New research released by the Financial Executives Research Foundation (FERF) and IBM shows how companies can best incorporate advanced analytics into their business planning process. When integrated with traditional legacy data trends and analysis, predictive and prescriptive analytics enable holistic business plans that include sound scenario modeling and forecasts that can help increase revenue, reduce costs, streamline operations, and minimize risk.
The paper also looks at the positive impact advanced analytics can have on the role of financial executives as they use big data to establish more accurate key performance indicators based on integrated demand planning and financial planning. Entitled “Forecasting as a Competitive Advantage: Optimizing Business Planning with Advanced Analytics,” the report is based on interviews with senior executives with advanced analytics experience. These research participants represent a variety of for-profit and charitable organizations located in North and South America.
Effective analysis of companies’ increasing amounts of data can enable better and faster decision-making. For financial executives, this affects demand planning, financial forecasting, and scenario modeling, which helps companies explore thousands of combinations of factors to rank potential outcomes and identify the factors with the greatest effect on business outcomes.
“More effective forecasting and a deeper understanding of how markets are likely to evolve can give finance leaders more confidence in their figures, paving the way to better collaboration with other business leaders and increased confidence in the finance team,” said Andrej Suskavcevic, CAE, President and CEO of Financial Executives International and Financial Executives Research Foundation. “This report gives CFOs and financial executives helpful information related to the implementation of advanced data analytics and guidance on how to best use these tools to improve business decisions within the finance division and across their organizations.”
Frequent users of data analytics interviewed in the report cite best practices including close partnership with IT, agreeing on consistent scope and metrics for the project, and investing in high-caliber data scientists who can work well with IT and understand databases, while also understanding the company’s business needs and goals.
The report also looks at common challenges such as the need for quality data and the high demand for data scientists. Legacy IT systems, ineffective processes, and a reliance on spreadsheets are common obstacles. Financial executives must play an important role by helping business units understand how the application of analytics will help them make more effective decisions. This will improve collaboration between finance and other business areas and lead to more impactful insights and better decision-making.
Training employees to minimize data entry mistakes, securing buy-in from senior executives early in the adoption process, and defining the scope of an analytics project are some of the solutions discussed in the report. In addition, agreeing on common metrics across the business, rather than disparate metrics based on local conditions, is integral to creating usable insights.
“Forecasting as a Competitive Advantage: Optimizing Business Planning with Advanced Analytics” is available online at https://www.financialexecutives.org/Research.aspx.
Financial Executives Research Foundation (FERF) is the non-profit 501(c)(3) research affiliate of Financial Executives International (FEI). FERF researchers identify key financial issues and develop impartial, timely research reports for FEI members and nonmembers alike, in a variety of publication formats. FERF relies primarily on voluntary tax-deductible contributions from corporations and individuals, and publications can be ordered by logging onto https://www.financialexecutives.org/Research.aspx