How Financial Departments and Consultants Use Business Intelligence Analytics
Financial departments and consultants can use business intelligence systems to collect, refine, and analyze financial and operational data to develop valuable business insights. Given the vast amount of shareable data that businesses interact with on a daily basis, automation augments decision-making and offers a better outlook for business performance.
This guide explores how financial departments and consultants use business intelligence (BI) analytics to ensure short-term and long-term organizational success. We focus on revenue management, risk management, profitability management, collecting and depicting a company’s profit-and-loss data, global account consolidation, cash flow management, forecasting, efficiency, and smarter decision-making.
One of the first real-world applications of business intelligence is through revenue management. With business intelligence, business leaders develop data-driven tactics to learn more about what to sell and what customer behavior means at the micro-market level.
There are three fundamental ways that BI systems can help in revenue management. The first is in product pricing, where companies base prices on demand and consumer price sensitivity. For example, you can look at data related to shopping cart abandonment rates, pricing position, and revenue margins to create a suitable pricing structure for your customers or to offer ideal discount margins.
The final two are product launch and promotion. An effective business analytics system will provide a 360-degree analysis showing market size, consumer accessibility, target groups, and segmentation types. These findings help businesses cope with competitors and launch new products into the market.
Similarly, you can use business intelligence to market products, especially when applying the marketing mix or during product bundling.
It is vital to note that revenue management through business intelligence is best implemented by availing of a supportive technological landscape. Revenue managers will only perform at their best when interacting with systems that reveal total revenue performance and allow for timely revenue responses in the short and long run.
A company will remain competitive and survive in the long run through proper risk mitigation strategies. With risk management, the focus is on curbing objective and quantitative risks that can harm business performance, cause drops in revenue margins, uncertainty, or increase expenses.
So, how does business intelligence help with all this?
An effective risk management process will entail five fundamental processes:
The first is risk identification. Modern AI and data analytics systems make it possible to point out potential risks that can harm business operations.
The next step is risk assessment. It is vital that business leaders establish the effects a given type of risk can potentially have on organizational goals and objectives. For example, analytics can help determine the effects of customer credit on cash flow management and business liquidity.
The third step is evaluating the risk magnitude. This is done through risk ranking, where business leaders establish the likelihood of occurrence and potential consequences.
The final two stages of risk management are addressing the risk and reviewing the effectiveness of the entire process.
An effective business intelligence system should enable you to prioritize the highest-ranking risks and implement relevant modification strategies. Similarly, business intelligence should help you track and monitor the risk management strategy’s suitability to the organizational budget, labor force, and goals and objectives.
As the adage goes, retaining existing clients is cheaper than acquiring new ones. A business becomes better placed for long-term sustainability when the focus is on customer retention instead of constantly searching for new leads.
Business intelligence tools enable a business to collect data that can then be used for target marketing. For example, marketing teams often maintain access to customer behavioral data, meaning they can upsell or cross-sell when needed. This ensures that your business’s most profitable and devoted clients remain on board over time and that you can increase customer lifetime value.
It is additionally essential to mention the applicability of BI in leveraging customer retention metrics like repeat customer rate, attrition rate, and average order value. Businesses with access to such data can establish a customer’s needs based on their profile, which can help improve service delivery and product quality in the long run.
Another application is inventory management. With the data collected from product demand and supply chain distribution, a business can streamline the procurement process, thus ensuring the enactment of policies that support the stocking and distribution of high-performing products.
Here’s a dashboard template enabling you to track these metrics:
Real-Time P&L & Balances
Business intelligence processes can also speed up the collection and depiction of a company’s profit-and-loss data. The most common form of application is the creation and maintenance of income statements to explain an organization’s financial position and for comparative company analyses.
A typical income statement shows the total revenue, expenses, and net income. By automating the collection and tallying of such data, businesses can minimize the amount of human error in income statements.
It also becomes easier to assess performance metrics, such as net profit margin and revenue growth.
Global Account Consolidation
When it comes to global account consolidation, it is sometimes challenging to deal with multiple entities or currencies. BI makes it easier to consolidate financial statements since you can view all the global financial metrics and how each business unit operates on a single financial dashboard.
Automation further reduces errors that might occur throughout the process, enabling you to reduce cost and time overruns.
Cash Flow Management
At a time when most businesses are grappling with the financial after-effects of the pandemic, it can become challenging to maintain steady cash flows. Data analytics makes it possible to identify what customers want and whether the business has the required cash flow margins to fund these operations.
Through business intelligence, you can lower your variable expenses to make your firm more profitable. You can always delve more into the data collected through analytics systems to restructure your variable cost structure by letting go of unnecessary expenses.
A business can also create cash flow management plans to manage backorders. Backorder management lets you know what customers wish to buy, eventually revealing the number of backorders and open orders you currently have.
In the process, you can figure out whether all these orders match up and enact the necessary countermeasures to avoid losses.
The financial uncertainties created by the pandemic have additionally made it essential for businesses to stay ahead of the competition at all times. With prescriptive analytics, you can better predict your business’s outlook for the future.
So, how can you use business intelligence software to develop an ideal growth strategy for your business?
First, you need access to accurate data. You can use BI software to collect real-time data based on historical trends, which offers an accurate snapshot of what to expect in the future.
Business intelligence processes are also ideal for storing information from multiple sources, whether you collect the data through spreadsheets, enterprise resource planning (ERPs) systems, or customer relationship management systems (CRMs). You can then amalgamate this data within a single database and use it to create high-value reports.
Business intelligence software enhances business productivity in two major ways: automating financial reporting and helping avoid human error.
As we have already stated, business intelligence analytics processes can speed up the collection and depiction of a company’s profit-and-loss data. Automation helps save costs and time, meaning that your business has more leeway to expand operations.
Furthermore, the less the manual interaction with financial statements, the easier it becomes to manage risks posed by flawed accounting entries.
Making Smarter Business Decisions
Finally, business intelligence has a significant role to play in strategic decision-making. This is made possible because you get a clearer view of market dynamics when you can make accurate reports, boost efficiency, and reduce human error.
Reports created accurately and timely further enable your organization to measure overall performance. Metrics, such as sales revenue, net profit margin, customer acquisition cost, and retention rates, provide you with a lifetime value of information for strategic decision-making.
The good thing is that most BI software products provide access to such metrics.
Try ClicData Today to Enhance Business Performance
Businesses today use business intelligence for a variety of reasons. This guide has covered the primary purposes of business intelligence across financial departments. We hope that this information will enable your business to remain competitive in the long run. Financial consultants can also use this guide to boost their clients’ overall profitability and decision-making.
At ClicData, we provide our clients with access to data analytics and business intelligence software that is customizable for any organization. Whether you want to use it for your business or as a complementary offering to your customers, we can provide what you want.
With ClicData, you get the following:
- Access to quality data for quick decision-making.
- Personalized analytics based on the data you collect and your preferred KPIs.
- Automated updates through real-time reporting from our state-of-the-art dashboard.
Contact us today to book a demo.