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Advice and Information for Finance Professionals

How to Get Better at Predicting the Future

Guest Author

By Robert Landon

As we've already seen, a vast majority of CFOs want to play a leading role in driving business agility in the digital age. Yet nearly 70% say they lack the resources to do so, according to Agile Finance Revealed: The New Operating Model for Modern Finance—a new research report from Oracle and the American Institute of CPAs (AICPA). 

However, some CFOs are bucking this trend, with a new, agile operating model encompassing three pillars:

  1. Greater efficiency through automation
  2. Better information to predict the future
  3. More influence to drive business outcomes

In our last post, we saw how agile finance teams are driving massive efficiencies with end-to-end cloud-based solutions—plus a new generation of technologies, such AI, machine learning and robotic process automation. 

Today, we'll examine how they're able to leverage information—both financial and non-financial—to predict the future and drive better business outcomes. In fact, they're already achieving those outcomes.  Agile finance leaders surveyed were significantly more likely to report:

  • Increased revenues (89% vs 63%) over the last three years
  • Increased profitability (95% vs 70%) over the last three years 

The Right Crystal Ball

Digital technologies and turbulent market conditions are upending traditional business models. In response, finance needs more data, better data, and more powerful analytic tools. Only in this way can the business respond more nimbly to changes—and identify profitable new opportunities.

Take a deeper look at agile finance organizations. Get the report.

Agile finance leaders have already heeded the call. They are ahead in unleashing the potential of big data analytics and artificial intelligence, with 60% percent rating their big data expertise as excellent, versus only 21% of other respondents.

According to the report, these technologies can turn a financial planning and analysis (FP&A) team "into a powerhouse that generates the insights organizations need to develop innovative strategies and achieve performance levels that eclipse the competition."

Finance and the Rise of Non-Financial KPIs

In a 2015 study, respondents were asked to rank the most important drivers of value in their business. Every single one of the top five were intangibles:

  • Customer satisfaction
  • Quality of business processes
  • Customer relationships
  • Quality of people (human capital)
  • Reputation

In order to track these value drivers, agile finance organizations are developing a set of non-financial KPIs. The new research outlined in Agile Finance Revealed found that agile teams are considerably more likely to measure non-financial KPIs like:

  • Competitive intelligence (65% vs 53%)
  • Brand reputation (69% vs 59%)
  • Talent analytics (81% vs 58%)

Meanwhile, vast majority is still playing catch-up. Only 28% of respondents have fully implemented systems that enable them use non-financial KPIs to guide capital investment. 

From Information to Working Capital

So, how do you turn that information into a desirable business outcome? The non-financial data is not enough. It must be grounded in commercial reality and reconcilable with actual financial outcomes.

“I think a lot of companies can’t orchestrate that or can’t figure it out. And it’s up to finance to do so," says GE Digital's CFO Khozema Shipchandler.

That is why agile finance teams are already playing a key role as brokers of information, not only validating data quality but also ensuring that data and analytics are widely available via:

  • Centers of excellence comprised of cross-functional teams of line-of-business experts and finance professions.
  • Self-service analytics available across the enterprise—powered by integrated ERP and EPM cloud solutions, big data analytics, AI, and machine learning. 

"We often find ourselves very much playing a connector role, driving financial discipline, execution, accountability, and strategy, and then serving as the connective tissue across the entire enterprise,” explains Shipchandler.

Next time, we'll take a closer look at the new skill set that finance teams need in order to become this “connective tissue” and drive better business outcomes across the organization.

Can't wait? Get the full AICPA/Oracle report now, Agile Finance Revealed: The New Operating Model for Modern Finance.

 

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