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Published On : 08/18/2021

Must-have tips for capitalising on operational data

By Dafydd Llewellyn, EMEA GM, insightsoftware

COVID-19 changed the modern finance team, as finance professionals adjusted their lives and the way they work together. With the effects of the pandemic continuing to linger, companies are still adapting; however, one of the more notable and specific changes for finance teams includes re-thinking the basics of operational finance.

Operational finance incorporates the indispensable roles and responsibilities inherently connected to consolidation, procure-to-pay, cash, close, reporting, and fixed assets. Pre-pandemic, companies managed these tasks reasonably well; however, businesses are now plagued with unexpected complications and difficulties, primarily because of remote working and accessing historic, on-premise data.

As a result, there is a need for finance teams to streamline their workflows and leverage analytics as part of their day-to-day operations. Furthermore, due to the pandemic, there’s a higher demand for more complicated forecasts.

To avoid issues, finance teams are dealing with data and workflows in new ways, as well as where and how operational data and analytics fit into the planning process. Here are three tips to help finance teams capitalise on operational data.

1: Make accounts receivable (AR) more real time

It’s easy to get caught up in the overwhelming amount of data that needs analysing in the AR world. It’s best to focus on the metrics that matter, such as days sales outstanding (DSO), collections effectiveness index, turnover ratio, and average days delinquent.

Understanding AR is critical to forecasting cashflow, and unsurprisingly, automation now plays a bigger role.

A recent survey from PYMTS.com suggests that 79 percent of firms with automated AR functions are more efficient. According to the survey, a key performance indicator for the effectiveness of AR automation is a shift in DSO; simply because of its ability to track cashflow more effectively.[1]

So where does a company begin with AR automation?

Invoice management is a good place to start. According to the B2B Payments Readiness playbook, “businesses handling more than 20,000 invoices per month that use automated invoice delivery tools have DSO averages up to 23 days shorter than those that rely on manual, paper-based processes.”[2]

Tracking DSO during a pandemic was a nightmare. Looking to the future, ensure more AR functions are automated for forecasting cashflow.

2: Use operational data to make more informed decisions

An FSN study suggested there are detrimental effects on strategic decision making if operational data is ignored by finance teams. The study looked closely into companies using non-financial data, concluding that these businesses are two times more likely to forecast beyond 12 months for strategic planning purposes, compared to companies not using operational data.

But all is not lost. There are now specialist development tools available to support operational data collection and analysis. They use operational data to drive meaningful insights, with data points held in many popular enterprise software applications. Importantly, they embed operational and financial data into each phase of reporting to generate more business value.

For example, if a retailer is keen to understand store profitability drivers, they can analyse operational data like the number of check out staff or stock availability throughout a given period. From there, the company understands the impact on sales trends on an annual or intraday basis. Such insights positively impact performance management, optimise strategy and deliver greater business value.

3: Simplifying the month-end close

Managing operational finance inputs is crucial during the ledger close. Invariably, data entry is involved in different phases of reporting – from journal entry capture and financial statement preparation to transaction processing and reconciliation.

However, straight-forward ERP solutions cause data blockages. An analysis produced by Deloitte[3] stated that ERP solutions don’t automate the “full, end-to-end close, consolidate and report process.” The analysis continues to observe that it can cause “a fragmented, manual, and inefficient close, as well as lead to inefficiencies throughout the accounting period.”

Business Intelligence (BI) solutions also cause difficulties during implementation, particularly if outdated report data arrives in the BI tool, or data aggregation levels are too high and generic. Consequently, these data issues prevent finance teams from gaining an understanding of the figures during a close cycle.

A viable solution is automating the monotonous steps in the reporting process. It solves a majority of the issues, providing real-time reporting, with built in financial intelligence, in a format that’s familiar, like a spreadsheet. Automation expedites the reporting process, encourages team collaboration, and eliminates the margin of human error even further.

Getting the basics right drives business value

The pandemic has shifted the priorities of CFOs. While it continues, teams are still exploring ways to invest in technology, process improvements, and policies to support one another.

Ultimately, real-time financial and operational data helps drive strategic decision making. If a finance team conquers the operational basics, they increase business value.

It’s never been more important to get the basics right; that way, teams can future-proof financial reporting and operations at a time of unpredictability.

[1] https://www.pymnts.com/accounts-receivable/2021/automation-revolution-improves-key-metrics/

[2] https://securecdn.pymnts.com/wp-content/uploads/2021/02/PYMNTS-AMEXB2B-Playbook-February-2021.pdf

[3] https://www2.deloitte.com/content/dam/Deloitte/nl/Documents/cfo/deloitte-nl-cfo-point-of-view-close-consolidate-and-report.pdf

Wanda Rich

Wanda Rich has been the Editor-in-Chief of Global Banking & Finance Review since 2011, playing a pivotal role in shaping the publication’s content and direction. Under her leadership, the magazine has expanded its global reach and established itself as a trusted source of information and analysis across various financial sectors. She is known for conducting exclusive interviews with industry leaders and oversees the Global Banking & Finance Awards, which recognize innovation and leadership in finance. In addition to Global Banking & Finance Review, Wanda also serves as editor for numerous other platforms, including Asset Digest, Biz Dispatch, Blockchain Tribune, Business Express, Brands Journal, Companies Digest, Economy Standard, Entrepreneur Tribune, Finance Digest, Fintech Herald, Global Islamic Finance Magazine, International Releases, Online World News, Luxury Adviser, Palmbay Herald, Startup Observer, Technology Dispatch, Trading Herald, and Wealth Tribune.