As organizations adjust strategic investments with an eye toward capturing revenue growth, today’s CFOs need every advantage to help their businesses make profitable decisions. In an environment of flat or decreasing budgets, the challenge is to move beyond typical finance functions to deliver insights and leadership to the business.
The pressure to provide more value-added services while maintaining or reducing budgets has never been higher. That stress is compounded by increased regulatory and market changes, along with the need for greater transparency into financial results.
The necessity to “do more with less” is forcing many organizations to rethink their historic methodology that depends on departmental IT tools and processes that don’t necessarily support today’s integrated analytics and granular detail requirements. No longer can finance departments spend 80% of their time on low-value and time-consuming data integration, reconciliation, and report creation tasks.
Kim Autrey, Senior Industry Consultant, Data-Driven Finance, Teradata
Instead, they must spend more energy on higher-value analysis and insights that make it possible to respond to “ad-hoc” requests, perform “standard” analytics in a timely manner, and rapidly act on requests for new or different financial analytics.
Moving Up the Analytic Value Curve
The journey to success is a continuum―companies can fall anywhere on the data maturity spectrum. The aspiration to an expanded role can be achieved and prove rewarding if organizations take a data-driven approach to managing financial data and performance metrics.
Often, organizations are unable to bring in new analytic capabilities without increasing the IT budget, because they are hindered by their traditional departmental approach to financial business processes, usually requiring taming or “untangling” increasingly chaotic and siloed systems. This analytic anarchy causes a range of challenges, such as getting reports from multiple sources with conflicting answers, resulting in costly manual and time-consuming reconciliation efforts and reduced confidence in the data.
To advance up the “analytic value curve,” the focus must shift from simply providing reports to delivering value-added services―such as spend analytics, cash flow forecasting, and customer or product profitability insights―which can enable proactive guidance for the business. In addition, the right systems and tools must be put in place.
The Data-Driven Approach
To overcome challenges, CFOs need to deploy an agile, sustainable data-driven approach which enables end-to-end data transparency and governance to ensure quality data that is consistently defined and available to financial analysts when they need it. This enables finance departments to move past existing roadblocks and expand analytical capabilities, while also taking advantage of new opportunities and reducing IT costs.
A simplified, integrated data-driven approach can yield enormous benefits such as:
- Consolidated and simplified IT architectures that reduce the business’ reliance on IT and lower operating costs, while allowing IT to focus on high-value activities
- Improved transparency between reported financial results and supporting transaction details
- A consistent, holistic view of data across financial functions
- The ability to manage detailed profitability and cost drivers to improve customer, vendor, and product profitability
- Quick adaptation to market changes
- Alignment of performance metrics to drive accountability
- Finance evolving into a value-added analytic enabler to the business
The results of a data-driven approach can be quite impressive. For example, a leading medical equipment manufacturer created a global financial data warehouse on a single platform. The result was a 50% reduction in cycle time and financial data refresh time of just five hours, instead of the usual 36 hours. In addition, detailed visibility into multiple profit and loss statements (P&Ls) and ERPs was gained from across more than 300 legal entities and nearly 500 ledgers.
How Data-Driven Is Your Finance Department?
The most effective companies employ a data-driven finance approach—moving finance functions up the analytic value chain to offer more detailed analyses, better forecasting, and increasingly granular information on products, suppliers, customers, and more. In turn, their analyses inform the business, increase corporate agility, and point the way to cost savings.
Achieving all these goals requires first knowing where you lie on the data-driven finance maturity spectrum, and then how to get farther up the curve faster.