Analytics is a core competency of the finance function, yet FSN’s 2020 research, “The Future of Analytics in the Finance Function” identifies that 86% of finance functions say it delivers very little insight. Earlier FSN studies consistently identified data as the main stumbling block to delivering insight and the 2020 research once again confirms that data continues to present a formidable challenge. But for the first time, this year’s study finds that modern finance functions are also technology constrained. 40% say they do not have the analytical tools to fully exploit the data they have and more worryingly, this is a 6% increase on 2018 when 34% of companies reported that they were technology constrained. So, what exactly are the technology constraints and where is investment most needed?
First things first
Analyzing data effectively depends on being able to get hold of the necessary information, ensure it is in a conducive format, and have the right analytical tools (and skills) to be able to exploit it fully. Many organizations fall at one or more of these hurdles. For example, 20% of companies are “data overloaded”, with too many conflicting data sources and poor data governance; and 28% feel “data constrained”, which means they struggle to access the data needed to drive insight and decision making.
Conservatively, data volumes are estimated to double every two years and to make matters worse, finance functions are increasingly required to contend with unstructured data from a variety of operational systems which doesn’t readily conform to established accounting rules. So, it is perhaps unsurprising that almost a half of companies struggle to respond to ad hoc requests for analysis, two-thirds can’t analyse their data fast enough to compete properly in their market, and 40% are overwhelmed by the sheer volume and variety of data.
Data quality, i.e. data integrity, accuracy and timeliness, is the foundation of insightful analytics and no matter how good the analytical technology, the results will be disappointing unless the data quality is fixed first. But this year’s research identifies that “data mastery”, (the ability to manage data as a corporate resource to provide competitive edge and insight) is slipping from the grasp of the finance function. Only 12% of finance functions claim to be data masters compared to 19% in 2018 and in a near perfect storm, this is happening at exactly the same time as businesses are reporting their analytic capability is technology constrained.
Resolving the data dilemma is challenging and made more complex by fractured legacy systems but before finance functions can make inroads into the lack of insight, they need unified information systems that connect to a variety of operational data sources and are capable of codifying and rendering it in an analytical platform to support decision-making.
Data visualisation is key to driving knowledge and insight
Once organisations have mastered their data, the next constraint is the analytical technology that can drive insight and decision-making. For this, finance needs analytical tools that understand the subtilities of their data, so the technology doesn’t get in the way or become a barrier to creating and sharing knowledge and insights. Ideally, all of this, without the need to depend on the IT function for support.
FSN’s 2019 research, “The Future of Business Partnering” identified how crucial data visualisation technology is to driving insight. Currently only 36% of organisations use data visualisation tools, however, looking ahead, this year’s research is encouraging. It identifies that 42% of CFOs are planning to invest in these tools over the next 2 years. Only 16% have no plans to use data visualization techniques in the next three years.
Modern finance functions face the twin challenges of data mastery and technology constraints, especially data visualization tools. It is becoming patently clear that organizations cannot compete effectively unless they use analytics to underpin their insight and improve their agility in a crowded market. Now, more than ever, CFOs need analytics at their fingertips and the current crisis has shone a light on the limitations of analytical tools and data. CFOs need to accelerate their investment in analytical technology, but they will be no further forward unless they invest in a competent data platform as well.