How to monitor business performance with financial analytics

The finance department monitors and analyzes business performance in detail. Yet they often have to dedicate a significant portion of time just to collate the numbers from different parts of the business - not to mention analyzing the detail behind those numbers. Then of course any identified insights need to be effectively communicated to multiple stakeholders, presented in a way that’s easy for everyone to understand, and delivered while the data is still relevant to inform current decision-making.

When it comes to monitoring financial performance, companies spend months preparing budgets, yet when the numbers are reviewed a year later, performance isn’t always aligned with expectations. In this blog we’ll explore how financial planning and analysis (FP&A) software, powered by a robust business intelligence (BI) foundation, can streamline planning and analysis. We'll delve into the advantages of integrating financial and operational data, the importance of dynamic and flexible reporting tools, and the ways in which real-time performance monitoring can lead to more accurate and timely decision-making. We'll also discuss how automation and BI analytics can enhance budgeting and forecasting, enabling businesses to react quickly to changing conditions and maintain a clear, up-to-date view of their financial health.

Financial planning begins with robust BI

A good financial performance management plan helps develop and promote a business, enabling them to lay a strong foundation for sustainable growth. Without clients and sales, there is no income, so strategies and budgets are largely oriented to them.

The automation of business processes makes it much easier and faster to build budgets and forecasts. Accuracy is improved as the risk of human error is significantly reduced. When budgets and forecasts are created in a BI analytics environment, financial and business operations data including sales, inventory, purchasing and customer data are automatically pulled from your ERPs. Historical data from previous periods is also included, making forecasts more accurate as the software automatically accounts for sales fluctuations such as seasonal trends from the previous period.

Give budgets and forecasts regular attention

A solid BI foundation that automatically feeds up-to-date, consolidated data to financial statements (income statement, balance sheet, cashflow statement) and budgets and forecasts can help turn financial planning on its head. With up-to-date performance metrics at your fingertips, businesses can become more proactive in monitoring financial performance because it’s easier to revisit the budget throughout the fiscal year. There’s peace of mind knowing that you can trust the accuracy of your reporting numbers, and it’s easy to compare actuals against budgets and make forecast adjustments where needed. So, if unforeseen expenses occur, they are accounted for in a timely manner and factored into the remaining budgeting period.

Keeping management in the loop

To effectively monitor financial performance, business partners must be connected to business performance metrics on a regular basis. Management reporting is intended to be a strategic tool that allows these people to understand the complexities of their operations and performance metrics, so they can chart a course toward success.

Many finance teams create multiple reports to suit different divisional needs, which can be an arduous and time-consuming task. A typical management report will provide an overarching view of financial and operational performance across the whole business including operating expenses and KPIs (key performance indicators). However, the head of sales will want to look at metrics specific to their division such as overall sales performance, sales by region or rep, and expenses such as renumeration, travel and mileage. Likewise, the head of operations will want to monitor metrics such as stock turnover ratio, production efficiency and cost of goods sold.

The risk in juggling multiple reporting needs manually is that by the time you’ve delivered them, the data is already outdated. With FP&A software, you can set up a management dashboard covering company-wide business metrics. This allows each department head to access the numbers specific to their division from the same dashboard, which is also easy to customize to suit their needs. There’s no waiting around for month-end to monitor performance metrics, as users can drill into the data specific to their division, where permissions allow, as and when they need to.

Move the needle of business performance

Achieving significant economies of scale is hard once a business has reached a certain level. To improve overall efficiency, a good place to start is a company’s data and their back of office functions. However, if you really want to drive sustainable business growth, financial performance monitoring needs to be a firmly embedded process.

As an an administrative or financial director, budget manager or accountant, maintaining a dynamic view of your finances and monitoring budgets and forecasts to improve business performance are primary goals. There are various BI tools on the market as well as FP&A software, which are for the most part offered as separate tools. If a BI tool needs to be added to your FP&A software (or vice versa) this can mean multiple integrations, added expense and a drain on time and resources.

If you’ve previously tried software solutions that didn’t meet your expectations, getting by using familiar financial performance analysis tools seems logical. But getting by isn’t going to move the needle of business performance. Plus, the frustrations that made you look for a software solution in the first place are still there. Meaning you’ve likely made a mental wish list of ‘wants’ which probably look something like this:

• You want to quickly and easily pull up-to-date data from your ERP + other sources.
• You want to carve out more time to monitor financial performance.
• You want to know that you’re working with reliable, up-to-date actuals.
• You want clear, up-to-date visibility of financial performance so you can spot trends, potential risks or underperforming areas.
• You want to drill into underlaying data to answer your own questions.
• You want actuals to automatically feed into financial statements and budgets and forecasts.
• You want the ability to customize financial statements, dashboards and various visualization tools without needing expert help.
• You want to show your financials alongside other business metrics such as sales revenue or inventory turnover.

BI and FP&A together

Phocas provides a comprehensive solution for financial performance monitoring by offering a platform that combines both BI and FP&A together.

What sets Phocas apart is the solid BI foundation that works smoothly alongside its FP&A products Financial Statements, Budgets & Forecasts and Rebates. Unlike other FP&A solutions, you won’t have the added expense and time investment of multiple integrations, as FP&A products can be quickly added (as and when you need them) on top of the BI Analytics foundational product.

Data is pulled directly from ERPs such as Infor, Epicor, Kerridge Commercial Systems, Sage, and SAP and other sources into one centralized platform. This becomes the trusted source of data truth that automatically flows through to reports, budgets, forecasts and rebates. Every department is empowered as up-to-date data is fast and easy to access and drill into – where security permission allows of course.

The real clincher, however, is how easy it is to keep track of financial performance. The flexibility of Phocas Financial Statements makes it simple to analyze performance across many levels of your business including subsidiaries, divisions, regions, branches and even customers. Financial reporting dashboards are quick and easy to set up and customize. Allowing you to see your financial metrics in one view, and to quickly scan through key statistical and financial ratios such as revenue per customer or debt-to-equity ratio.

As for monitoring budgets and forecasts, Phocas gets everyone on the same page by bringing together financials, planning and analytics. The Finance office no longer needs to act as the ‘budget police’ chasing down the numbers, as each division can collaborate on the same up-to-date financials within the same tool. With more people actively involved in planning and with performance data at their fingertips, it’s much easier for budgets and forecasts to be revisited throughout the year. And when results are shared regularly, it helps people stay focused on the goals set out during the planning phase or to know when to pivot and reallocate resources should market changes dictate a change in direction.