Finance Analytics: The Next Necessary Data Analytics Asset

Finance Analytics

Finance Analytics

How can finance analytics help make a better sense of financial data?

We live in a data populated world. Today, in the connected world, users and devices together create over 2.5 quintillion bytes of data daily! If businesses leverage the right data and analytics tools, they can significantly enhance decision-making. This is why there is increasing use of analytics in many organizations these days for various operations and departments. Finance is one of the sectors that play an important role in increasing the value of ones’ business. Hence, companies are now employing finance analytics models in their operations (e.g., algorithmic high-frequency trading to payment wallets or P2P lending) to search and gather meaningful insights from financial data, in combination with other business data, to inform decision-making.

The use of finance analytics is not new.  Many finance teams have been using data to report on trends and past performance since the 1980s. However, the rumble of the fintech industry is one of the main drivers of the finance analytics market. The size of the Financial Analytics industry in India is US$2 billion in revenue, while the global Financial Analytics market is expected to grow to US$11.5 billion by 2023. Leveraging finance analytics has a positive impact on a range of business outcomes. This includes risk mitigation, customer satisfaction, and bottom-line results.

Further, analytics is the lever by which finance can distinguish itself as a valued business partner to the organization. According to APQC research which was conducted into the current state and success drivers of finance analytics before the effects of the pandemic were visible, finance analytics is maturing at an accelerated pace. Out of the 200 finance executive respondents, almost half of them informed to have been conducting analytics in finance for more than ten years, and 68% have been doing analytics since at least 2014. A majority of the organizations have also increased investment in finance analytics over the past three years.

Finance analytics can involve much more than just a set of discrete projects. It links internal and external data to generate insights that weren’t possible or practical before. It can also evolve into a necessary and true business discipline like other data analytics types (e.g., predictive analytics). Therefore, businesses should consider utilizing finance analytics tools. It can shape up tomorrow’s business goals, measure and manage the tangible assets of an organization like cash and machinery. It can offer deeper insight into a business scheme’s financial status and improve the profitability, cash flow , and value of the business. Finance analytics can also forecast the variations in the market and increase the functionalities of information systems.

Additionally, it is helpful in making smart decisions to increase business revenue and minimize the waste of the business. Lastly, it can also lead to a new business model i.e. Business to Employee, apart from existing B2B and B2C models. It can also help recognize the risk exposure with specific customers, and how each customer relationship affects working capital. It also eases the identification of customer segments that offers the largest margins, currently and in the future, and understand how those margins are affected by the choices made by business leaders. It also presents data and results visually, so they are easier to understand and have more impact.