Andy Morris | Principal Product Marketing Specialist
The role of a chief financial officer, or CFO, is always evolving. It’s not simply about being a finance executive anymore; it’s about being a strategic partner to other business executives. Thanks to their analytical mindset and familiarity with company numbers, CFOs use business intelligence (BI) as a strategic tool to expand influence throughout the company.
To continue building partnerships across the organization, CFOs need to become masters at translating all sorts of data into insightful analysis and actionable advice. Is that new marketing campaign delivering the expected results? Are supply chain adjustments paying off in better on-time delivery of parts and raw materials? Did shifting our call center operators to work from home help or hurt customer service?
That’s where BI systems and dashboards come in. BI technology helps finance leaders pull data from internal and external sources and build analyses that track relevant data and develop key performance indicators (KPIs) that matter.
What Is Business Intelligence (BI)?
Business intelligence (BI) is the technology driven process that enables businesses to organize, analyze and contextualize information from around the company. To support decision-making, a BI system needs high-quality data inputs. Your financial accounting suite is a key source for shared, accessible data that can be supplemented with BI-driven reporting, predictive analysis, data mining and third-party feeds.
With the power of BI, companies can use both financial and operational information to gain business insights from current, historic and even future trend data. This data can then be used to update performance metrics, such as financial, sales, marketing or operations KPIs. With BI, companies can closely track financials, optimize their supply chains and make better decisions on everything from marketing to M&A.
BI capabilities center on built-in, customizable dashboards that allow for real-time analysis based on business objectives and goals developed from the information coming from a central database. Decision-makers can identify exceptions, trends and opportunities and drill down into any underlying metric or transaction for greater detail.
Integrated BI systems allow the entire organization to make better decisions by analyzing very large volumes of data from all lines of business, as well as external sources. Look for a scalable system that provides a range of integrations so you can pull in all relevant data and allows for role-based access to ensure your team has access to the right dashboards and key performance indicators, with the right data at the right time.
Why Is Business Intelligence Important to CFOs?
CFOs know that a company's financial health depends on accurate, up-to-date data. A BI practice can help your organization remain competitive and financially stable by providing fast access to detailed cash flow insights, expense management optimization opportunities and the ability to make informed decisions about costs and profitability, and tie all of this back to business performance.
BI is also good for the finance team. Once they get used to consuming BI-driven insights, finance professionals become more efficient at their jobs and adept at knowing what actions promote growth. They become evangelists for a data-driven culture and trusted partners to the rest of the company.
Benefits of Using Business Intelligence (BI) for Finance
Using business intelligence software is the opposite of juggling cobbled-together spreadsheets or relying on basic, one-dimensional reporting. BI provides a manageable way to correlate and visualize large amounts of disparate data from multiple sources to reveal financial and operational insights and make it available to anyone in the organization.
Let’s take a look at potential benefits.
Your organization can mitigate risk by using BI tools to track financial behavior and detect fraudulent activities in near-real-time. BI tools can also monitor employee behavior to ensure compliance with industry regulations. In addition, you can combine internal data with information on current industry and market trends to, for example, analyze credit portfolios and see if there are any occurrences or indicators of delinquency. It’s a proactive way to mitigate accounts payable risk.
When it comes to profitability, retaining current customers is better than having to continually acquire new ones. BI tools can keep marketing and sales teams armed with the most current information on customers. They can zero in on your most loyal and profitable clients to market new products and services, upsell and increase customer lifetime value. Conversely, they can take information from BI to make less profitable customers more profitable.
BI can be used to monitor customer retention metrics, including attrition rate, average order value, repeat customer rate and purchase frequency. Your BI tool can also collect product- specific information to determine where to focus R&D efforts, how services can be enhanced and which product lines should be shelved to protect profit margins.
BI tools, with proper role-based access, ensure everyone has access to the same data at the same time. No more double-checking Excel spreadsheets or waiting for separate data source analysis; a centralized data warehouse with role-based access, data-rich KPIs and visualizations offer teams the ability to tell better stories with better data.
BI can be also used to compare your product or service offerings to your competitors to discover ways of strengthening your competitive position within a market. For example, when it comes to using personalization to gain a competitive edge, the banking and financial sectors are seeing exceptional benefits from BI tools that enable them to customize products by drawing on available data. This information can also be used to monitor market trends to predict customer behavior, plan new investments and ensure existing products continue to meet customer needs.
Any customer relationship management (CRM) data your organization has gathered will contribute insights into the ROI or profitability of marketing campaigns. Using BI to measure advertising spending, email marketing performance and a campaign's overall success will reveal where your organization's messaging resonates and where it falls flat.
Making sure your organization operates efficiently internally is just as important as measuring the consumer experience. Business intelligence software is a data-centric way to assess operational performance, whether resources are being allocated efficiently and how your employees perform relative to peers.
To that end, don’t forget to include HR teams in BI planning. For example, BI can be applied to human resources to understand employee satisfaction, engagement and productivity. It can also be used to ensure you have the right workforce plan in place to match your future business objectives.
How Finance Is Using BI
BI offers insights into internal and external factors that affect a company’s bottom line. Here are just some of the dashboards and analysis categories that indicate the business’ current state, trends and problems.
Planning and analysis: FP&A, budgeting and forecasting dashboards support operational and strategic goals. Financial analysts frequently use BI tools to forecast how an organization will perform. The data they use, drawn from sources that provide insights on business trends, cash flow, historical data, scenario modeling and variance analyses, can help finance teams compare actual performance with what was forecast and drill down into the reasons for any discrepancies. If there are opportunities for improvement, CFOs can now lead the way.
Operations reporting: This type of dashboard provides a tactical view of business operations by pulling together insights on the daily realities of running a company. Because operations reporting in BI systems deliver detailed insights on current and short-term needs, CFOs can zero in for rapid decision-making. In other words, operations reporting reveals highly granular information to make strategic decisions that benefit the company. For example, BI can be used to analyze how long it takes to turn an invoice into cash to support cash-flow goals and greater process efficiency.
Risk management: When threats arise, leaders need to respond quickly. BI and data management tools help the finance department track financial performance and provide a comprehensive view of the organization’s credit and market risk. BI allows for the placement of important KPIs front and center on any dashboard to ensure your team can all instantly see what matters most. Plus, BI is extremely helpful compiling risk assessments as investment opportunities arise and responding should regulators require you to submit information more often.
Expense reporting and management: The finance department can utilize dashboards and analyses to gain a comprehensive picture of employee spending, enforce expense policies and monitor T&E trends. Effective tactics include scheduling dashboards and reports to be delivered via email to help managers monitor their staffs, setting up alerts and notifications to proactively manage spending, and connecting BI tools to your organization’s expense, invoice and online travel booking systems.
In fact, CFOs should ensure that BI draws data from the company’s full expense management workflow.
Cash flow management: Managing cash flow is easier with BI because managers can automatically generate and continuously update AR and AP forecasts. That way, if there is ever a cash surplus or shortage, the organization can scale back or respond quickly to growth opportunities.
Other ways business intelligence can help with cash flow management include helping companies analyze the duration and cost of major projects, become more deliberate when it comes to spending on inventory and determine whether to go forward with a merger or acquisition.
Balance sheet management: Spreadsheets and financial reporting are commonly linked, as many finance departments use Excel for reporting, especially for balance sheets. While spreadsheets can summarize a sizable amount of information, they are not useful for exploratory analysis. Instead, BI can find and analyze contextual information and generate visual analytics within operations, financial and accounting systems. CFOs can now be armed with detailed variance reporting and the ability to dissect and analyze the information behind the balance sheet.
Revenue management: The insights created by business intelligence systems make financial management, including revenue management, efforts more effective. The right BI tool can guide important decisions like what to sell, whom to sell to, when to sell, and what price to set. Dashboards can now harness the power of a centralized BI system to collect, interpret, and present data through key performance indicators helping teams formulate data-driven plans and predict customer behavior.
- Pricing: Business intelligence systems gather insights into, for example, competitive and historical pricing, pricing position, discount analysis and shopping cart abandonment rates so that organizations can recover lost sales and boost conversions to generate higher profits.
- Inventory: Finance teams can use BI to understand future product demand based on past transactions and suggest supply chain optimization tactics, improve procurement, trigger cancellations and send alerts when stock needs to be replenished.
Profitability management: BI systems break down factors including channel profitability, discount impact, lifetime revenue contributions for various groups and more. With these insights, CFOs and other business leaders can focus on acquiring and retaining profitable customers.
Ultimately, BI helps leaders better understand the link between customer behavior and profitability.
Performance improvement: Paying close attention to financial KPIs is vital to monitoring performance metrics, including net profit, cash conversion cycles and operating profit margins. The data delivered by BI systems indicate whether the organization will be able to hit its targets.
Customer segmentation: Organizations can use data gleaned from business intelligence tools to better understand their customers' individual needs, whether based on interests, spending habits, age or gender. This deeper understanding, including what each customer segment finds the most valuable, will enable marketing to target groups with relevant campaigns, leading to more sales.
Business Intelligence & Financial Accounting With NetSuite
BI solutions, such as NetSuite SuiteAnalytics, collect financial and operational data to produce timely dashboards and reports and enable integrated analysis across multiple information sources and software suites. That real-time visibility helps leaders identify issues, trends and opportunities and instantly drill down for more information.
An explosion in both the volume of data and the number of sources has left many CFOs struggling to get a handle on their own realms — helping operations, marketing, sales and other departments might seem like a pipe dream. Think of BI as the CFO’s secret weapon. These systems will help CFOs wrangle all that data, uncover new revenue opportunities, deliver a competitive advantage, position their companies for growth — and teach staff and peers to embrace a more data-driven culture.