Recently updated on September 5th, 2023 at 09:45 am
A company’s Chief Financial Officer (CFO) is becoming increasingly important. The finance management was previously responsible for keeping the books, managing the budget, and managing cash and capital. Many CFOs and their teams still use Excel to collect data manually and store it rather than studying and understanding it with business intelligence. As a result, data silos become disjointed and inconsistent.
However, as our global economy becomes more competitive, it is becoming increasingly important for every member of a company to add direct value. CFOs have the potential to accomplish so much more. CEOs and boards of directors are expecting more from their CFOs, expecting them to provide insight, advice, and strategy for the company. As a result, this position is well-positioned to take advantage of the data that BI Intelligence has to offer.
Redefining Business Intelligence
BI began in the 1960s as a means of sharing information across an organization, but as computer technology advanced, it took on a new and expanded role. The Big Data Revolution has changed entire industries, and modern BI now encompasses data mining, reporting, querying, data preparation, and statistical analysis, among other things. Business intelligence entails more than just data analysis but finance management software too. Finance management tools are a subset of BI, but it encompasses a lot more. This department collects a large amount of data from various sources, organizes it, and defines it so that it can be used effectively.
Regardless of what you’re selling, every business generates data. Finance management BI tools create a holistic view of an organization’s data, which can then be used to drive change, adapt to the market, eliminate inefficiencies, and more.
Finance Department The Fuel To Drive The Change
The finance department has the potential to be a powerful change agent for the entire company. As a result, the CFO and the BI department are a perfect match: a potent combination that can propel a company forward. The Business Intelligence department is your way of adding more value to the organization as a CFO by having access to a large amount of high-quality data and knowing how to use it. A strong relationship with business intelligence enables a CFO to do more with the data collected, elevating their role from accountant to strategic advisor.
Wayne Eckerson wrote a white paper that is worth reading that is a little older but still relevant. It’s almost as if the massive amount of data that BI intelligence brings in will “supercharge” the CFO’s role, allowing them to do more than just accounting. A Chief Financial Officer who actively collaborates with a Business Intelligence department is far more valuable to an organization than a traditional “accountant” CFO. BI can help a CFO do so much more than just keep track of the numbers.
Here are a few examples of how business intelligence tools can help the CFO with Finance Management:
Information is gathered in a fair and impartial manner.
Companies require an unfiltered stream of data that is free of any agenda or filter. The primary function of the BI department is not to analyze or interpret data. Instead, it collects as much data as possible in a completely unbiased manner. This unbiased stream of data, free of any agenda or filter, is critical for a business.
When data collectors have a goal in mind, they are more likely to find data that supports the ideas they are attempting to prove. This frequently occurs inadvertently, and the perpetrators may not even be aware of it. The BI department lays the groundwork for clear, scientific responses to questions like “Who are your most profitable clients?” What was the performance of your sales team in the previous quarter?” “What was the revenue from your most recent marketing campaign?”
The finance management (department) can focus its time and energy on analyzing the data rather than collecting it now that the BI department is in charge of bringing it in. The BI department then brings the information to each individual expert, free of the goals and motivations of the various departments, so they can decide what data is most important and what to do with it.
Organizing A Diverse Set Of Data
CFOs must lead by example in breaking down data silos and advocating for the use of a diverse set of data.
When it comes to making business decisions, having a bigger picture and a more robust set of data is critical. However, unless you have a BI department to keep it organized, looking at a diverse range of data all at once can be confusing and overwhelming.
The BI department gathers data from a variety of sources and combines it to make it more manageable. When the CFO collaborates closely with BI reporting tools, there is a shift in mindset in the finance department about how to use data in general. They will recognize the value of combining all types of data, including financial and non-financial information. This will set a fantastic example that has the potential to spread throughout the company. The team will begin to think outside of its department’s data silos, combining data from a variety of sources to make decisions.
This means that, rather than having a plethora of disparate data sources, all of them can be combined and used in concert. It would be overwhelming noise without the BI department to organize and make sense of this stream of diverse data. This data would remain siloed without a strong BI strategy to bring it together. For example, you might have Google Analytics web traffic data but no idea how to use it to improve your sales efforts or operations. This means you’re missing out on important information.
Redefining Data The Old School Way
As CFO, you must ensure that there is a single version of truth throughout the organization and that it can be reconciled with financial data. The BI department establishes agreed-upon answers to the question of “what does this data mean?” when it defines the data. Because all departments understand the data in the same way, everything is quantified and described clearly. As a result, it can be used more effectively.
The data can become meaningless without these definitions. Various departments within the company can use and interpret it in a variety of ways, which is inefficient and can cause a lot of confusion.
Finance Management can Make Informed Decisions
The Business Intelligence department’s most important role is to provide information and context that allows the CFO to make smart, informed decisions. Without this context, your business strategies are just that: guesses – hopeful stabs in the dark.
Consider a company that is deciding whether to devote marketing resources to retaining existing customers or to attract new customers. You can’t figure out this strategy by guessing or copying what other companies have done; you need to look at the numbers.
There are some very important things to know before making such a decision. Let’s look at an example of a SaaS company:
- How do you define the data that underpins key customer metrics like new, active, reactivated, and churned customers? Is an active customer, for example, simply someone who has an active account or spends a certain amount per month or uses your service a certain number of times?
- How much does it cost to market to existing but inactive customers in order to reclaim their business?
- How much does it cost to bring a new customer through the sales funnel from beginning to end and win their business?
- In comparison to a new customer, how much does the average existing customer spend?
Before you can determine whether marketing to existing customers or new customers will yield a higher return on investment, you must first answer all of these questions.
This information provides context for the decision, ensuring that all options are as well-informed as possible. To develop a data-driven culture, CFOs must lead by example: decisions must be based on actual facts and numbers, rather than doing things “because that’s how we’ve always done it” or on gut instinct. David Waller of Oliver Wyman recently wrote a good article on the 10 steps to creating a data-driven culture that can help you get started.
It’s also critical for BI to pre-filter with data sets that are safe for others to use. This type of “self-serve BI” allows anyone to run their own analyses without needing the assistance of an analyst.
Rather than simply feeding in meaningless data, the BI department assists in decomplicating the data and delivering it in a format that is easier to understand.
Flaws Are Your New-Best-Friend
Your informal internal audit department could be Business Intelligence.
It is frequently true that taking a step back and approaching a problem from a different perspective can provide better insight and generate new ideas. The BI department is more likely to spot issues with the company that might not be apparent to each of the individual departments by collecting more robust data and looking at it from a bird’s eye view.
It’s possible that your company has flaws that aren’t readily apparent from unusual reports. This type of “big picture” analysis is possible thanks to the Business Intelligence department’s robust and comprehensive data. In addition, the BI department has the ability to detect data that is missing, incomplete, or inconsistent. This frequently indicates flaws in a company’s controls and processes, which is critical.
This allows each department to make changes that could save a lot of money. You’ll be able to work ahead of time to ensure that any flaws don’t cause problems before the end of the next fiscal period.
Keeps An Eye On Trends
Machine learning algorithms and advanced statistical methods can help you take your forecasting to the next level.
A truly effective CFO does not rely solely on historical data. They make educated guesses about what will happen next and then prepare themselves accordingly.
Rather than using traditional forecasting methods, CFOs can use advanced methodologies to make projections for the future of the company and develop smart plans using the complex data collected by BI. Of course, knowing the future with 100 percent certainty is impossible. You can, however, make smart informed guesses and stay ahead of the curve if you have the right data. What about a forecasting model with over 200 variables, like the one described in a recent McKinsey article? It’s possible thanks to BI! Without this element, many businesses become reactive and lose their competitive advantage, doomed to always miss out on the next best move.
The BI department can keep up with industry developments, track market changes, and anticipate customer needs. In addition, BI will aid the company in determining its relative strengths and weaknesses in comparison to its competitors, as well as identifying trends and market conditions.
Decision-makers can act quickly and correctly with this information, taking a chance on potentially profitable opportunities.
How to Begin Using Business Intelligence
The Chief Financial Officer’s role is expanding to include a lot more, which makes it an exciting time to be in this position. You can elevate the CFO’s role and provide more valuable, data-based insight to your company by leveraging the power of a BI department.
Business intelligence will not only help you deliver more value in your role as CFO, but it will also benefit the entire company. According to a Nucleus Research study, investing in analytics pays $9 for every dollar spent. Any CFO’s dream is to have such a high return on investment. The most enticing reason for CFOs to get involved with the Business Intelligence department is the fantastic results.
If you’re ready to start a business intelligence department in your organization with PathQuest® but aren’t sure where to begin, here are some helpful hints:
- A CFO who is analytical and tech-savvy is the type of CFO who can make the most of a BI department. They will place a high value on the data collected by the BI department and enter the process with their eyes wide open.
- Begin by defining your business strategy and the key performance indicators that will help you determine whether you have met the strategy’s objectives.
- We recommend that the BI department and the CFO be in close proximity to one another. In my company, for example, I even relocated the BI and finance departments to the same floor.
- Define roles clearly. Everyone should be aware of who reports to whom and what aspects of the business they are responsible for.
Do not be hesitant to inquire. After all, it’s impossible to be an expert in everything as a Finance Director, so don’t pretend to be. Instead, concentrate on being a knowledgeable partner with whom to discuss these issues. Work closely with the PathQuest® BI department and ask lots of questions so you can fully comprehend what they’re doing and how you can apply it to your objectives. They work at the intersection of business and technology, and their knowledge can be extremely valuable. Know more about Business Intelligence finance management Or Book a Demo here