Analytics have become a go-to tool for most organisations today. We have discovered just how powerful it is for businesses to get information in a timely manner. It helps them make better decisions and to respond much better to current trends that are always in a state of flux. There is perhaps no better use of analytics than finances. If marketing analytics is the heart of every business then financial analytics is the blood that allows them to thrive. We are discovering new ways to increase the value of our business every day.
In short, financial analytics have become game changers for businesses. They are constantly changing industry trends around the world.
What Exactly Is Financial Analytics?
To put this as simply as possible, it’s a tool that provides different looks at a company’s financial information. This analysis is used to gain a deeper understanding of business performance so that improvements can be made. Finances play a key role in all aspects of a business so financial analytics are an essential ingredient of success.
The simple truth is that financial analytics provide forecasting that can be used to shape the goals of a business. This powerful form of reporting is changing industry trends.
Sheds a New Light on Revenue Projections
The data provided by financial analytics reveals some important points about how a customer makes a purchase. For example, you can use predictive analytics to determine where your website is losing customers. For example, Amazon uses analytics to determine the behaviour of a customer in relation to product reviews. They know that products with several reviews get more purchases, so they are able to build this fact into their revenue model. They famously provide an information-driven pathway for customers on their website, using a complex ranking system to drive buyers to better products.
My point is that revenue projections make this possible because Amazon can see that buyers are spending more money on these types of products, so they rank them accordingly. The result is fewer lost sales.
Answers Important Questions About Business Processes
Technology is forcing businesses to create more complex systems so there are several questions that tend to always come up. Financial analytics will help you answer some of these important questions.
- What are the biggest financial risks?
- How can we adapt our process to avoid these risks?
- Are we making the right investments in technology?
- How are different channels bringing us profit?
- Which market segments are generating the most profits?
Understanding these key points strengthens a business and everyone within it because we can create processes that are geared towards higher profits.
Businesses are Rethinking Labour Costs
Financial analytics are changing the way businesses look at labour costs. Let’s use the utility industry as an example. Customers are more likely to call in when their bills are high. By using predictive analytics, power companies can determine which customers will have the highest bills in a given month. This information can then be used to alert these customers before their high bills arrive. That will lower the number of customers that call about high bills, therefore allowing these companies to lower labour costs at their call centres.
That is just one example of how financial analytics can directly affect labour costs. Businesses should make sure that employees are working on core business processes.
CFOs Have Faster Access to Data than Ever Before
Traditional financial analytical systems do not analyse data in real time. They rely on daily/weekly reports being filed. Then those reports are analysed to create charts and other important analytical tools. CFOs can only see things happening in past tense – when it’s already too late to make meaningful changes. That’s why businesses had to rely on intuition so much in the past. They did not have access to real time data.
Fast-forward to the modern business world where CFOs are able to access real-time data. Having access to financial data provides CFOs with the ability to make important financial decisions that can help navigate a business in the right direction. They no longer have to deal with those delayed reports.
Pinpointing errors immediately allows a business to react quickly and mitigate issues before they become too much of a drain on the business.
Businesses Have Become Proactive Rather than Reactive
Businesses have always been infamous for being reactive in nature. Changes occur in the market and a business reacts to those changes. However, the ability to access real-time financial data has led to a shift in businesses. They have the ability to become proactive. In other words, they can predict changes in the market and take action before the change actually occurs.
In business, we’re always under pressure to acquire new customers and optimise their experience. Financial analytics help us learn the spending habits of those customers so that we can create the best possible buying experience. In the past, we were forced to wait until we saw drops in customers to even know there was a problem. Today, we see businesses acting well in advance of consumer trends.
Financial analytics should not be reserved solely for large businesses. In truth, small businesses have just as much to gain from this powerful tool. It ensures that you are able to adapt to trends that could potentially affect your operations. Plus, financial reports are the measuring stick for success used by banks and investors.