Nowhere is data more influential in driving decisions than in the financial sector. Finance executives rely on accurate, up-to-the-minute information to inform decisions and evaluate a company’s performance. How can analytics transform your financial operations? Here are some ways that data can change your business.
Make Data-Driven Decisions
Controllers and CFOs can rely on company data to influence future decisions. By looking at critical metrics from the past, financial professionals can make predictions about the future. They can also evaluate what’s working — and what’s not working — so they can allocate resources to the most effective business strategies.
This is also where AI comes in. Artificial intelligence (AI) can help professionals organize and evaluate large amounts of data quickly to provide a comprehensive picture of the organization’s financial health. AI-powered tools will become a vital part of the analytical process, helping businesses make faster decisions based on the latest data.
Increase the Accuracy of Your Forecasting
Analyzing past data is often the best way to predict future performance. Finance executives can rely on past data to create cash flow forecasts, make revenue projections, or even predict the return on investment for new programs and initiatives.
In fact, the accuracy of these projections is aided by the use of more data. Analytical professionals commonly refer to “data” footprints, which include every interaction a customer or website visitor has with an app, webpage, or business location. AI-powered tools can organize this granular data and identify historical trends that may contribute to future financial performance.
Research More Effectively
Sometimes, the quantity of data isn’t as important as the quality of data. But finance teams won’t always have the resources — or the time — to sift through company records or industry publications to harness the best and most relevant information.
Once again, AI-powered tools such as a chatbot can respond quickly to research queries. Controllers and CFOs can gain fast, reliable answers to their questions and use these responses to align their financial decisions with industry best practices.
Users can even sift through the company’s own data to gain insights into past performance or notice cyclical trends to be aware of for the future. This can be particularly helpful when preparing presentations or recommendations for advisory boards, company leadership, or stakeholders.
Comply with ESG Criteria
The adoption of ESG criteria has caused something of a shakeup in corporate America. ESG, which stands for “Environmental Social Governance,” refers to practices and initiatives that contribute toward a more inclusive workplace, corporate accountability, and environmental sustainability.
But companies must also comply with ESG disclosure requirements and demonstrate what types of steps they’ve taken toward the above goals. Data enables companies to validate their ESG reporting so that they can remain in compliance.
For example, finance executives might use financial records to prove a company’s commitment to green technology, carbon offsets, and more. But data can also reveal important metrics related to diversity, equity, and inclusion (DEI), which will allow your organization to adopt a more strategic approach toward creating a more inclusive workplace culture.
Prevent Fraud and Mitigate Risk
Just about every industry in America is vulnerable to fraud. But data analytics can be used to improve fraud prevention tactics. Advanced software can analyze past data to identify common fraud tactics, and it can also be used to detect data anomalies in your current customer base.
Financial entities such as banks and mortgage lenders can leverage data when screening new loan or mortgage applications. The best customer data can help you screen for potential risk and ensure that you connect each customer with the loan program that best fits their needs and financial situation.
Learn more in Eight Tips to Reduce Fraud in Financial Reporting.
Track Progress with KPIs
Data can also help you track business growth. Business leaders can use data such as the revenue growth rate to monitor progress and evaluate the effectiveness of new business strategies and programs.
Similarly, controllers and CFOs can partner with other department leaders to track other important KPIs.
For example, marketing teams might rely on customer click rates and website conversion rates to assess their marketing plans. Finance executives can compare that data with the company’s financial performance to determine the ROI on things like digital marketing or PPC advertising.
The Future of Data
The growing promise of artificial intelligence and machine learning only means that companies will become more adept at analyzing their data and making critical decisions.
But this trend will also increase the demand for skilled financial executives. Controllers and CFOs who understand how to use data in service of the organization will find themselves valuable assets for any company.
Likewise, hiring teams will no doubt place greater priority on candidates who have a background in data analytics, which may also become a growing part of continuing education for financial professionals.
