The analytics and its application for modern finance

Founded 4 years ago in London, the International FP&A Board now conducts member meetings in 11 countries of Europe, the Middle East, Asia, USA and Australia.


CCH Tagetik partners with the International FP&A Board and frequently sponsors meetings in Benelux, Switzerland, Germany, UK and Sweden and in the USA. They also collaborate in Asia (in Kuala Lumpur).

financial analytics
Following are highlights from our conversation


WHAT ARE YOU SEEING IN THE FP&A ARENA?

This is a very exciting time for FP&A. Organizations around the globe are actively pursuing ways to further their use of meaningful analytics. Our International FP&A Board now has presence in 14 cities in 11 different countries. Wherever we go, we see huge interest in the topic of analytics and its practical application for modern finance. At the same time, as organizations commit to doing more and better analytics work, we also see accompanying transformations in staffing, processes, systems and even culture.


IN YOUR MIND, WHAT ARE THE PRIMARY DRIVERS BEHIND THE EMPHASIS ON FINANCIAL ANALYTICS?


The biggest driver is today’s business environment and its constant change. Businesses must be agile, and consequently, decisions must be made very quickly. When making presentations, I often ask audience members to raise their hands if they have had to deal with one or more unexpected situations (sometimes called “black swans”) in the last year. These days, approximately 60 to 70% of people raise their hands.

The second driver is the availability of affordable and flexible analytics tools and FP&A systems on the market. The ability to more and more efficiently manage and utilize large volumes of data is making it possible for finance teams to perform meaningful analytics.


WHAT ARE THE BIGGEST CHALLENGES TO EMBRACING FINANCIAL ANALYTICS?


Without a doubt, the biggest challenge is business culture. As we all know, finance has been traditionally focused on historical accounting. Changing to a focus on forward-looking activities, key business drivers, and relevant decision support requires significant changes in mindset, staffing, and priorities.

The second challenge is around investments. There is much confusion and uncertainty related to how and in what systems and tools to invest. And, then there’s the matter of funding for finance. Too often, dollars are scarce. It used to be that finance-related costs averaged around 2.2% of a company’s revenue. Now it’s more likely to be around 1.7% -- and some companies want to take that even lower. This cost-savings mentality has significant limitations. Companies that want to take advantage of the opportunities and reduced risk offered by analytics will have to make investments in FP&A.


WHAT SKILLS ARE REQUIRED FOR FINANCIAL ANALYTICS?


Positions related to FP&A are by far the most difficult to fill. In the United States, approximately 80% of finance directors say that analytics-related positions are the most difficult to fill; in Europe, it’s about 70%.

The “new generation” of finance professionals need a range of skills outside of traditional finance training. They need to have the ability to forecast and plan quickly and to build driver-based models. In addition to performing detailed analysis, they must also have a sound “helicopter view” of the business.

Also, it is very important that they have the communication skills to be good business partners and support decision makers with relevant information and good advice. Modern finance professionals must be able to work with data scientists, risk managers, operational managers, business unit leaders – people from all across the enterprise.


WHEN IT COMES TO ANALYTICS, IS THERE A GAP BETWWEN EXPECTATIONS AND WHAT FINANCE TEAMS CAN DELIVER?

Absolutely. Many senior leaders bring 21st century expectations but fail to realize that their FP&A teams are working with antiquated infrastructures. Very commonly, finance teams are working with outdated systems that are very inflexible and require much IT support. Excel is still widely used, which is not conducive to collaboration, data consistency, or versioning.

And, as I mentioned before, many finance teams are working under financial constraints. They don’t have the dollars to invest in the tools and systems – or the people – needed to meet these high expectations.


WHICH COMES FIRST – AN ANALYTICS STRATEGY OR ANALYTICS TOOLS AND SYSTEMS?


An analytics strategy must come first. A company can purchase a modern system, but if it doesn’t have an analytics strategy with defined drivers, KPIs, and required models, the investment will not yield the full potential.

Much of a company’s data is in islands across the enterprise. Collecting and consolidating data is a critical prerequisite to performing analytics. It is very important to ensure that data used in any kind of analytics work is 100-percent accurate and consistent. Otherwise, results will be flawed and untrustworthy.

 

For more information on the International FP&A BOARD, go to: www.fpa-trends.com


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