In today’s data-intensive world, data analytics have become an integral part of the corporate sector. The marketers have already integrated predictive and descriptive analytics models to anticipate emerging market trends. Similarly, leading chief finance officers (CFOs) are also using financial analytics to renew investments and acquire funding. Are you familiar with financial analytics? In simple words, it helps organizations to predict the future of their strategies and make decisions that can foster growth.
Financial analytics also measures operational key performing index (KPI) including, return on assets, profitability, debt to equity ratio, etc. It highlights different aspects of financial data, unfolding areas that need attention. At the same time, analytics also enables businesses to augment revenues and the shareholders’ net worth.
As today’s enterprises need timely information and accurate financial forecasting to remain competitive, consider integrating analytics. If you are unsure about it, have a look below. Here we are listing five reasons why financial analytics is likely to be the next big thing for CFOs.
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Helps with Taxation
Undeniably, filing and reporting taxes is one of the most daunting tasks for every entrepreneur. With changing regulations, the taxation world is likely to become more complex. From the labyrinthine tax code to new acts – everyone is turning to analytical tools to streamline taxes. Financial analytics can analyze massive amounts of big data, ensuring compliance and closing doors for tax penalties. However, to make tax analytics work, CFOs must be well-versed with tax laws and regulations.
You can enroll in online MST programs or take some short courses to help make accurate tax calculations and learn to conduct extensive tax research. Once you insert the data into analytical tools, it will ensure compliance with over 14,000 jurisdictions and 44,000 rate combinations. Thus, making sure the CFOs charge correct tax rates.
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Evaluates Products & Profitability
Usually, entrepreneurs may have multiple products and services to offer. However, to remain competitive in the marketplace, every company must identify the area of its profit and loss. Well, financial analytics can determine the profitability of individual products. It collects data from different platforms, evaluates every product’s cost separately, and discovers the product generating the highest return on investment (ROI).
Similarly, it sheds light on low-performing products that are hindering business growth. The analytical tools can also draw graphs and charts to demonstrate growth patterns in the product. A persistent decreasing trend will be a potential indicator to discontinue the product or relaunch it into a new market. In short, financial analytics will enable CFOs to gain quick insights across all offerings, helping them make more apt decisions.
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Predicts Revenue Growth
Recently, predictive models are becoming increasingly popular in the finance world. The CFOs are utilizing these tools to anticipate growth patterns and implement relevant strategies. After all, setting realistic growth expectations can have a strategic impact on the bottom line. Do you know how to leverage financial analytics to anticipate revenue? Although you can hire IT professionals to integrate analytical tools, it is always best to do things yourself.
Furthermore, you can also complete an online masters analytics to upscale the company’s financial landscape. It will enable you to prepare revenue forecasts with accuracy and augment the sales pipeline. You can also adopt different tactical approaches to learn about customers and expand the revenue streams. For this, you can compare past trends and conduct a correlation analysis through predictive techniques. If the predictive models show low sales for a particular period, you can plan innovative strategies to avoid any drop in revenue.
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Optimizes Cash Flow
The movement of cash in your business doesn’t directly affect profitability but influences business survival. After all, you can’t keep operational for even one month without cash. Therefore, use real-time or retrospective indicators to assess the company’s liquidity situation. Here, cash flow analytics can help you optimize cash inflows and outflows. It uses indicators like the cycle of cash conversion and working capital ratio to determine the component behind cash flow discrepancies.
An interesting fact is that, the analytical tools can run a cost flow analysis to increase cash by prioritizing customer needs. For instance, if the customer wants products by the 10th of every month, the analytical tools can create a customized payment plan. It will facilitate sales while bringing cash into the business.
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Improves Security
Today, cyberattacks are on the rise in the corporate sector. Modern-day hackers steal company’s financial data and threaten owners with ransomware. Sometimes, the hackers even publish and sell data online, landing the company into legal troubles. Financial analytics can save the company from all kinds of data breaches. It has encrypted software with defense mechanisms. Likewise, it stores data in servers with multi-layer protection, eliminating the likelihood of cyberattacks.
Additionally, the integrated AI-enabled servers in analytical tools can monitor activities in the system. It can oversee monetary transactions in the business accounts and identify uneven patterns quickly. If there have been several logins from a new IP address, it will alert the relevant department and prevent a potential cyberattack.
Final Thoughts
With accelerating advancements in the tech world, it has become essential for CFOs to embrace financial analytics. It provides comprehensive datasets that give insights into costs, market trends, taxes, and profits. Similarly, analytics also improve data security, ensuring sensitive information doesn’t get into the wrong hands. Hence, alongside keeping your business out of trouble, financial analytics also help make more informed business decisions.