Companies That Use Advanced Finance Analytics Are More Profitable

A great piece, well summarised by Estelle Lagorce in Digitalist.

Enterprises that leverage advanced finance analytics are 57% more profitable than companies that don’t, according to a recent survey by the IBM Institute for Business Value. Of the more than 600 CFOs surveyed, only 4% were considered at the top of their game, employing the use of technology and data to pursue profitable growth. So what about the other 96%?

This huge gap was the topic tackled by the speakers at the recently concluded Association of Accountants and Financial Professionals in Business (IMA) Webinar. Redefining Performance in the Age of Digital Transformation – A CFO Perspective featured thought leaders from SAP and IBM and was moderated by Adam Larson, senior manager of Educational Technology Enablement at IMA. 

A quick reality check

The world is changing, and so are people’s expectations. Enterprises that fail to adapt in the ever-volatile marketplace risk getting left behind by smaller, more agile competitors. Keeping this in mind, Randy Garrison, VP, Line of Business Finance at SAP, kicked off the presentation with two key questions that finance executives need to ask themselves: Do you have the insight to face the challenges today? Do you know what actions to take to respond to all these challenges?

What type of enterprise is yours?

Steve Hammond, delivery partner, Record to Report at IBM, shared the findings of the survey. The survey found that enterprises can be categorized into three groups:

  • Performance accelerators, who use advanced financial analytics to pursue profitable growth
  • Value integrators, who are efficient and excel at standard financial processes
  • Everyone else

Out of these three groups, performance accelerators typically enjoy 55% more revenue growth than value integrators and everyone else.

Challenge the challenges

How do these performance accelerators enjoy such high revenue growth? Randy explained that there are five trends that are dramatically changing the economy, namely hyperconnectivity, smarter technology, supercomputing, cybersecurity, and cloud computing. These performance accelerators have embraced the changes brought about by these trends, adapting and using these new technologies to drive more value to the business.

Taking a lesson

Steve explained that these high performers have a finance team that takes a long view. The disruptions brought about by digital transformation push these finance executives to be active, strategic partners who anticipate risks and opportunities, using integrated information as well as predictive models to provide strategic counsel to company stakeholders.

He added that they found that anticipating trends and the “next wave” is crucial if finance executives aim to be among the ranks of the performance accelerators. He mentioned that CFOs need to be able to adopt new digital frameworks, such as cloud, mobile, security, and analytics, to move their businesses toward scalable and more efficient operations. Championing common standards and practices is equally important for optimization of internal processes as well as to evaluate new opportunities and capital investment. Last, and certainly not the least, CFOs need to be able to look at the information from management and turn it into competitive intelligence that the business can use to boost revenue growth and profits.

Reactive to proactive – leveraging technology and analytics

Technology is a powerful tool that businesses can invest in to move with greater speed and certainty.

The panel agreed that the right technology can enable businesses to integrate information across all departments, enabling all stakeholders to have access to one version of the truth. This “digital core” is something that finance can use to instantly process and analyze company performance data to gain valuable insight and make informed predictions that can then be used to advise stakeholders in handling threats and risks. Steve shared a quote by Randy Harwood, CFO at Graybar USA, one of the respondents in the IBM survey, to sum up the importance of technology in transforming the business. “I want to equip our company to leverage data to become more predictive and less reactive in managing our business.”

Aside from addressing threats and risks to the business, Steve mentioned that performance accelerators also use analytics to drive organic growth and growth through M&A. The survey found that top-performing companies use predictive analytics through a “digital core” in three areas – to identify new products and services, to analyze risks in M&A, and to optimize their pricing and promotions.

In the survey, performance accelerators also mentioned creating a center of excellence for analytics as a main goal in improving the implementation and delivery of analytical capability to the business. An overwhelming majority of performance accelerators polled also pointed to shifting transactional activities, such as receivables, payables, and collections, to a shared services model, automating what can be automated to enable the finance team to become more strategic.

What does this all mean for finance?

Randy shared that finance is in a unique position to become a driver of digital transformation to the business. This is because finance understands the processes of the business inside and out. And with the “digital core,” finance can essentially “run live.” This means that, through instant access to performance data, faster close periods are now a reality. Finance can analyze company performance data and generate actionable insights in real time.

To close the Webinar, the panel took questions from the audience. To sum it up: With the constant change in factors including customer expectations, regulations, and security challenges, how does the finance team juggle engaging stakeholders properly while still having room to support the business? “It all comes down to agility,” Randy answered.

No one can predict the future, so finance needs to be agile, and it’s difficult to do this with legacy systems that rely on heavy configuration. Steve added that finance teams need to be organized, integrated, and efficient, and that integrated solutions can save company resources. These resources can be invested instead in predictive analytics and growing the strategic capabilities of the business.

Neil How
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Neil How

Neil ran his first SAP transformation programme in his early twenties. He spent the next 21 years working both client side and for various consultancies running numerous SAP programmes. After successfully completing over 15 full lifecycles he took a senior leadership/board position and his work moved onto creating the same success for others.

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