Advanced analytics continues to permeate more functional areas of the enterprise. From marketing campaigns and sales optimization to supply chain and human capital management, business users are deploying newer, easier to use technologies to gain deeper insights, improve decision outcomes at the point of decision, and achieve strategic, financial and risk management objectives.
To ensure that financial and risk management goals are met, CFOs are embracing advanced analytics as well. They are decreasing their reliance on spreadsheets and legacy financial systems. Instead, they are adopting modern tools and applications that facilitate resourcing and monitoring of fund flows to functional areas and return on investment (ROI) of strategic projects.
Advanced analytics also help CFOs adhere with GRC (governance, regulatory, compliance) requirements. At the same time CFOs can also improve the timing and accuracy of financial reporting – and communications – to investors and analysts.
Advanced analytics helps CFOs be more responsive to their various constituencies – both inside and outside of the organization. They can better partner with CIOs to act as enablers to business units by ensuring fast and efficient flow of the company’s two most vital assets: information and cash.
This collaboration drives a virtuous circle: The better the data the CFO and CIO have to work with, the more confidence they will have in their capital allocations. In turn, better investments result in better decision outcomes and operational and financial performance.
Cash can be funneled to those information investments that can not only improve financial ROI, but also the company’s return on data assets (RDA). In digitalization toward the app economy, no two metrics are more critical to the business.
With a stronger understanding of technology initiatives, CFOs can more readily agree on budgets with their CIOs and line of business managers. This ensures better data governance and reins in shadow spending on advanced analytics at the departmental or user level.
Advanced analytics not only provides finance and business teams with a common language to evaluate project funding decisions. It also arms CFOs with their own insights and arguments to measure investment validity and optimize the flow of capital to those that drive both ROI and RDA.
CFOs can also use advanced analytics to justify cost reduction and productivity enhancement programs. Better metrics support improved business processes and head count allocations to increase agility, operational performance and competitiveness. It also makes it more difficult for business managers to push back against hard data, short-circuiting efforts to circumvent the CFO by appealing to the CEO.
Better metrics also enhance communications with shareholders and Wall Street analysts. Without revealing sensitive information, CFOs can more effectively articulate why the company is spending where it is to drive stronger operational performance and financial results.
In turn, with a clearer understanding of the company’s investment decisions – and their potential risk/reward – analysts will have more confidence in management and their own position on the stock’s valuation. Advanced analytics also helps CFOs with forecasting, thereby providing more accurate – and achievable – guidance to “the Street” on quarterly conference calls.
Better data also lets CFOs make a case to shareholders why they should stick around for the longer-term. A more stable shareholder base reduces stock volatility and makes it easier for the CFO to build support for strategic investments with the company’s owners – its shareholders. This may also reduce the influence of activist investors, who have less of an argument in the face of strong ROI and RDA analysis.
To be on the same plane as their other C-level counterparts, CFOs are embracing advanced analysts. They are partnering with their CIOs on funding initiatives that maximize ROI and RDA. Armed with more timely, relevant and accurate data, they can make a strong case to their CEOs and Board of Directors on matters of strategy and performance.
CFOs should also make advanced analytics a priority in dealing with an increasingly data-aware investment community. A company with a higher perceived data IQ among analysts and investors correlates with higher valuations.
While cost reduction and productivity enhancement – two of the three components of ROI – are near and dear to every CFO’s heart, they will have to invest in technology, talent and training to support their advanced analytics initiatives. By doing so, they can join their C-level colleagues in the third ROI component: driving revenues to sustain growth.