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Transforming Finance through Analytics
The document discusses how the role of the CFO is changing and the challenges finance organizations face in providing business insights and efficiency. It notes that CFOs are taking on more advisory and decision making roles. However, many finance organizations still spend too much time on transactional activities and lack common data definitions, processes and platforms. The document proposes that a CFO dashboard can help address these challenges by providing integrated planning, predictive analytics and performance management to help CFOs control costs, anticipate changes and improve decision making.
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Transforming Finance through Analytics
- 1. Transforming Finance ThroughAnalytics Jenny Hellström 11 Oct, 2011 [email_address] mobile: +46.70.793.29.49
- 2. Denmark for me!Anne Phil Brottet De utvalda Livvakterna Frihet! Legoland!
- 3. Businesses are challengedby rapid change 38 years 13 year 4 year 2 year Years to reach 50M users: Radio TV Internet Facebook Supplier lead time is 62% faster than just two years ago
- 4. The role ofthe CFO’s is changing Enterprise cost reduction management Selection of key performance indicators Capital asset management Risk management Prioritization of resource allocation Strategic revenue planning Business model innovation/ reshaping Information management strategy Elevated Role of Finance Role of Finance in Driving Decisions Across the Enterprise 45% 47% 34% 41% 53% 54% 59% 39% 44% 41% 50% 42% 26% 24% 19% 33% Source: 2010 IBM Global CFO study In the Nordics it was 90%! Advisor (e.g., analysis and insight) Decision Maker (e.g., create a plan) Over 70% of CFOs believe they have an advisory or decision making role on the Enterprise agenda.
- 5. … Improve effectivenesson the enterprise agenda 34% 28% 26% 21% 16% 9% 28% 35% 23% Core Finance Enterprise Focused CFO Agenda: Importance vs. Effectiveness 2 GAP 1 3 Importance Effectiveness Driving integration of information across the enterprise Providing inputs into enterprise strategy Supporting / managing / mitigating enterprise risk Driving enterprise cost reduction Strengthening compliance programs and internal controls Driving Finance function cost reduction Executing continuous Finance process improvements Developing your people in the Finance organization Measuring / monitoring business performance RANK 0% 20% 40% 60% 80% 100% Source: 2010 IBM Global CFO study
- 6. Efficiency Challenges - due to issues related to automation and standards Source: 2010 IBM Global CFO study Finance continues to spend nearly 50% of time on transactional activities Over 25% lack the necessary common data definitions and processes Nearly 40% of enterprises produce financial metrics manually Over 35% lack a common reporting platform
- 7. Business Insights Challenges - staff, technology and analytic capabilities strategic insights Source: 2010 IBM Global CFO study 44% are poor to average at anticipating external forces Over 50% manually producing operational metrics Nearly 50% lack a common planning platform 55% not satisfied with their operational planning and forecasting analytical capability
- 8. 4 Finance profilesStandard data definitions Standard Chart of Accounts Standard processes Corporate philosophy of information standards Operational planning capability Finance talent development Common planning platform 85% Source: 2010 IBM Global CFO study
- 9. Provide a CFOdashboard with an enterprise focus Control Visibility General Accounting & Financial statement reporting Planning & Performance Management CFO Dashboard Anticipate & Shape Control Account Respond Assess Trusted Information Or....IBM Cognos Dashboard Jenny Hellström Scenario & Predictive analytics
- 10. General Accounting Automateproduction of key financial metrics Dynamic reporting Ad-hoc Analysis Business self-service CFO Dashboard Account & Control Accounts Receivables & Payables Asset Analysis Balance Sheet & General Ledger Customer Payment History Days Sales Overdue Product & Sales Analysis
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- 12. Financial statement reportingCFO Dashboard Control & Confidence Product & Sales Analysis External Reporting (SEC, HMRC, etc) Internal Financial and Management Reporting Integrated XBRL tagging solution Regulatory Reporting Public Sector Reporting Corporate Social Responsibility (CSR) Reporting
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- 14. Planning & PerformanceManagement Incorporate KPIs from revenue, expense, workforce, capital and operational plans and forecasts Integrate what-if scenario planning Evaluate performance gaps CFO Dashboard Visibility & Control +3% Revenue Worst Base Best -7% +0%
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- 16. Predictive Analytics: MovingForward Ensures that the interactions are the right ones at the right times for the right customers with the right relevance. Predict future outcomes Algorithms that automatically “learn” significant patterns Deployed into business process for dynamic decision making CFO Dashboard Visibility & future outcome
- 17. Where to createthe CFO-dashboard? New unified workspace: Self service dashboard assembly Interact & analyze Share & collaborate Search assisted authoring Data exploration & ability to “do more” Faster time to better decisions Powerful analysis and in-place data exploration Better utilization of existing BI assets Business User self service Reduces IT bottlenecks Benefits
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- 19. Jenny Hellström, FPMSwat team Nordics +46.70.793.29.49 [email_address] If you have questions! Please stay and talk with me after the session!
Editor's Notes
- #2 Welcome to my session where I will talk to you about how Finance can be transform through Analtycis. The reson for why I will do this, is that we see how Finance is growing in importance within the companies when it comes to decision making on the enterprice agenda at the same time as the pressure makes it hard to deliver on the expectations.
- #3 My name is Jenny, qualified accountant and I been working with system solutions to support decision making ever since. My role is to support sales situations and facilitate discussions with clients who need a solution to support the close, consolidate and reporting process, or planning & analtyic process or both in our Nordic Countries. And Denmark for me is this! And I am very glad to be here!
- #4 Let me put it the “pressure” in a context: We live, work, and play in a world dramatically different than even a decade ago. Making excellence a faster moving target. Here are some facts – which of course is just the tip of the iceberg. If you look at the list of the largest companies in the world a decade ago – only 2 out of 10 is still on that list. And if you think about the fact that traditionally business cycles have ranged from 4-7 years and the new online business cycle is just one single year – Finance need to deliver faster insights into information. Let’s put this in a historical perspective! Do you know how many years it took to reach 50 M users for the Radio? It comes as no surprise to any of you then, that business is placing demands on FINANCE to move faster, be more flexible, and lower costs – all while delivering the business insight to take smarter decisions and to outperform your peers.
- #5 10/24/11 We see that the Role of the CFO office – finance is changing! Every second year IBM conduct a CFO Study, and last year we interviewed over 1900 CFO:s – and I was personally involved in doing some of the interviews. One of the questions was how they viewed their role in decision making at a strategic level in the company. On average, over 70% of the CFO said they had an advisory or decision-making role on strategic questions. Looking at the nordic countries the percentage was 90%! They also told us that they often invited to the boardroom for discussions regarding the company's strategy and problems and how these might be addressed. CFO.s role is to provide insights, explanations and alternatives to the economic consequences of strategic questions on an enterprise wide level. Which point us in the direction that the CFO's role has become broader!
- #6 10/24/11 So given the CFO's expanded role we expected to see a higher level of effectiveness compared to previos years but the study shows the opposite Most finance functions have a gap when they grade their own effectivness against what they consider to be important over the CFO agenda - both Core finance tasks and enterprise focesed ones. We can draw three conclusions from this. 1) If we compare again with the previous year's result, we see that the gap between importance and effectiveness becomes bigger. Effectivness has remained stable while increasing responsibility in the CFO office makes the Importance more important. 2) For the first time in this study we asked the CFO:s to rank their top three priority areas and we found that all were "enterprised focused" and why is it interesting? - Well, it further confirms this shift.
- #7 10/24/11 What was the main reasons that the distance became wider? Looking at the efficency challenges due to issues realted to Autmation and standards we learn: 40% of the companies in this study continues to produce its financial ratios manually. Given the financial systems we have today its suprising! 35% lack a common reporting platform which means that much work still done in Excel sheets, ad-hoc reporting which often leads to lack of transparancy and that people in the boardroom sits and discusses the various versions of the truth. 25% says, they lack common data definitions And finally, 50%....book journals entries manually pay bills, pay saleries etc.
- #8 10/24/11 It was also found to be a number of factors that made it difficult to increase business understanding 1) To have manual processes to plan their activities also include manual procedures for review and approval. Having Excel versus a Planning solution results in: Long reporting cycles Most employ hate the budget process, that is the most basic of business tools - and it is not surprising in these circumstances. 2)To manually prepare and work with data that drives the planning process is inefficient and takes lots of time and makes it difficult to quickly get an overview of the situation from the unit level to corporate common level. 3) 55% of the participants that they are not happy with their analytics (Customer Example: customer XXX (Swedbank), create new tabs in Excel) 4) The predictive characteristics of a finance department must have in order to anticipate and adapt to the increased uncertainty and risk
- #9 10/24/11 The result of the study gave us 4 finance profiles based on FE and BI Financial efficiency - the degree of overall process and data standards across the organization Business understanding - how well the staff, technology and analysis capability works to provide the business with optimization, planning and strategic insight. The companies that outperformed compared to others where the VALUE INTEGRATORS. The 4 factors…. The 3 factors….
- #10 10/24/11 Considering the demands on the “New” CFO office IBM have released a what we called a CFO dashboard and the areas that need to be covered to make it possible for FINANCE to deliver on the expectations on HIGH financial efficency and HIGH buisness understanding are the following: General Accounting and Financail statement reporting The KPI:s based on this information are history. But critical to help the CFO office to understand the financial health of the company and to communicate this to managers and external shareholders. Planning and Performance Management This area provides economic and financial insight and control. CFO office must combine the question “what should we be doing” with the historic image of the business - which comes from the financial control. Scenario and Predivctive analytics Scenario planning and analytics makes it possible for you to see the impact of different possible outcome due to external and/or internal cirumstances. And predivctive analtyics will help you answer the question what is most likely to happend?
- #11 10/24/11 If we start with the general accounting and financial information , it is most common to start include this part of a CFO dashboard For example you need the capabilites to see…. What is often missing today is a lack of automation of data flows and reporting such important financial information. As I described the IBM CFO study then produces 40% of the companies financial ratios manually. What can you do with modern technical support? Replace your spreadsheets and home-reporting systems using modern software for performance management to automate and organize your reporting process Which gives you the opportunity to: Work and use dynamic reports that are updated in real time Working with Ad-hoc analysis tools for comparison of sales by product, region and different time periods And do all this with a modern software environment that enables self-service: ie, giving users the ability to switch views and look at the information in the appropriate manner without having to wait hours or days for it to run a complex script. But ... if we now consider the results from the CFO Study then this would be a "score keeper" CFO dashboard or at best a "disciplined operator" dashboard. (There, the difference would be the degree of standardization In both cases, if you stop here, you are missing the opportunity to improve your management of your company as a whole. OK, what do we need more of a CFO dashboard? Nytt! Klicka på orden ovan om du vill visa alternativa översättningar. Ta bort permanent Google Översätt för: Sökningar Videor E-post Telefonen Chatt Företaget: Översättningsverktyg Global Market Finder Website Translator Om Google Översätt Inaktivera snabböversättning Sekretess Hjälp
- #13 10/24/11 CFO dashboard will also include a consolidated view of the companies performance by supporting reports such as This process is a very time consuming part of the reporting processes Due to manual processes is related each reporting period Difficulites when it comes to collaboration – involves many people Ex Lantmännen
- #14 If you ask yourself how you work for with example an annual report. I suppose most of you do it in Excel and Word Disconnected from the underlying consolidation solution. This is a way of doing things in a secure, faster way. We will connect directly to the consolidation solution to secure audit-trail, and last minutes changes. What we see here is an annual report divided into sections handling text using World and handling tables using Excel – which allows many people to work with a part of the report. We can also see who is responsible for what part, and when things has been done and completed. There is also a document status we can use to see the progress of the report for example.
- #15 10/24/11 Plannering and Performance Management This is a way of giving the CFO an opportunity for forward-looking and have "control" of future revenues, expenses, how to allocate resources and so on. By combining these forward-looking approach to business with the historical image of Accounting and Financial Management, the CFO can anticipate problems in time I described earlier that the economic climate is marked by increased uncertainty. One of the methods we noticed an increased demand for is to work with scenario planning and analysis.
- #17 10/24/11 Predictive Analytics is about taking analytics to the next level and be able to predict future outcome. If you compare predictive analtytics to Business intelligence I woulds say the predictive analytics is comuter-based analytics using advanced algorithms versus BI which is human-driven analytics. You can use it for detailed credit risk analysis. Alpha Credit Belgium is using it to speed up the loan appliciations – is the customer creditworthy?! But it can be used in all areas such as sales - Which products to cross-sell/upsell and how do you determine the factors of offering a promotion The secret behind it is that you can discover patterns in your data you can act on which is deplyed into business process for dynamic decision making.
- #18 10/24/11 Where do you create this CFO dashboard? IBM Cognos launched last year (okt 2010) What we call a unified workspace early this year and this is the place to start to create a dashboard were the information can be displayed. This year, was the first year, IBM decided to send all the presales (even myself, qualified accountant who are doing FPM!), Why should you do this? Because you can then find relevant information – make it to actionable insights – take smarter decisions and be this Finance office that really contribute to your companies success!
- #19 DEMO
- #20 [SCRIPT] This brings my presentation to a close. Hopefully this helps you understand how leading companies are improving performance, governance and risk management. Are there any questions? <<END>>