The value of data to modern businesses is indisputable. From performance analytics to market research, customer intelligence to financial insights, data is considered integral to how organisations plan, make operational decisions and unlock new opportunities for growth.
Yet in finance departments, there seems to be a feeling that data is not being used effectively enough. According to recent research from financial management software firm AccountsIQ, 86% of CFOs and finance leaders in Ireland feel that decisions about financial strategy are being made without sufficient data. Less than half feel they have access to the right kind of data and analytics to make informed business decisions.
How data improves finance strategies
So what exactly are finance teams missing out on if they don’t feel they are leveraging data well enough?
Financial strategy is all about how you finance business objectives. So you’re looking at two things – growth aspirations on the one hand, and resourcing on the other. An effective financial strategy marries the two together in the most effective and efficient way possible.
Data first and foremost tells you what resources are at your disposal. Business growth often requires investment. So you need to know what you have available to invest, or what level of debt you could safely take on within your current financial structure to fund investment, or else what you would need to do to change that structure so you could safely take on extra debt burdens if required.
We’ve used the word safely twice there. Financial strategy is also about risk management – funding your ambitions safely. That includes identifying risk factors both inside and outside the business. In the latter camp, you have things like wider economic trends, but also compliance requirements. Again, data helps to identify what these risk factors are, so you can plan to mitigate them in your strategy.
Data is also hugely valuable for the way that it takes the insights of the past and uses them to help steer the path into the future. Yes, every business wants to track current performance and there are a whole host of financial KPIs used to do that. But thanks to powerful techniques like predictive analytics and AI-driven forecasting, past and present performance can also be used to build detailed statistical models of how financial decisions are likely to play out in terms of future performance.
How data deficiencies hinder financial strategy
Businesses that feel their approach to financial data management and analytics is not robust enough risk locking themselves out of these kinds of future-facing insights and the level of informed decision-making that goes with it. That puts them at a competitive disadvantage versus businesses who are using financial data most effectively.
The AccountIQ survey also gives hints at wider drawbacks. The picture coming from CFOs is that they don’t feel in control. They’re feeling the pressure from all angles. Asked about the main challenges facing their organisation, 40% said the impact of rising costs on profitability, 40% said cash flow, 37% said revenue and profit targets, 29% the accuracy of reporting, 24% compliance risks – the list goes on. This all has a human as well as an operational cost – Irish CFOs say they feel overwhelmed by the challenges facing them 8.5 times a month on average.
Put simply, data can move you from not feeling in control of all the moving parts that go into financial management, to having the level of in sight you need to make informed, meaningful, effective decisions. It replaces guesswork with substantial intelligence, and when you can be confident of the direction you are taking, much of the stress goes away.
Talk to our Corporate Finance team to find out more.
