How can financial data analytics enhance decision-making?

Financial data analytics can be applied to companywide performance in a wide variety of ways such as developing company goals and objectives, building dynamic profit and loss statements, speeding up month-end close to streamlining budgeting and forecasting.

Modern business intelligence and financial planning and analysis solutions are emerging to address the changing roles of the CFO and finance team. These all-in-one platforms enable them to access a full data set of financial and operational data and rely on the big data processing to deliver scenario planning and pricing updates to assist many people in the business. When preparing reports more regularly and for multiple locations, it’s proving essential for a company to have a single source of data truth so all stakeholders can customize reports from the same place so everyone is making consistent and accurate decisions.

What is financial data analytics? 

Financial data analytics is a specialized subset of business intelligence (BI) and data analytics that focuses on analyzing financial data. It also enables finance team to easily and accurately analyze and report on the financial performance of a business and find and solve problems (with a financial view). 

It provides finance teams with the ability to drill down from high-level metrics, such as revenue or profit margins, into granular transaction-level details. This layered approach enables organizations to understand trends and inform decision-making, and address risk management effectively. By leveraging financial data analytics, businesses can create management reports, improve forecasting accuracy, and drive an understanding of financial health (like cash flow) at every level of the business.

Data analytics for Financial Statements

Financial Statement analysis involves evaluating a company’s historical data to better understand the current and future financial health of a company. By tracking your financial performance alongside operational data, you have access to holistic financial analysis. For many companies, having dynamic financial statements means the data analysis is more real time so finance teams can use the financial reporting to answer immediate questions.

The Phocas Financial Statements platform gives finance professionals the tools to create multi-entity statements with more branch-specific details, making them more relevant to the people working in those areas. The inclusion of the operational data also allows for measuring ratios like revenue per person, which used to be time-consuming to calculate across divisions and departments.

The Financial Statements can be transformed from the traditional data template to visualizations. If you are the financial analyst for many different divisions in a business you can graph all or part of the statement. For example, the Australian group is struggling to manage costs. The data platform allows you to access a full breakdown of costs per month and quickly graph them all over a set period so the people responsible for the financial performance of that division can see at a glance what costs are spiking and potentially address some specific use cases.

Featured video

Spot opportunities & risks

Watch now

Combining business intelligence with financial services

The fintech that consolidates financial and operational data from your ERP and other data sources then works as a reporting, analysis and budgeting platform is often referred to as a business planning and analytics platform.

Finance professionals are taking advantage of artificial intelligence for query prompts in data analytics, customizing performance indicators in financial statements and swapping spreadsheets for built-in templates for financial models in these platforms. Finance teams have the administrative rights but can also provide access to many people in the business so they can collaborate on financial planning.

In the Phocas business planning and analytics platform, a Profit and Loss Statement can compare current to previous, current to budget, or current to previous to budget for greater insight. A customizable executive dashboard can present a wide variety of metrics, such as Return on Assets (ROA) to determine if you are using assets efficiently?

Here is a shortlist of some finance KPIs and metrics that are easily attainable using Phocas Financial Statements solution:

• Gross Profit Margin: This KPI tracks how much profit your company is generating on each dollar of revenue after all direct costs associated with manufacturing. The higher your Gross Profit Margin, the more income you retain from each dollar of sales. This KPI enables you to measure the efficiency of production.
• Operating Expenses Ratio: This KPI allows you to track and optimize your operating expenses by comparing the cost of running core operations to your total revenue. Changes to a company’s OER overtime indicates whether or not you increase sales without increasing operating expenses.
• Net Profit Margin: The Net Profit Margin is one of the most closely monitored finance KPI as it measures how well the company is turning revenue into profits. The higher the net profit margin, the better off you are. Any decline should be closely reviewed for issues such as unsatisfied customers decreasing their orders.
• Current Ratio: This KPI is a liquidity ratio that measures the ability to pay short-term obligations, usually over the next 12 months. The higher your current ratio, the better.
• Accounts Payable Turnover Ratio: This is another short-term liquidity metric that tracks how quickly a company pays its suppliers and bills. A high APT ratio indicates that a company pays its bills frequently, which is important when negotiating with a supplier. However, this also reduces the amount of available cash.
• Accounts Receivable Turnover Ratio: This ratio tracks how quickly a company collects payments. It indicates how effective the company is at extending credit. A low ART suggests the company should revise their policies to ensure timely collection. The higher the ART, the more liquidity is available to pay short-term liabilities.

When business decisions are data-driven

Conventional business decision-making often requires the examination of information from various sources to determine a course of action. Should there be a need for further information from any of the reports, the process entails requesting the creation of a new report, resulting in a cumbersome and less insightful procedure.

In the past, obtaining the necessary facts and data for decision-making was a considerably more challenging task. However, the finance sector now has access to platforms that can handle an abundance of data that can be effortlessly collected, shared, organized, and analyzed in ways previously unimaginable.

Modern self-serve BI and financial planning platforms have revolutionized how businesses access and utilize data, making advanced analytics accessible without relying on data analysts for every query. These platforms leverage  technologies such as machine learning, data science, and sophisticated algorithms to process and interpret vast datasets in real time. With built-in tools that often incorporate Python for advanced modeling, users can perform complex analyses with minimal technical expertise. This access to data empowers decision-makers by reducing dependency on specialized analytical skills, enabling faster insights and more strategic actions.

Choosing a data analytics solution for financial data

It’s essential that you choose a solution that provides information in real-time, is user-friendly, has a customizable dashboard for a dynamic slice and dice analysis. Phocas Software’s Financial Statements module is specifically designed to integrate financial data into Phocas — right down to the individual transaction level. Phocas’ Financial Statements is secure but allows permissions for access to anyone, including your financial team, division managers, branch managers, purchasing teams and more.

No longer limited by traditional reports, users have fast access to their data, from anywhere, so they can stay on top of expense issues and new revenue opportunities. The ability to instantly generate and share financial and management reports enables finance leaders to quickly respond to dramatic changes in trading conditions.