Predicting the Unpredictable with Data
There isn’t a company team, initiative, or function that isn’t touched by finance. The finance department is where everything comes together in the organization. Because finance and credit leaders oversee everything, they have access to an incredible amount of data and insight into all of the workings of the company. The finance and credit team understand how the firm generates revenue, how they measure up to the competition, where their pricing stands across the industry, and what products and services are selling well.
The CEO and other business leaders look to the finance and credit team for guidance in terms of how they’re running the business and for insight into the stability of the firm. The finance team knows whether the company should be investing, where they should invest, which companies they should acquire, and what debts needs to be paid and what should be distributed to shareholders. Using data to run predictive analytics, finance and credit professionals can take the value they add to the company to the next level and help to steer the entire strategy of the organization.
How Data Can Drive Growth
There’s more data available to finance departments now than ever before. The business world’s shift to digital systems has opened the door for firms to track data on everything, from industry patterns, to credit and payment terms, sales, revenue, costs, and more. This is both an incredible opportunity and new challenge for finance professionals. Just think about auto manufacturers as an example: it’s possible to outsource the development of many parts and services from many external suppliers.
Without predictive analytics, how can companies best manage these suppliers? To do so, they need data on how much to pay them, how to benchmark the value they provide and manage any risk involved. This is especially important as companies become more global and may run into issues with managing terms of pay across multiple international borders. As the complexities for organizations grow, the need for data and information from the finance team becomes even more vital for success.
Start with the Data That You Have
You already have the resources that you need for successful alignment between credit and risk. Finance and credit leaders can get started with predictive analytics by first using the data that they already have access to. Think of all the reports, income statements, balance sheets and statement of cash flows that you have—those are still important and won’t go anywhere. But there are other reports that are produced weekly or monthly that highlight where revenue is coming from, what companies you’re selling to, the credit exposures you have and how much money your firm owes — those reports can be used to begin to create predictive analyses with data. Using the data that you have, you can better understand which customer segments to target to sustainably grow your business. This is how predictive analytics can help you get started driving revenue for your organizations.
Create a Data-Driven Culture
Data can show finance teams where the firm is making the most money relative to competitors as well as where the company should set its focus for 2017 and beyond. The data itself does 75 percent of the work. However, finance can’t make these decisions in a vacuum. To be successful, finance and credit teams need to collaborate with other growth-oriented departments, such as sales and marketing. But when data is difficult to access or understand, efforts to collaborate end before they are even begun. To keep information flowing freely, finance and credit teams should follow four basic steps when sharing data:
- Keep things simple: Avoid under-communicating (or over-communicating) by being selective with which metrics you include in your reports.
- Use visualization: Presenting data with visuals is an effective way to give your colleagues a lot of context, quickly. Aim to share visualizations that anyone could grasp within 10-15 seconds (or less).
- Surface patterns and insights: Reporting on trends is important for the success of the business, but it’s also crucial to share how you’re drawing insight from the data.
- Be mindful of how data is shared: To spread the joy of data and make it easy for other teams to interpret by using tools, like cloud-based dashboards.
The insights that the finance and credit team develop can help sales and marketing pursue the best industries and customers for the business. This will help lower the accumulation of bad debt as well as strengthen the firm’s customer portfolio. Collaboration and transparency with data help create a data-inspired culture for the whole company.
The data that resides with finance and credit teams is extremely valuable and can be game-changing for the organization as a whole. Using data to drive predictive analytics, finance and credit can steer the organization toward stronger growth.
To learn more about how credit and finance leaders can drive growth and value within their organizations, download Fueling the Revenue Engine.