Analytics is arguably one of the top tools driving business today. As the discipline matures and technology advances, many companies are finding analytics to be an absolute necessity to better gauge a wide range of factors that directly affect their business—from customer demand to weather patterns.
But is finance at the center of the analytics revolution? According to a recent study, only 30% of respondents say FP&A is a priority where accessing information and analytics capabilities is concerned. In other words, the very people who need the tools the most don’t appear to have access to them. This makes it challenging for FP&A to drive analytics if they don’t have what’s necessary to succeed.
At the same time, according to a global PwC study, 61% of executives rely more on experience and advice than data to make decisions. While that finding may not be surprising, it also demonstrates the FP&A function’s challenge of gaining more access to data.
The human intuition factor and lack of access to analytics set up roadblocks to FP&A performing its most essential role. More and more, finance is a forecaster, a predictor of trends based on current data. But without providing the means to perform that role, businesses essentially shoot themselves in the foot.
At the same time, other departments are gaining access to analytics—from marketing to strategy to HR. While it is certainly a positive development that other parts of the business use analytics (think logistics using tools to better predict traffic patterns), CFOs need to make a strong case that their people need predictive technology as well.
Long before budget time rolls around, CFOs should lay the groundwork, reminding leadership all the way up to the board of the important role finance plays. They need to argue strongly for investing in forecasting technology and wider access to data. They only need point out that having this wealth of information frees up time for FP&A to concentrate on other high-value tasks that support decisions and build internal partnerships.
Today’s technology makes a CFO’s case for a greater analytics presence even stronger. Many cloud-based solutions offer self-service functions that enable FP&A to run queries without involving IT—a huge time and labor saver. These developments allow FP&A to put powerful analytics into the hands of business partners, resulting in more timely and richer relationships. In the Association for Financial Professionals’ FP&A Benchmarking Survey, 56% of the respondents said that access to integrated, internal and external data and real-time analytics is a key competitive differentiator.
Research also shows a clear correlation between technology investment and efficiency. For example, full-time employees (FTEs) in companies whose technology investments were less than 10% of their total budget spent an average of more than 384 days manipulating financial data. However, FTEs in companies with up to 49% of their budgets allocated to technology only spent an average of about 62 days manipulating the same data. These numbers are compelling.
Even the most fiscally conservative companies should understand that the more they spend on technology, the less time it takes FP&A to complete budgets, forecasts, and rolling forecasting cycles. The result? Greater efficiency and bigger bang for the buck.
For example, the same organizations that spend less than 10% of their budgets on technology say it takes an average of nearly 90 days to create a budget, 23 days to build a financial forecast, and nearly 16 days to complete a rolling forecast. But companies that spend up to 49% on forecasting technology complete those same tasks in 75 days, 17 days, and 12 days, respectively. And, not surprisingly, companies spending more than 50% of their budgets on technology saw those numbers drop to 15, three, and two days, respectively.
Automate and streamline
It bears repeating—when we look at numbers like these, the conclusions are clear: Automating and streamlining many basic, routine financial planning activities significantly reduces the time it takes to complete them, freeing finance to do other, more forward and value-added work.
The time for CFOs to start investing in forecasting technology is now. Doing so will not only help their teams run more efficiently, but it is also an essential step toward steering their companies’ strategic decisions, ultimately helping them become more productive and profitable.