Finance teams have always been responsible for reporting on the health and performance of their businesses. Historical reporting according to GAAP, however, doesn’t always present the clearest picture of the trajectory or provide the insights for the management team. From the CFO’s perspective, a key challenge is the shift from reconciliation to a greater focus on how we get the right analytics and business insights from data.
Using analytics tools and big data to draw business insights
Innovation in technology has positioned finance leaders with more tools to be successful in their roles and to aggregate data across the enterprise to help them make informed decisions. As a CFO, I’m constantly evaluating and leveraging technologies to help streamline processes. Technology makes things like reporting much simpler than how it was done in the past. We now have opportunities to access data in real-time and use that information to inform how we operate as a business.
In my experience, it starts with developing a common language with the management on the key performance indicators (KPIs) and critical metrics for evaluating the growth of the business. Once you have these definitions in place, it becomes easier to map out a process for using a technology solution to automate the calculation and reporting into dashboards.
For example, I’m able to report on the KPIs of the business at any moment with a technology solution like Domo. This gives our management team a common view of the performance of the business and provides us the ability to react in real-time and adjust our plan as necessary. If we’re underachieving in one area of the business, we can pivot our strategy and adjust our expenditures to realign to our plan. Having access to these analytics allows me to feel confident in the decisions I make every day.
The ability to access data across the enterprise also helps CFOs to inform decision-making and further understand the business. The trends revealed from these large data sets gives a more accurate picture of what’s happening in the business – areas of improvement and areas of achievement. Technology offers a holistic view of the business and helps simplify the strategic decision-making process for business leaders.
Leverage data to make thoughtful financial decisions
Technology and big data analytics offer CFOs the opportunity to be more effective strategic leaders for the business. This helps finance leaders decide what parts of the business need to adapt, shift, or adjust to achieve KPIs.
Consider a few examples to better understand how this thinking might be applied. Take for example Radio-Frequency Identification (RFID) technology. It’s more than just supply chain or inventory management. The chips in RFID devices carry bytes of data that can be aggregated to understand the bigger challenges of the business. For businesses centered around inventory, having the ability to not only know where that inventory is — but also understand the processes around shipment and tracking — gives them insight into their operations. With this information, they can make changes to their strategy to improve processes and management.
Another example of how to leverage data to make better business decisions is the Internet of Things (IoT). The data gathered in IoT devices can also be aggregated to understand broader trends. IoT helps CFOs understand consumer trends and market opportunities. With IoT information is more real-time than it’s ever been before. CFOs can now understand what’s being sold and how it’s being used. These insights inform every part of the business including go-to-market strategy, product development, and user experience.
If you’re not currently leveraging technology to inform financial decisions, it’s time to start evaluating the options available. Find the right fit based on your needs and you’ll be better positioned to lead your business to the next stage of growth.
The CFO Corner is a recurring series on the Motus blog featuring advice from Motus Chief Financial Officer Tim Brown who has spent his career working with technology and growth companies as an executive and investor. The topics covered range from management best practices, insights on industry trends, and advice for the modern finance leader.