize operating capital and cash flow; to anticipate areas or periods of slow-down and proactively manage company assets.
With 24x7 access to advanced, cloud-based financial management tools, the CFO will be much better equipped to obtain, analyze and understand the status of the company’s financial position in order to address - on a daily basis - the firm’s strategic goals and to make fact-based, fully informed business decisions.
This real-time access to accurate data achieved with focused, user-oriented analytics tools creates an environment that facilitates a better informed and much swifter decision-making. This process starts in the executive suite and then permeates the entire company as data is shared.
Enhanced Communication with Senior Management
In the Economist Intelligence Unit report survey, respondents indicated that the three top functions that benefit from a data-driven culture are strategic decision-making, operational efficiency and financial controls. The most successful strategy for promoting a data-driven business culture has proven to be “top-down guidance and/or mandates from executives,” a situation that provides the CFO with a built-in opportunity to lead the company’s big data initiative. Such an effort will enable the CFO to provide clearer, more comprehensible intelligence to senior management and other business stakeholders, including external audiences. Data analysis can be delivered in instantly understood formats, including graphic visualizations that convey information much more effectively than old-fashioned spreadsheets.
The Economist Intelligence Unit survey asked participants which parts of their organizations adopted a data-driven culture. The top response was “finance and accounting,” followed by “strategic decision-making.” It is not at all surprising then that this upward trend in cultivating a data-driven business mindset often begins in the CFO’s office.
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