In a recent study conducted by Workday, researchers found that CFOs that are leveraging the power of data analytics in finance are seeing impressive benefits. Yet only 35 percent of the 670 respondents indicated they are making extensive use of these approaches and tools that yield deeper insights.
If the benefits are so great, what is holding other companies back from leveraging advanced analytics? The answers come from understanding what they are, what benefits finance groups can expect, and the challenges facing CFOs looking to embrace the deeper insights discovered.
What Are Advanced Analytics?
Advanced analytics, according to research and advisory company Gartner, is the “autonomous or semi-autonomous examination of data or content using sophisticated techniques and tools, typically beyond those of traditional business intelligence (BI), to discover deeper insights, make predictions, or generate recommendations”.
To uncover these deeper insights, organizations are using techniques like visualization, machine learning, predictive analysis, and data mining. These practices go far beyond the analysis of existing financial data and leverage information both from other internal departments and external data.
Of course, there are challenges to accessing that information to gain the insights that are possible with advanced analytic practices. The benefits, it seems, make overcoming the obstacles worth it.
How Advanced Analytics Benefit Finance
The Workday survey uncovered that many of the CFOs – over 30 percent of respondents – that are using data analytics were focusing them on financial reporting. But advanced analytics is also becoming important in other areas of finances, like business forecasting, identifying opportunities for cost reduction, risk management, profitability, decision making, and self-service data analytics.
In fact, self-service data is one of the areas where these tools and techniques can make a significant impact, yet, as the survey indicates, it is the area seeing the least attention. Only 25 percent of those surveyed indicated they were using analytics to offer business leaders access to self-service data.
When CFOs provide their peers with better access to financial data and analysis, leaders throughout the organization are empowered to make data-driven decisions that combine financials with information that cuts across organizational areas.
Beyond the advantages that self-service access to data can bring, advanced analytics can offer other, significant benefits. In another study conducted by FSN and in collaboration with Workday, non-financial data used in conjunction with traditional financial data resulted in faster and more accurate forecasting, a longer forecasting horizon, and an increase in positive responsiveness to market changes.
The Challenges to Adopting Advanced Analytics
The obvious question is – If advanced analytics can provide such considerable benefits, why hasn’t everyone adopted them? As with any tool or process of real value, there are challenges to adoption.
One of these is simply access to data. Finance departments have access to their own data, but the power of advanced analytic techniques comes in combining it with non-financial data. Integrating data across a company is key to successful comprehensive analysis. Yet many enterprise systems are isolated in specific organizational silos, making integration difficult.
Overcoming this challenge requires CFOs to collaborate with their peers and work closely with IT. An organization’s CIO likely already identifies digital strategy as a priority, and the integration of internal systems is part of that.
Another challenge that requires a close partnership between the CIO and the CFO is making non-financial data accessible for analysis. There is a wealth of information in unstructured data like that in Big Data systems. Financial data, by contrast, tends to be highly structured. To make full use of internal and external data to develop insights, data must be adapted to be compatible with advanced analytics tools through structure and standardization.
As it is said, that which is worthwhile is rarely easy. This is especially true for the use of advanced analytics in the world of finance. Even though there is work to be done to extract the deep insights that these tools and techniques can provide, the potential benefits are worth the investment.
Small to mid-market organizations rely on Centage Corporation’s Maestro Suite, which includes Budget Maestro™ to help them keep track of and manage their cash flow. Budget Maestro improves the efficiency and effectiveness of business budgeting and planning, financial forecasting, financial consolidation and reporting processes. For more information, take a tour of Budget Maestro, contact Centage, or call 800-366-5111 now.