Data-driven finance; the future beyond 2023

By Buddhika Nayanajith, Director – Finance

The function of finance has altered due to the rapid pace of change brought on by new business models, changes in consumer behaviour, and economic uncertainty. If 2020 prompted us to consider what the ‘new normal’ might entail, 2022 has solidified the idea that we are currently (and probably always will be) in a state of never-normal.

Finance executives are now more important than ever in guiding the firm in this new climate. Finance teams have quickly progressed from being merely a bookkeeping function to serving as strategic advisers that work actively with operating functions to advance the company.

Data-driven decision-making is the norm in the modern financial sector. Yet, it goes beyond financial information. Financial, operational, and external data must all be used by finance. Many tech companies invest heavily in cutting-edge technologies to help finance this progression. These technologies are incorporated into cloud solutions so that finance can benefit from all available data.

Data collection, preparation, and analysis typically take more time and effort as data consumption increases. Solutions backed by the cloud automate data analysis using data science, machine learning, and predictive analytics, allowing financial professionals to concentrate on strategic decision-making and action rather than data collection, preparation, and analysis.

This is extremely consistent with a smart piece by McKinsey & Company about the direction that finance is heading. Rethinking your financial model, empowering decisions with more data, and automating processes to free up finance are the three main areas of concentration for the future finance organisation. Let’s dive into each of these areas:

1. Rethinking your financial model (by connecting finance and operations)

Connecting and coordinating important decisions between finance and operations is necessary for finance to become data-driven.

The actual usefulness of networked enterprise planning begins at this point. It ensures that everyone makes decisions using all the pertinent financial and operational data. It does this by coordinating goals and strategies across finance and operations. By collaborating with operations and lines of business, this integrated planning process enables finance professionals to take on the role of strategic advisors.

2. Empowering decisions with more data 

Economic conditions and competitive actions impact every firm, so it is important to consider these aspects when making strategic decisions. Imagine identifying trends in customer perception and purchasing patterns across your product range in several geographies and using that information to predict demand and financial success.

Also, many firms have invested in data science platforms, but it might be difficult for them to use these investments while making decisions on a regular basis. The right solution will let organisations leverage all available data – internal and external.

3. Automating processes to free up finance teams (with intelligent automation)

The secret to freeing up finance to concentrate on higher-value activities is intelligent automation. Every Enterprise Performance Management (EPM) process must be rethought and updated using automation, AI, and machine learning technology.

Before acting on these insights, finance spends a disproportionate amount of time gathering and evaluating data to identify problems, trends, or anomalies. Finance will need more time and effort as more data is considered. It is obvious that acting on the insights rather than just evaluating and reporting on the data creates company value.

In conclusion

The future of finance is data-driven because data plays a crucial role in making informed decisions. With the increasing availability of data and technological advancements, finance professionals can now leverage big data analytics to extract meaningful insights. This allows them to improve risk management practices, enhance customer experience, optimise performance, and drive innovation. Using data in finance can help companies stay competitive, reduce costs, and drive growth.