Business leaders, how important is financial analysis for the growth of any business? The assumption is that financial analysts are expected to do it for you. Businesses today increasingly feel the need for more real-time measurements and metrics that will facilitate timely decisions and responses which can significantly impact performance and growth. This requires moving beyond standard FP&A outputs to an upgraded system that will provide you with greater Business Performance Intelligence.
However, most financial analysts would take the standard approach and will provide you with cash flow and profitability analysis, ratios that highlight efficiency, rates of return, variance analysis, etc. These are reasonable markers to understand the performance of your business. However, these are ‘lag measures’ or scores made available for past performance or simply, the old way things got done.
Business Case
Let us consider the example of a moneylender. The financial analyst will tell the moneylender how his business is doing based on how borrowers are repaying their loans. He will also get reports that tell him if the audience he is serving is good enough to sustain his business or if he needs to change his underwriting strategy. This is useful information that will help the moneylender to consider what he needs to do to improve the business. However, improvements based on lag measures will need to wait for the completion of a cycle or term when these reports are again made available, to see if they bore fruit or not.
Instead, the moneylender can elevate his game based on more parameters that can be brought in for analysis and review on a more real-time basis. For example, specific borrower behaviors tracked on an individual loan basis, the efficacy of payment processors, etc. This then starts to stretch beyond the standard metrics and ratios to create more relevant and timely business performance intelligence.
This is just a quick illustration of how business intelligence solutions provide a better competitive advantage compared to standard financial analysis. Similar cases can be identified across every business vertical.
How Small and Medium Businesses (SMBs) can make Business Performance Intelligence work for them.
Two important competencies that are required for creating such business intelligence solutions are – database and SQL as well as Analytics skills. This is increasingly expected within the finance organization itself rather than looking at IT and other functions. The old archaic finance and accounting functions are changing and doing things they could never do before. They are metamorphosing into the ‘finance organization’ to change the old ways of doing things. Digital technology is shifting from expense control and spreadsheet-driven accounting and reporting to predictive analytics and creating many areas of business value. Business intelligence tools are becoming a norm and accounting teams are expected to know to use tools like PowerBI and Tableau. Accounting is no longer about living in the past. The Finance Organization is about living in the real-time present to impact the creation of your desired future.
The Finance Organization today requires more than CPAs, MBAs, and accountants. In addition, statisticians, data scientists, finance engineers, behavioral scientists, economists, and even anthropologists need to be in the mix. Disruptions are the new norm. With transactional tasks getting automated or outsourced, humans are encouraged to move to more decision-making support, predictive analytics, and performance management tasks. For SMBs especially, working with a spectrum of talent to achieve this goal may seem daunting and expensive. However, the pandemic has caused many to discover the efficiencies of remote engagement as their employees are forced to work from home. Remote engagement opens doors to new opportunities of engaging talent globally, fully or fractionally to realize the combination of talent at impressive cost efficiencies. This is true – advantage SMB! Those who adapt to the new norms will discover new opportunities and growth. Those that don’t will perish sooner or later.
Finance Engineering and Analytics at Insight
We have built the Insight Collaborative Business Partnering Model to help you enable your very own co-created Finance Organization. No matter what disruptions you are facing now or will face in the future we believe we will always have your back. Our existing and growing customer list testifies to this.
If in your organization you are already moving past traditional mindsets and creative competencies are becoming part of your new normal way of doing things, then we ought to have a brief
We’ll discuss what currently exists and discover what can be envisioned and implemented in future-focused businesses.
