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In the current business climate, finance teams - and by extension, organizations overall - face two major issues relating to their financial data.
The first is that the sheer volume of data they can collect, store, and process has never been bigger, and is growing all the time. This puts pressure on finance teams to make the most of this data and uncover insights that can help the business succeed and grow.
The second is that the amount of regulations and compliance demands placed upon businesses has similarly increased. This incorporates data protection rules such as GDPR and CCPA, and also financial regulations intended to counter criminal activity and ensure transparency for customers. “Data security is very high on the agenda, privacy, the credibility of the data, the reliability. In addition to independent audits on the credibility of the data, organizations may need independent suppliers that can facilitate supplying the data to comply with the new mandates.” Nancy Kamp-Roelands, Professor Non-financial information, integrated reporting and assurance at the University of Groningen.
All this means that businesses, and large enterprises, in particular, must ensure that their financial reporting and analytics capabilities are secure and fit for a fast-changing world, in order to remain competitive and stay compliant. This report explores the current status of financial reporting and analytics, the most common challenges, and how these can be solved, with expert insight from business finance and technology specialists.
Jeremy Price
Senior VP of Financial Planning & Analysis, MicroStrategy
The ability for analytics to provide unprecedented levels of insights for finance departments is well-known. However, despite this, many organizations simply aren’t making the most of the opportunities available to them. Research has found that only 14% of businesses are driving data insights to their maximum; the 86% that aren’t are therefore prone to missing out on insights that can drive competitive advantage. Finance departments need to look at the opportunities, in addition to identifying risks.
A lot of this is due to the fact that analytics tend only to be used on an ‘as-needed’ basis. This is where ad-hoc analysis is conducted reactively when particular insights are required to aid specific decision-making. Instead of taking a constant and proactive approach to their analytics, firms tend to enter a cyclical process of producing reports periodically, which can aid decision-making at the time. However, these cannot be used to spot trends as they emerge and take action to react to them with agility.
“Don’t only look at risks, but also look at opportunities. Identify business challenges and see if that requires a different decision.” Nancy Kamp-Roelands, Professor Non-financial information, integrated reporting and assurance at the University of Groningen.
At a technical level, many organizations using visualization and business intelligence tooling are only applying them for specific use cases, and then only by individual siloed departments. Cross-departmental use of financial data and analytics remains relatively rare. “The finance function needs to break through their silo and work with a holistic approach. The function needs to change from the Chief financial officer to the Chief Value Officer.” – Nancy Kamp-Roelands, Professor Non-financial information, integrated reporting and assurance at the University of Groningen.
Research indicates that enterprises are finding it difficult to handle all the different financial responsibilities they have to fulfill.
The CFO’s responsibilities have grown in a few important areas, particularly in digital. Between 2016 and 2021, certain activities increased greatly for the finance function; digital activities (+22%), investor relations (+20%), and the use of artificial intelligence (+14%). Finally, the use of advanced analytics for business operations has almost doubled (+42%) while data visualization and connectivity increased with 32%. (McKinsey & Company (2021) Mastering change: The new CFO mandate).
The lack of an effective, proactive framework for financial data, reporting, and analytics inhibits businesses’ opportunities to address all of these concerns. In particular, four common challenges have emerged that are preventing real progress from being made: