So, You Want to Build Finance Analytics?

Analytics – probably one of the most overarching terms in businesses.

Unless you have majored in Data Science of received a degree with a focus in Analytics, it’s a tough word to define. You may have an idea in your mind about what it is but struggle to articulate it.

Dictionary.com defines it as: the patterns and other meaningful information gathered from the analysis of data.

When speaking to Finance Leaders, I always try to understand what they mean when they tell me that they want to build out Finance Analytics.

What prompted you to make this a key initiative?

Have you done this before?

What have you done already to tackle this initiative?

Their answers typically provide me an understanding of where they are in the Analytics creation framework or as I like to call it: the Process of Building a House.

Building out Analytics in Finance has 3 crucial parts to it: Data Quality, Metric Selection and Insight.

Foundation

When talking to CFOs, I think setting the foundation is the most challenging part for anyone. Many of the people I speak to are wearing many hats, with the responsibilities of HR, IT, Legal and more rolling up to them. They also work with lean teams that don’t have the systems in place to streamline the data input.

These challenges are common and just like building a house, getting the foundation correct will set the stage for a lasting output. The foundation of Finance Analytics is the Data Quality and this includes Data Integration and Data Stewardship.

I’m sure the companies that provide Data Integration support are salivating at the idea of Finance Leaders needing to buy their platform or services. In reality, you can create your Analytics framework regardless of your current system investment. I spoke to one CFO who took me through his team’s integration of two smaller construction firms because he had his “best buddy” excel. It’s challenging to do in just Excel but having a complete picture of all your transactions is vital in setting the foundation.

Along with being able to have a complete view of your data, Data Stewardship must be created. As you know, Data in your organization is not stagnant and will continually change with each transaction. Data points, especially those in disparate systems, need to be standardized to eliminate duplicative information.

Implementation of systems like an ERP, BI tool or even RPA for back-office tasks were created to save Finance teams countless hours of effort and help them do analysis across the business. While it is not necessary to go out and purchase these tools to be successful, Finance Leaders should keep an eye on the market so they can make an educated investment when the opportunity arises.

Framing the House

As you start to frame your house, this is where you begin to provide visibility into the data, the windows and doors into the business so to say (corny analogy, I know). This is the part where coordinate KPIs with data points and begin your Report Building.

“The way a team plays as a whole determines its success. You may have the greatest bunch of individual stars in the world, but if they don’t play together, the club won’t be worth a dime.” – Babe Ruth

The KPIs that are selected for the organization should be cascaded both from the top down in the business as well as the bottom up. Easy concept to say, challenging to implement especially as your organization grows. I’ll save you from a KPI tangent and the importance of selecting ones that can both drive the growth of the business as well as your employees and just highlight the importance of engaging the organization for both KPI/Data point selection and Report Building.

I encourage all Finance teams to not solely focus on the data that they are consuming but to go out and understand the rest of the business. Be proactive in your conversations with other departments so you can understand their view and role in the business.

How many of you are tired of ad-hoc reporting requests? Or worse yet, other departments pulling data points and making conclusions out of data that doesn’t tell the whole picture? Engage your departments by asking “Why do you want to build this report?” and “What are we missing in our current reports that you feel we need” and you will not only cut down on these report requests and but you will build trust and cohesion across the organization.

Building the Roof

Ssome construction companies like to subcontract parts of the build out. Some will subcontract out the roof building to another firm while they focus on the interior of the house.

This reminds me of the firms where Finance does not play a central role in the Decision Making, the reason Finance Analytics is created in the first place. They create and share the reports but do not have a role in the decision making.

Many times, Finance teams are more traditional and are made up of more transactional staff. Maybe the only person capable of sharing the insights and challenge assumptions is the CFO. If so, it is important to address this skill gap and to find those team members that can support analysis, assess trends and create models to support decision making.  

Success in this project means that the Finance team takes the role of not only providing insights but telling the story of the data back to the organization. In doing this, Finance can move from a Reporting Business Partner (FP&R) to that Analytical Business Partner (FP&A) that helps drive growth in the business.  

What about the rest of the house?

So, if you have been envisioning the Finance Analytics house in your head, I’m sure you are wondering: What about the Master bedroom? Did we add an extra bathroom in the basement? Do we have an island in the center of the kitchen? We need an Island!

Every business is unique and therefore every layout will also be unique. If a company tells you there is an exact repeatable tool or service for setting up your Finance Analytics that “everyone uses”, they don’t have your best interest in mind. There are best practices and support that can be customized to fit your business (shameless Gartner plug) that can guide you as you tackle this initiative.

Just like other organizations, creating your version of Finance Analytics will be in iterations that will be continuously improved upon. It won’t happen overnight but every action you take in the right direction will take you that much closer to your end goal of providing actionable insights to the rest of the business to support decision making.

“As you gain fresh insight from your data, it opens the door to new questions. As you have new questions, you need to update your instrumentation and analysis. Saying the process is “done” is saying you understand everything there is to know...” – Brian Balfour, Founder and CEO of Reforge