Analytics is crucial for any organisation that wants to stay competitive in today’s data-driven environment. Financial analytics can assist an organisation in gaining a better understanding of the company’s historical and current performance as well as in taking strategic decisions.Financial analytics is a concept that offers several perspectives on a company’s financial data. It enables us to get in-depth insights and take strategic measures to improve the company’s overall performance.
Financial analytics can assist businesses in determining the risks they face, how to improve and extend business processes to make them more efficient, and whether their investments are being directed – at appropriate places. Organizations will be able to rethink their strategies for addressing challenges and supporting business choices thanks to advanced analytics and its capacity to work with large data. Analytics can also assist businesses in determining the profitability of items across multiple sales channels and clients. It helps in identifying which market sectors will generate the maximum profit for the company.
Key types of financial analytics include:
- Predictive sales analytics- Predictive sales analytics creates projections, anticipates behaviour of prospective clients thus helping in designing better campaign designs for both B2B and B2C organisations. It uses predictive algorithms and trends in historical date which is acquired from a company’s CRM or ERP software.
- Cash-flow analytics- A cash flow analysis determines a company’s working capital—the amount of money available to run business operations and complete transactions.
- Value-driven analytics-The value driven analytics framework aids in the development of a clear understanding of corporate value. It also aids firms in determining their current maturity level and establishing a metrics-driven strategy to achieve business value realization and long-term competitive advantage.
- Shareholder value analytics-Shareholder Value Analysis (SVA) is a financial management strategy that focuses on generating economic value for shareholders through share price performance and cash flow.
- Product profitability analytics- The practice of relating a company’s overall profit to the profit of a specific product is known as product profitability analysis. The money left over at the end of an accounting period after deducting total costs from total revenue is referred to as a company’s overall profit.
- Client profitability analytics-Customer Profitability Analysis (CPA) is a management accounting and credit underwriting tool that enables businesses and lenders to estimate the profitability of individual customers or groupings of customers by allocating profits and expenditures to each customer independently.
In the future, data analytics is predicted to transform the way we live and do business. We already employ analytics in our technology gadgets for a variety of decisions in our daily lives. Another way to look at it is that financial analytics first aided decision-making, but now allows us to make better decisions than we could on our own. Cases where analytics is used to merge numerous data sources, resulting in new and superior insights, such as combining sales, location, and weather data to explain sales increases for certain stores and enhance the restocking process, spring to mind. It turns out that a data-driven decision-making process will deliver greater results in the future.
