Analytics Helping Finance Teams Boost Performance

A lot of the buzz around the growing use of analytics to inform more effective business decisions focuses on customer data, but the technology can help finance teams enhance the value they generate internally.

By analyzing and reporting internal data more effectively, finance teams can devote more time to advising business units about reducing risk, managing expenses and, ultimately, increasing revenue.

Harshal Chaudhari, CFO of IBM Analytics Solutions, told Financial Executives International’s Committee on Finance & Information Technology how his company is applying analytics tools to help the finance department be a more effective strategic partner to business units.

“We’ve always focused on telling the business where it’s been, but now we’re getting more involved in helping them understand why things happened, and where we think they’re going next,” Chaudhari said.

“By being a trusted advisor, we can help change potential outcomes, and a key tool for providing those insights is analytics. If you think about the information you’re analyzing in your day-to-day work, analytics can help you get to a higher level.”

Data Challenge

In broad terms, data analytics refers to tools and processes that automate the examination of organizational data to revel hidden patterns, unknown correlations and other information that can be used to make better decision.

In a finance context, Chaudhari said analytics tools can help organizations enhance operational efficiency by standardizing mundane tasks and opening time to deliver insights to business units.

At IBM, Chaudhari said, the finance team is using analytics tools to provide dashboards that provide predictive insights about the company’s services backlog and revenue trends, spending patterns, optimizing accounts receivable collection, and critical risk management metrics.

“A successful effort starts with a business problem you need to solve, and asking how can analytics get us there,” Chaudhari said. “None of these projects will be successful if you don’t start with a business objective that you’re trying to address.”

For instance, analytics can help improve revenue tracking and forecasting by analyzing not only historic data, but also pending deals and CRM data. Analytics tools can also factor in criteria such as pending product refreshes that can delay sales among customers waiting for a new product, or the willingness of sales teams to offer more favorable terms as a quarter winds down.

For many organizations, the ability to generate insights from their data is often hampered by a number of factors, including the amount of time finance teams spend organizing and formatting data to get it ready to analyze. For example, most companies have a lot of customized systems and applications that stores sales, customer, risk management and other types data in a variety of incompatible formats.

External Reporting

For finance teams, analytics can also streamline external reporting by centralizing data stored in disparate systems. For IBM, Chaudhari said reporting involves data related to operations in 160 countries and thousands of legal entities. With analytics, he said, the company can allocate revenue from countries to the appropriate entities, and generating the appropriate tax and accounting data, as well as conversions to and from U.S. GAAP and IFRS.

“We have a single system with one regulatory reporting warehouse,” Chaudhari said. “Now we have common disclosure management that generates narrative reports that are linked to the appropriate data sources. We’ve reduces time to produce reports, as well as potential errors associated with manual input and modeling.”