Recent benchmark research from Ventana Research found although a majority of participants recognize the need to make changes to their financial analytics, only one-third are planning to make them in the next 12 to 18 months. Another 35 percent also acknowledge the need to make changes but don't view them as a sufficiently high priority to lead them to take action.
In order to make the much-needed improvements, your organization must be willing to commit and make a long-term investment in itself. Here are seven recommendations for restructuring and reorganizing how analytics are used within your organization, by whom and where and why current analytics are a worthwhile investment. This is the third in a three-part series of business analytics' history, capabilities, problems and solutions.
There is strong support for improvement in how analytics are used.
There is room for improvement — in some cases, considerable improvement — in the way companies use analytics. Almost nine out of 10 finance participants in this research said they can improve their use significantly or somewhat. Moreover, those in more senior roles are most likely to say that use can be improved significantly. These results suggest that efforts to improve analytic processes are likely to be perceived as valuable. Even participants who said they have few issues with data quality or their ability to access data for analytics asserted there is room for improvement. This finding points to flaws in one or more aspects of the analytics: the design and/or scope of the analysis performed, the metrics and key performance indicators (KPIs) management chooses, and the way these metrics and KPIs are applied. It is important to show how those measures will support improvements. Examine each of these aspects to determine where problems lie, and craft a project proposal that addresses fixing them.
Assess the maturity of your organization's deployment and use of finance analytics.
The research found organizations tend to rely on traditional budget-related metrics and conventional rearview mirror types of analytics; few use innovative tools, such as predictive analytics or customer profitability to optimize margins or proactive tools such as fraud detection. However, it is a sign of maturity that more than half of participants said it is very important to their business goals to simplify making analytics and metrics available. Applying the Ventana Research Maturity Index methodology, these organizations are most mature in the technology category and least mature in the information and process aspects.
Focus on making finance analytics more accessible.
Making analytics more accessible is a priority for finance departments: Almost nine in 10 research participants regard making it simpler to provide analytics and metrics to those who need them as important or very important. The implications of this finding are clear: Companies must focus on making it easier for employees to access useful and relevant analytics and metrics. Those who have job titles in management most often said this is very important (63 percent vs. 56 percent overall).
Make more analytics available to executives and managers.
Analytics are not always at hand for everyone who needs them. Fewer than half of senior finance executives and just one-third of other senior executives have them always available whenever they need them. Only about one-fourth of vice presidents, directors and managers have them always available. While it is true that a large majority of executives have most of what they need, this is insufficient for optimally effective performance. To profit fully from analytics, an organization needs programs and processes to continuously evaluate the adequacy of the analytics and metrics available to executives and managers and to quickly and efficiently address gaps uncovered by this process. This effort may include making analytics easier to work with for users who are not very skilled technically.
Consider using advanced as well as traditional analytics in the finance function.
Many finance managers use a range of finance-related metrics focused on profitability, revenue growth, accounting accuracy and budget variances. The most important analyses they perform involve income statements, financial planning, cash-flow planning and product profitability. Although the focus on traditional areas is understandable, this benchmark research reveals finance organizations pay too little attention to more advanced types such as predictive analytics and leading indicators as well as relevant market data and trends and customer profitability. Each of these is critical to enhancing the finance function's ability to look forward; in the aggregate, they enable the department to sharpen plans and budgets and to spot important deviations that signal the need to make changes to plans or their execution.
Appeal to concerns about expenses and budgets, but look forward as well.
Perhaps reflecting today's business emphasis on cost control, the research participants' use of analytics and metrics focuses first on controlling operational expenses, managing budgets and keeping tabs on cash flow. Similarly, they identified operational expense and adherence to budget as the most important metrics they use while ranking customer profitability as well as sales and revenue related analytics among the least important. This reflects the traditional role of the department in controlling spending and in part is a cyclical phenomenon. It's important that as the cycle advances and the focus changes, analytics capabilities are available to support the change in emphasis. Finding ways to improve analytics for budgetary issues is a good way to generate support for a project. Following that, open discussion on analytics for improving profitability and other business results.
Work to provide fresh data and timely assessments.
Timeliness of the data used in analytics and metrics is important, yet more than half of organizations have stale or outdated data in the metrics and performance indicators they use. These same companies review their data less frequently than do companies that have data available in real time or nearly real time. The research uncovered an even split when it comes to the timeliness of the important metrics and key performance indicators that people receive: Nearly half get this information within one business week. The rest take more than a week, which Ventana Research found to be too long and even detrimental to an organization's performance because it delays people's ability to take advantage of opportunities, address issues or correct mistakes. In addition, those receiving outdated information may question its accuracy or relevance. If your organization does not have timely data, address the root causes that delay availability. For example, if you take more than one week to close the books monthly, investigate processes and tools that can accelerate the accounting cycle.
To read Ventana Research's benchmark research on financial analytics, click here.