Business Intelligence Platforms: A Cheat Sheet For Finance Managers
Companies which design, produce and sell Business Intelligence software have claimed that the use of their platforms has increased productivity in Financial Planning and Accounting by anywhere from 20% to 50%. What’s more, is that these companies claim that the use of their software not only increases efficiency but provides insights into the business in a way which was just not possible earlier.
But how does all of this really happen?
How does a BI platform create efficiency for the finance and accounting functions? It does so by incremental improvements in every step along the way:
1. BI platforms essentially take financial and other company information as input and then have the ability to automatically make sense of it based on minimal user input. The user does have to define some relationship between variables and data and the best platforms should be able to take it from there.
2. BI software can then throw out some predefined reports and arrange all the data provided in a way that aids in budgeting and planning. The information can be categorised based on business function, type and so on. This way, division heads can work on their own departmental budgets in an iterative manner.
3. Business Intelligence platforms encourage a repetitive way to plan things. You can define an end result (like for example, increasing profitability by 10%) and then make adjustments to various revenue targets, costs, etc. to achieve that result. The advantage here, as compared to say an excel model, is that the system is not prone to errors, is faster, allows for easy collaboration and generates better reports.
Providing new insights
Creating efficiencies is good but most BI platforms aim to go further. They are designed to add value not by doing the existing tasks in a better way, but rather by finding newer things to do. Some companies dedicate their finance departments to traditional tasks of financial planning, accounting, budgeting and managing the accounts. With smart BI platforms, the role of the finance function can be more transformative. Instead of creating a static budget or plan to meet a company target, some of the more robust BI platforms encourage the use of dynamic plans which can support each business function continuously.
Traditionally, each business division would be provided with a budget and then be tracked on their performance. The new paradigm is to provide ways to achieve that budget instead and that is where BI platforms come in. If the budget calls for a 10% reduction in transport costs, then the BI software will help you find out how that can be achieved while still maintaining all of the other parameters within the desired thresholds.
So instead of spending time on creating and modifying budgets, finance departments can create a dynamic budget which can then be continuously tweaked by the business divisions themselves. The finance department then spends its time trying to find insights and efficiencies using the data analytics capabilities of the BI platform and help drive growth.
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