The role of Chief Financial Officer (CFO) has changed greatly over time. CFOs today not only manage the organization's finances, but also have strategic responsibilities and a significant role in guiding the organization forward. This requires the CFO to have control over the organization's financial data and be able to analyse it into insights to act on. To succeed, the CFO needs the right tools - this is where Business Intelligence comes into the picture.
A Business Intelligence (BI) system gathers operational and financial data in one single place. The data is combined and processed into real-time analyses and displayed on dashboards, allowing decision-makers to spot trends, opportunities and abnormalities. For further insight, check out these 10 ways that CFOs are using BI to lead the financial organization.
1. Planning and analysis
Dashboards that show budgets and forecasts are excellent tools to use when setting the organization’s operational and strategic goals. Data is drawn from business trends, cash flow, historical performance, scenario modelling, and variance analyses. Current performance can be compared to the forecast, and when performance doesn’t match the forecast, the reasons can be explored and improvements can be made.
2. Operations reporting
Dashboards that show the daily operations also show current and short-term needs. Seeing these needs in real-time, the CFO is able to make fast and strategic decisions that will benefit the organization. An example is to use BI to analyse the time from invoice to cash and take steps to decrease this time.
3. Risk management
Dashboards displaying crucial KPIs that show the organization’s financial performance, along with a comprehensive view of the credit and market risk, ensures that management is informed and able to respond fast to abnormalities. With BI, the organization also has ready access to compiled risk assessments should an investment opportunity or a request from regulators arise.
4. Expense reporting and management
Dashboards showing a comprehensive view of employee spending and analyses of travel and expense trends is a useful tool to make sure that these expenses don’t exceed the desired limit and to enforce employee expense policies. The BI system can be connected directly to the organization’s expense reporting, invoice, and travel booking systems.
5. Cash flow management
With BI, managers can automatically create and update accounts receivable and accounts payable forecasts. By knowing there’s a cash surplus or shortage, it’s easier for the organization to decide whether take on new growth opportunities or to scale back. BI also lets organizations analyse the cost of projects and inventory spending.
6. Balance sheet management
BI tools can find, analyse, and visually display information in a way that traditional spreadsheets can’t. Visual analytics can be generated from the organization’s operational, financial, and accounting systems and clearly displayed on a dashboard, and the financial department is able to dissect and analyse the information behind the spreadsheet.
7. Revenue management
BI can guide decisions such as what, to whom, when and for how much to sell. Organizations can gather data on competitive and historical pricing as well as discount and purchase abandonment rates to set appropriate prices and attempt to recover lost sales. BI can help with inventory management by understanding future demand, identifying ways to optimise the supply chain and procurement, and keep track of inventory.
8. Profitability management
Profitability relies on acquiring and retaining profitable customers. BI enhances the understanding of how customer behaviour and profitability are connected by breaking down things like channel profitability, impact of discounts, and lifetime revenue contributions by group.
9. Performance improvement
The insights gathered with BI are used to track performance metrics such as net profit, operating profit margins, and cash conversion cycles. They are the basis for setting crucial financial KPIs which are displayed in real-time on a dashboard, indicating whether or not the organization will hit its targets.
10. Customer segmentation
With BI, the organization can gather valuable data on customer segments, such as needs, interests, spending habits, age, and gender. This knowledge will enable the marketing department to create target groups and create more customised campaigns, eventually increasing sales.
Why is Business Intelligence important for today’s CFOs?