Financial Analytics

The practice of financial analytics provides businesses with the ability to manage their operations more effectively.

It does this by providing a continual information stream that is based on real-time data on how the business is performing. This performance information can assist leaders with identifying trends that expose the firm to adverse risk.

For example, HR leaders use financial analytics to identify employee turnover trends, allowing them to make adjustments and retain key individuals. Situations like this have the added benefit of reducing turnover costs in conjunction with reducing turnover risks.

Financial analytics also provides key insights into sales channels and market segments. This type of data helps to identify ways to increase efficiency or develop strategies to expand in markets that have the highest profits.

This type of data is often used in predictive analytics as well, helping to create forecasts that leaders can use to identify the impact of allocating resources to certain products and sales channels.

Finally, financial analytics provide critical insight into supply chains, helping to manage inventory or raw materials better.

The access to a more robust pipeline of data is allowing businesses to manage cost, reduce shortages, minimize overages, and identify vendor partnerships that have the highest growth.

By utilizing financial analysis and other historical data, financial analytics can provide leaders with a robust view of a business’ historical, present, and potential future performance. There are some keyways that financial analytics provides this insight.

Client Profitability Analysis

• This helps to identify clients that are more profitable than others. The information provided can help leaders build better relationships with lower-margin clients or focus their attention on higher-margin clients to expand sales.

Product Profitability Analysis

• This analysis helps to identify which products are the most profitable, often leading to product mixes that, when combined, can boost margins.

Cash-Flow Analysis

• Real-time monitoring of cash flow KPIs often include working capital ratios and days in receivables. The analytics are often used to project future cash flows.

Predictive Sales Analysis

• In this analysis, trends are identified from historical data or other relevant indicators that help to forecast potential sales volume.

Value-Drivers

• These analytics are used to identify the best value drivers for the business and other relevant metrics to achieve management’s goals.