Every business has relied upon its Finance function to act as the fulcrum around which they have planned, strategized and taken critical decisions regarding growth and development.
Technology has completely changed the finance industry. Further, with help from the internet and proliferation of handheld devices and applications, financial institutions are competing more aggressively along-with meeting customer demands and developing a tougher control and risk assessment framework to operate in.
However, technology has also given birth to the most powerful and effective tools. These very tools can be utilized to leverage customer data for insights that can ultimately result in wiser management practices and more sound business decisions.
Business Intelligence is just one of those fields of technology that has specific tools and software that can:
In order to be better prepared to embrace this modern future of technological advances, Finance needs to focus on Business Intelligence.
Business Intelligence or Decision Support as it is also known today is a field that focuses on turning data into reliable information by applying knowledge, technology, and analysis.
BI technologies can be used for the different types of data and information for:
From the above, we can derive the most important reason as to why Finance needs to give due attention to Business Intelligence since one of the source systems which contains a plethora of data and information is the Financial system.
It cannot be denied that technology is revolutionizing the way business is conducted in the present day. To highlight the reasons why Finance needs to give tremendous focus and attention to Business Intelligence is as follows:
This is the defining reason as to why Finance needs to put its focus on Business Intelligence going forward. Everything is done in the business world is done to keep the client happy by delivering what they need accurately, cost-effectively and as quickly as possible.
To begin with, Business Intelligence tools and software can assist financial institutions in identifying and pursuing those customers that are most reliable and profitable to work within the long-run. It can also be identified as to what causes a particular client to switch to a competing institution or vendor or company to service them.
Secondly, the ability to track customer habits, behavioral patterns and preferences allows the Finance division to drive profitability, reduce risks and create a competitive advantage for the customer.
It is important to understand that the financial universe is ever-expanding and filled with uncertainty. Business Intelligence tools help to eradicate these risk elements in a number of areas.
Firstly, BI has the capability to track the entire history of customer transactions which allows in an immense reduction of fraudulent activities, for example, credit card and loan fraud.
BI also has the ability to monitor the behavior and communication style of internal employees who are into trading securities in the debt and equity market which then helps to impose tighter regulation frameworks.
It also gives an accurate assessment of the risk of customer loans and bad debts basis key criteria like borrower’s earning capacity and current financial assets as well as external variables such as economic climate.
BI can tremendously assist Finance in analyzing credit portfolios, timely detection of delinquency cases consequently helping in taking preventive action proactively.
The value of data is key to securing sound investment. Asset and Investment managers are using new data sets to develop new strategies for investing. They have also started developing models around social media platforms to gain specific insight into customer sentiment and thereby develop reliable trading signals.
Financial Research Analysts are spending considerable time understanding the global flow of commodities in each sector and how consumer buying patterns and spending affect the inflow and outflow of goods and services.
This information then in form of Meta-Data and Data cubes is shared with the leadership and senior management team of companies for them to make broader decisions with respect to organic or inorganic growth as well as quantum and time of investment required in a specific region of the world.
An example is that of O2 Ireland which prior to 2007 was finding it extremely difficult to gain customer insights as it had a ton of disparate customer data. Using BI software tools, O2 discovered a key fact that only 65% of their prepaid SIM customers have an active ongoing relationship with their company. This insight enabled them to target customers more precisely and invest their efforts in places where they will have the best outcome.
Apart from the above 3 reasons, there are also certain other notable areas where BI has also made Finance teams sit up and take notice of its involvement. BI has greatly helped Finance in improving its own operational efficiency as a department and institution. This can be done by simply studying the performance of their account managers, financial consultants, and accountants. Even the marketing of financial products and services can be improved by identifying new cross-sell and sell-up opportunities.
Most of the accounting software management companies have already started to leverage the power of BI in preparing the finance teams of their clients to harness its potential.
Finance has a great opportunity now, more than ever before, to take a keen interest in BI and leverage its capability. Even the BI tools available today are not as costly as they used to be before hence SMB’s and startups can also spend well on this technology.