Financial Excellence: Thriving With An Online Finance Degree – Finance functions can leverage two competencies related to dynamic planning and advanced business acumen to enhance future strategic advisory roles.
With greater visibility and better scenario planning, companies can improve control over operations, markets and customers, and make faster, more informed decisions. A number of building blocks are required to transform this step into excellent driving.
Financial Excellence: Thriving With An Online Finance Degree
In today’s volatile and uncertain environment, it is essential that finance functions increase their role as strategic advisors to guide their business. At the core of this expanded role are two related functions of governance: dynamic planning and advanced business intelligence. Dynamic financial planning provides a comprehensive, driver-based view of potential future performance and accelerates a company’s ability to sense and respond to a changing business environment. Advanced business intelligence capabilities enable real-time analysis of historical and future performance.
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In today’s volatile and uncertain environment, it is essential that finance functions increase their role as strategic advisors to guide their business.
With greater visibility and better scenario planning, companies can improve control over operations, markets and customers, and make faster, more informed decisions. Companies of all sizes and industries can rapidly adopt proof-of-concepts for new solutions, building long-term capabilities while capturing short-term tangible value.
A number of building blocks are required to make this radical change in financial performance improvement. Companies must implement digital tools and visualization engines, creating driver-based business logic that connects strategic, financial, and operational metrics. Achieving success requires short planning times, a unified data platform, and a new talent strategy. Given this scale, effective coordination of efforts across economic, business, and technological sectors is critical.
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To meet the challenges of today’s business environment, companies need more accurate and faster planning and more effective business intelligence. They are facing an unprecedented combination of intense supply chain pressures, high inflation, low unemployment, rising interest rates and global political conflict. To guide decision making in an uncertain environment, companies must understand how different scenarios will affect operational and financial performance.
Detailed planning and business intelligence strategies help attract and retain top talent. Finance professionals will be empowered if they spend more time performing value-added analysis and supporting decision-making, rather than acquiring and using data. In addition, more accurate and accurate information allows CFOs to become true advisors to the company’s strategy and better prepare for investor meetings.
A progressive approach allows the finance function to focus on the factors that affect the company’s most important metrics, such as growth, margins, and shareholder returns. It improves the quality and efficiency of decision-making and strengthens strategic partnerships with business leaders.
A major US department store chain has implemented dynamic planning and advanced business intelligence to respond to the challenges of the Covid-19 pandemic. The company has improved inventory turnover by 15% compared to pre-pandemic levels, set prices at the location level, and rethought how stores measure productivity. This resulted in the following:
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Developing and updating plans, budgets, and forecasts takes much less time and allows for faster decision-making. The department store company has cut the time it takes to produce forecasts to the usual three to four weeks. It now updates performance dashboards in real-time and produces comprehensive management reports within hours compared to two to four weeks ago.
Finance functions that update planning and business intelligence become 15-20% more efficient by reducing time spent extracting, managing and consolidating data. The department store’s finance function has reduced its time spent on these low-value activities from 60% to 80%, down from less than 20% previously. This allowed financial professionals to spend more time on business advisory activities.
Realizing new capabilities requires identifying five building blocks: driver-based business logic, digital tools, streamlined processes, data and talent platforms, and redesigned operating models.
Every company needs to understand its business logic, performance drivers, and systems for analyzing results. Two features are important:
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The American luxury retailer developed a guide tree for all key income statement items, including sales, cost of goods sold, supply chain expenses, and SG&A. Appendix 1 shows a driver tree for shop floor variable work and how the company uses automatic and manual input.
After building the business logic, the finance function needs to build digital planning tools and visualization engines that allow teams to examine what-if scenarios, interpret results, develop actionable insights, and define plans. Financial planning tools (such as Anaplan and OneStream) and visualization engines (such as Tableau and Power BI) are examples of modern cloud-based tools that are transforming traditional financial processes. Exhibit 2 shows an example of a dynamic dashboard that displays real-time data and enables stakeholder analysis across the organization.
The US retailer has built an ML engine to improve its ability to sense demand and respond quickly to customer needs. The model integrates multiple external data sources to better predict consumer buying patterns and is “smarter” to detect demand over time. The company integrated the model into its operational and financial planning processes, informing day-to-day decision-making and resource allocation decisions.
Finance functions must rethink their processes to effectively use digital tools with new business logic. They can use automation to shorten planning, budgeting and forecasting processes. In addition, frequent forecasting with detailed planning and budgeting allows companies to increase operational visibility and control while reducing time spent on annual planning. Companies can increase efficiency by breaking down organizational silos and improving touchpoints with senior management to better align financial and operational planning.
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Finance functions must rethink their processes to effectively use digital tools with new business logic.
To adopt AI-based algorithmic forecasting, the automaker’s leasing business unit needed to replace its traditional bottom-up forecasting process. The new process included strategy sessions where executives used their expertise to manually adjust the algorithm’s predictions and then model the effects of changes in strategic levers (such as debt ratios). Full use of algorithmic forecasting allowed the company to move from retrospective analysis of past performance to proactively identifying stocks and their potential outcomes.
To power digital tools and computational engines, companies must build data repositories (ie, data warehouses and data lakes) as a single source of truth. (See Appendix 3.) Companies should take the following steps to use databases effectively.
Companies must identify the new skills needed to manage dynamic planning and advanced business intelligence. They need to train their current workforce (eg, new tools, scenario analysis) as well as hire people for new roles (data scientist, financial instrument configuration specialist, etc.). The Competence Center must monitor all future changes to new digital tools and ensure that they are used to their full potential.
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Leading organizations are aggressively addressing this critical issue; Many see this as urgent given the fierce competition for digital-based talent. A global healthcare company has changed its talent strategy to accommodate changes in its digital tools and business model. This includes training financial institution staff through formal training in core skills, enhancing the skills required for each role (such as coding, scenario modeling) and expanding career paths to prioritize a variety of skill-based experiences. This innovative approach significantly improves employee value and helps the company attract and retain top talent.
The concept behind dynamic planning and advanced business intelligence is not complicated, but many companies struggle to implement it successfully. It is important for organizations to think holistically about the changes required in people, processes and technology, creating bold and appropriate ambitions to move forward in their journey to create maximum value. Companies can use diagnostic methods to understand their starting point. For example, the CFO Excellence Index compares the performance of the finance function on metrics such as information technology, financial systems, planning and forecasting, and business intelligence.
Dynamic financial planning and advanced business intelligence promise change. Finance functions can forecast by day instead of week and prepare plans and budgets by week instead of month. Finance teams can avoid spending more than 70% of their time on manual processing. Business stakeholders have access to all the information they need at their fingertips. Ultimately, the finance function will have more appropriate processes that enable better and faster decision-making and manage operations with greater confidence and foresight. To meet the challenges of today’s economic environment, companies must act now to make the future of financial governance a reality.
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