Big data and predictive analytics are often described as game-changers for CFOs. The message is clear: capitalize on these processes to gain a competitive edge and make your business more profitable. This post briefly describes big data and predictive analytics and how these help a CFO to make more reliable financial forecasts.
What is big data?
Big data essentially refers to data that is too large – in terms of quantity, variety, complexity or speed – for traditional processing and commands newer methods of processing. It includes both structured data like transactional information; and unstructured data, including social media posts and metadata.
What is predictive analytics?
Analytics refers to processing data to find and communicate meaningful patterns that emerge from it. Predictive analytics takes this process beyond reporting, to the next level. It covers a range of statistical techniques that employ business intelligence to anticipate future events. Analyzing both past trends and current patterns and the connections between various factors, it identifies opportunities and risks for tomorrow.
How do they help a CFO?
As a rule of thumb, more data leads to more accurate analyses. In turn, these lead to smarter decisions, greater operational efficiencies, lowered costs and reduced risk. A combination of big data and predictive analytics can prove invaluable for you as a CFO. We have covered three main areas in which you may leverage these to improve forecasting.
1. Increase profitability
These analytic techniques help identify customer segments that are most and least profitable. Once you interpret the data, you may act upon it to improve your organization’s bottom line. You could identify key characteristics shared by profitable customers and take steps to retain the ones you have and attract more like them. Also, you could encourage less profitable customers to use less costly self-service channels.
2. Retain talent
Good financial talent is hard to attract and even harder to retain. By learning more about the traits of employees who have left the organization, you may identify the ones who are likely to leave in the near future. You may take measures to eliminate or reduce the reasons that are behind this attrition and intervene to make both reviews and interviews more successful.
3. Optimize Financial Planning
You may establish which market signals affect revenue, arrive at precise profitability and gain insight into demand fluctuations. You may also significantly lower time taken to close books and flag inter-company transaction abnormalities to manage risk. In addition, you may make real-time cash forecasts to gauge liquidity and determine if there is increased need for hedging.
All in all, using big data and predictive analytics can enhance your team’s efficiency, help you make accurate forecasts and enable you to offer invaluable insights to increase profitability and growth.