Analytics in Finance & Accounting (F&A) - Moving from Dependability to Predictability


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CFO’s need to re-think their use of data and traditional tools to move forward with analytics. Engaging with a BPS partner to increase organizational agility and responsiveness with analytics could be the answer.

This whitepaper covers how correctly utilising analytics within F&A, alongside ever-evolving technologies and the current economic climate, can benefit organisation’s and take them from dependability to predictability.

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Analytics in Finance & Accounting (F&A) - Moving from Dependability to Predictability

  1. 1. White Paper Business Process Services Analytics in Finance & Accounting (F&A) Moving from Dependability to Predictability
  2. 2. Ateendra Dabas, Assistant General Manager, TCS Ateendra is part of the Finance and Accounting team supporting sales and solution design within the TCS Business Process Services unit. He has over nine years of experience across consulting, strategy, accounting operations and business advisory. Ateendra has led several large-scale transformation programs across the financial supply chain in organizations across manufacturing, BFSI, retail, telecom and government sectors. About the Author
  3. 3. The role of analytics as a key enabler of sound decision-making has long been established. Analytics provides the best results when it is used comprehensively across different functions in an organization and is not held in isolation. The CFO is best suited to own the analytics practice and consistently apply it across the firm. The evolving technology and economic climate have made it possible and essential for analytics to play a more significant role in decision-making. Traditional tools and analytics may be inadequate for a holistic and progressive view of the market and the organization in real-time. CFOs need to move towards a more proactive use of information to drive business outcomes. This is not an easy task, given the evolving regulatory environment and the current state of economic instability. Given this environment, CFOs need to re-think their use of data and the investment they make in analytics. Smarter analytics and decision making support from the right partner can propel the firm towards growth. Engaging a BPS partner can help the CFO analyze operational, business and external data to gain insights that increase the organization's agility and responsiveness to the market. This also enables better management of expenditure, cash flow and investments, resulting in lower costs and faster revenue growth.
  4. 4. Contents Introduction 5 Advanced analytics for CFOs 5 How CFOs can derive value from analytics 6 How analytical foresight can drive better business outcomes 8 How CFOs can build analytics capabilities 8 Engagement models for analytics services 9 Conclusion 9
  5. 5. Introduction Increasing globalization and evolving regulatory requirements put tremendous pressure on an organization's ability to ensure business continuity and growth. Organizations need to keep abreast of changes and react quickly. CFOs play a key role in corporate decision-making for business growth by evaluating market opportunities, weighing associated risks and challenges against potential advantages and returns, and assessing the impact of evolving regulations and ensuring compliance. Since the sub-prime crisis and the ensuing recession, the global economy has been in turmoil. Most organizations are either striving harder than ever to stay profitable or are lying low 'until the storm passes'. Finance teams are under pressure to address cash flow and capital acquisition challenges along with margin improvements and revenue growth. A deep understanding of all these aspects can support decision-making and compliance across the enterprise. In order to accomplish this, CFOs need visibility and transparency across the entire organization. Analytics is a powerful tool in the CFO's armory. If aligned with the CFO's objectives, analytics can deliver real-time benefits and enable swift action. However, information flow to CFOs hasn't kept up with changes in market dynamics and the increased need for accurate, updated information. Organizations invest heavily in upgrading to newer and better analytics software but are unable to draw meaningful insights that would enable useful predictions and better decisions. CFOs need to move towards a more proactive use of information instead of taking a reactive approach. Advanced analytics for CFOs Improved analytics provide CFOs with insights into their business and enable them to take data-driven decisions to stay ahead of the competition. Analyzing the business environment accurately and taking strategic and timely decisions are essential to unlocking an organization's growth potential, and becoming a market leader. CFOs can realize significant returns and improve operational discipline by employing smarter analytics that support proactive decision making. Implementing advanced analytics solutions leads to positive business outcomes such as: n Revenue assurance: Assure revenue by reducing billing leakage and predicting credit risk. n Increased revenue: Realize hidden revenue, identify opportunities, increase cross or up-selling and diversify product streams. n Improved operating margins and expenses: Identify and eliminate bottlenecks, improve efficiencies, minimize waste, and ensure contract compliance. n Improved working capital: Optimize inventory and logistics for better cash flow. n Improved financial control and agility: Reduce financial risk, enhance statement quality and regulatory compliance performance, make decisions quickly, and adapt faster to market changes. 5 [1] TCS,“World-Class Budgeting/Planning: From Dependability to Predictability”, 2012, accessed December 9, 2013 1212-1.pdf
  6. 6. 6 Analytics programs are usually deployed in one of four distinct forms: 1)Reactive analytics: Basic dashboards and reports analyze current business metrics. 2)Decision analytics: A deeper analysis of data enables validation or rejection of assumptions and helps in decision-making. Decision analytics involves mining data to explain decisions and trends. 3)Forecasting analytics: Forecasting key indicators using data modeling and other statistical techniques provides timely alerts and triggers for future events. 4)Predictive analytics: More sophisticated than simple forecasting, predictive analytics uses trends to develop decision trees and make complex predictions. How CFOs can derive value from analytics Every CFO needs to evaluate how sophisticated the finance team is in their use of analytics and the type of analytics solutions they need. To realize maximum value from all operational and strategic initiatives, each function should aim for effective use of predictive analysis. Typically, each function within the organization is at a different point along the maturity curve of analytics adoption. For example, the accounts payable team might be using a reactive mode of analysis by reviewing dashboards and maintaining their KPIs and SLAs. The treasury department on the other hand, might be using forecasting analysis in its day-to-day operations, say in trying to peg the exchange rate or budget for high-value payments. The evolution of analytics can be explained with the example of the collections process in any organization. An organization that is not supported by the right form of analytics may view collections in hindsight or in a reactive mode – after a cycle is complete and payments have been realized inadequately. They only track the amount collected along with payments aging and try to realize outstanding payments. This usually leads to high outstanding amounts at the end of each cycle and problems come to light well after they occur. This traditional approach delays action and may require the organization to resort to litigation in order to recover the payment. However, the use of analytics is turning this situation around for many organizations. Analytics can identify patterns through data analysis and develop heuristic models to predict inefficiencies in processes. For example, predictive analysis can alert the CFO to the possibility of default even before it happens, enabling preventive intervention. As the benefits of the predictive analytics model kick in, other forms of analysis (such as reactive or decision based analytics) can further refine the predictive analytical results.
  7. 7. How analytical foresight can drive better business outcomes Once CFOs have identified their position in the evolutionary path of analytics, the next step is to set up the organization to successfully deploy and use analytics. Leveraging analytics as a continuous process enables CFOs to improve business metrics. CFOs should bring greater discipline to this process and drive consistent rigor across the organization. Systems should have built in triggers that initialize processes 'as-needed' or 'on-schedule', and integrate analytics and decision-making. Real-time data analysis should be used to monitor processes as well as raise alerts and report status as an ongoing activity within the office of the CFO. Across functions, each insight should then be linked directly to a business outcome. How CFOs can build analytics capabilities Analytics is essential to the day-to-day success of an organization. For instance, a bank might analyze data to decide the features of its next credit card, or an insurance company might use insights from analytics to design an endowment plan. The decision of whether to build the analytics program in-house or with a partner needs to be considered carefully. 1.Develop the capability in-house: Many CFOs like to keep analytics closer to 'home.' Having an internal analytics team helps them keep tighter control over the data. However, this requires building a dedicated team of professionals with requisite depth of knowledge as well as intricate understanding of the industry. Furthermore, the learning curve of such resources is usually long. Therefore, this option is suitable only for firms that can afford the associated costs as well as the long incubation period. 2.Partner with a business process service provider: CFOs are increasingly partnering with FAO providers in their adoption and implementation of analytics. This has various direct benefits for the organization: n Direct cost savings: The organization does not need to invest in nurturing, hiring and retaining these highly skilled but expensive resources. Labor arbitrage also continues to provide savings in the range of 20-60% depending on the source, destination and the type of analytics. n Flexibility: A service provider has the flexibility to resize the team required for the client organization based on fluctuations in demand that may arise due to the cyclical nature of business or strategic decisions made by the client. n On-time results: Ongoing and real-time analysis of the organization's data-feed is easier since it does not distract the client organization from its core business, nor does it leave the analytics function un-attended. n Access to specialized expertise: Business service partners have experience in managing analytics for a wide variety of clients. Their experienced, well-trained resources bring in the perspective and expertise that is difficult to build in-house. 8
  8. 8. 9 Engagement models for analytics services Using an external partner gives a CFO the flexibility to choose how the organizations engage with each other. The choice also extends to where the data used for the analytics is stored. The data can be housed in proprietary servers of the firm or can be shared with trusted partners. Various approaches have evolved in the industry and can be adopted as per the firm's needs. 1.Project-based approach An organization can engage a provider for a short term, with a defined scope of work and end date. This approach works best when the client wants to address a specific issue. Such an engagement typically has some variable costs associated with it as well. 2.Managed service approach Another approach is long-term engagement with resources dedicated to a client's processes, a flexible scope of work within the defined domain, and fixed costs. This model enables the partner to support the development of specific capabilities and the application of best practices within the client's operations. 3.Outcome-based approach As organizations build greater trust in their service partners, they can target mutual growth. In this model, the client shares the expected business benefits with the provider. The scope of the project is identified and measurable targets are agreed upon. The service provider funds the project. On completion of the engagement, the results are compared against the targets agreed upon earlier. If the targets are met or surpassed, the partner stands to gain a share of the financial returns or earn a bonus payment. Conclusion CFOs need visibility and transparency across the entire organization to highlight opportunities for improvement and meet business objectives. They also need to meet the challenges of the current market and regulatory environments. The investment they make in analytics assumes greater importance in this scenario. Along with traditional analytics, CFOs need to employ predictive analytics for proactive decision-making Nurturing highly-skilled and experienced analytics personnel is both essential and difficult. CFOs have the choice of building an in-house analytics team or partnering with a capable business process service provider. A BPS partner provides a cost advantage to the organization. Such partnering allows businesses to focus on core activities with the assurance that an important activity that supports business decision-making is being well-executed. The budget, the reputation of the provider, and the mutual trust between the partners are all factors that affect this decision. Regardless of the choice, the criticality of the analytics function cannot be denied. It has become intrinsic to the role of a CFO and can affect both the bottom-line and top-line growth of an organization.
  9. 9. All content / information present here is the exclusive property ofTata Consultancy Services Limited (TCS).The content / information contained here is correct at the time of publishing. No material from here may be copied, modified, reproduced, republished, uploaded, transmitted, posted or distributed in any form without prior written permission fromTCS. Unauthorized use of the content / information appearing here may violate copyright, trademark and other applicable laws,andcouldresultincriminalorcivilpenalties. Copyright©2014TataConsultancyServicesLimited IT Services Business Solutions Consulting Subscribe to TCS White Papers RSS: Feedburner: About Tata Consultancy Services (TCS) Tata Consultancy Services is an IT services, consulting and business solutions organization that delivers real results to global business, ensuring a level of certainty no other firm can match. TCS offers a consulting-led, integrated portfolio of IT and IT-enabled infrastructure, engineering and TM assurance services. This is delivered through its unique Global Network Delivery Model , recognized as the benchmark of excellence in software development. A part of the Tata Group, India’s largest industrial conglomerate, TCS has a global footprint and is listed on the National Stock Exchange and Bombay Stock Exchange in India. For more information, visit us at TCSDesignServicesIMI12I13 Contact For more information about TCS’ consulting services, contact About TCS Business Process Services (BPS) Business Process Services (BPS) at TCS is about managing and executing business operations. Our domain expertise helps deliver core business processing across industries, analytics & insights and support processes such as accounting, HR and supply chain management. TCS partners with customers to accelerate co-transformation, and generates business value for customers through delivery excellence, risk management and through innovative models such as Platform BPS which delivers process as a service. With annual BPS revenues of greater than US$ 1.4 billion, TCS is one of the largest BPS providers with 47,500+ employees servicing 225+ customers across the globe.