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Become a data-driven organization that makes investments and operating decisions with increased confidence and mitigated risk.
A renewed wave of digital transformation, including advanced analytics is taking over the corporate finance function – financial analytics.
These technologies are giving rise to disruptive new business models and revolutionizing the processes that form the foundation of enterprise performance management.
Financial analytics is the creation of detailed analysis to answer specific business questions and forecast possible future financial scenarios.
The goal of financial analytics is to create a strategy for business through reliable, factual insights rather than intuition.
Sixty-three percent of CFOs believe that they are best positioned in the race toward using data and analytics to drive higher returns on investment.
Why financial analytics?
Financial analytics is the science and art of pulling together data in a logical and meaningful way to help an enterprise forecast their financial status – profitability, cash flow and value of the business.
Increased expectations for more meaningful partnering, pressures from investors or stakeholders for greater transparency, continued economic uncertainty and the changing regulatory environment are some of the key factors influencing CFOs and their teams to be more analytical in their roles and responsibilities.
1. Revolutionizing your financial processes will free finance from the vortex of legacy inefficiencies. It will increase confidence in meeting compliance deadlines and accelerate actionable feedback loops by responding to business demands on a timely basis.
2. Fostering analysis to integrate a variety of finance data sources (sales, supply chain, tax) into your financial analytics system will help improve line‑of‑sight to key business issues, bring fact‑based context to significant business decisions and reduce the risks associated with lagging or inaccurate information.
3. Modelling the business using practical drivers and advanced statistical or visualization methods can help avoid unpleasant surprises and make smarter resource allocation and strategy decisions.
Finance analytics helps organizations gain visibility and deeper insight into revenue, cost, profitability, cash flow and identify areas that require attention to impact positive business outcomes earlier than otherwise possible.
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Upcoming trends expected in 2021
1. Automated Account Processing
Automation eliminates errors, which is why companies are more inclined to invest in automated solutions.
According to an ACCA Study, over 50% of C-level executives in the accounting industry expect the development of automated accounting systems.
Accounting automation guides businesses in arriving at data-driven decisions faster than ever before.
Watch the video to find out how Data Semantics can help you simplify and automate Billing processes for your organization to save thousands of hours and millions of dollars from bill payment efforts.
2. Rise of Accounting Software Solutions
According to a report by Fortune Business Insights, all over the world there is a strong demand for software platforms to manage spreadsheets and taxes.
During the forecast period of 2020 to 2024, the market is expected to grow at a CAGR of 6%.
3. Cloud based Accounting
With cloud-based accounting systems, companies and firms can have access to their system anytime, anywhere.
About 67% of accountants now trust that cloud technology can make their roles easier (Sage, 2018).
The survey also reveals that 53% of the respondents adopted cloud-based solutions for better project management and client communication.
4. Blockchain
Blockchain is already changing the accounting sector by lowering the costs of reconciling and maintaining ledgers.
It also provides the needed accuracy in terms of ownership and history of assets.
With blockchain technology, accountants gain an unobstructed view of their organization’s obligations and available resources.
5. Role of AI
AI provides vast opportunities for accountants. The Sage Practice of Now 2018 report reveals that about 66% of accountants would invest in AI.
More recently, 58% of accountants also believe that AI can help them improve overall efficiency and are looking forward to adopting relevant AI applications for their company.
6. Advisory Services 
The elimination of manual and repetitive tasks opens opportunities for accounting firms to spend more time analysing data, providing insights and giving advice to their clients.
Automating accounting processes also means fewer errors, thereby increasing client confidence in the data and improving the quality of advice given to them.
Transforming finance through robust data analytics
The biggest risk may be getting left behind by competitors who mature their financial analytics capabilities to be more effective analytical advisors and partners to the business.
1. Financial Analysis Predicts Sales
Now improve sales numbers by analysing past trends and finding patterns to help develop more focused marketing campaigns.
2. Cash Flow Analysis
Cash movement in a business is an important metric to measure. Companies that monitor these indicators can make adjustments on the fly to ensure that their profit margins stay up.
3. It Shows the Profitability with Specific Demographics
Markets work on the 80/20 rule, where 20% of the customer base creates 80% of the profits. Businesses that understand this can use financial analytics to target that 20% more effectively.
4. Determine which Products are Profitable
Product profitability is one of the most powerful tools for businesses to discover which products are bringing them the highest profits. T
his provides insight into which marketing campaigns should be pushed more aggressively and helps in the development of new products and services.
5. Laser-Focused Revenue Projections
The analytics keeps track of how customers interact with a business’s website and can identify patterns in their behaviour.
For example, you can find out how often customers click on the “buy” button within specific pages. These metrics guide business for future products and can assist in building powerful revenue projections.
6. Eliminating Major Unnecessary Expenses
Financial analysis helps businesses avoid unnecessary expenses. It identifies areas that might be underperforming so executives can reduce or eliminate those costs.
7. Improving the Efficiency of Supply Chains
Finally, financial analysis can combine substantial amounts of data to create real-time forecasts that are used to determine which products are selling.
Executives can use these insights to make proper inventory purchases.
One problem that a lot of small businesses face is that their stock runs out so quickly that they have to resort to emergency purchases with rush delivery to meet their demands.
The success of data and analytics efforts depends on many factors – good data that is sufficient for analytical tasks at hand; sound models that yield useful insight; and so on.
All these are necessary conditions for data analytics initiatives, not sufficient.
For analytics to work, business leaders must bring financial analytics at the core of their digital transformations and must also have the foresight to invest in the right solutions.
According to Gartner, 1 in every 4 decision maker does not use financial analytics as part of their decision-making process.
Only 47% of decision makers say financial analysis adequately portrays story of their business area and its performance.
Misuse of finance analytics can cost organizations as much as 1% of revenue per decision, adding up to dramatic business loss over time.
Companies that successfully implement and use financial analytics periodically realign their approach.
These companies first focus on business decisions along with the information needed to support them, and then move on to concentrate on the analytics side of it.
This approach enhances the company’s ability to predict and plan for failure earlier.
