This article was written by RishiK and originally appeared on the Alteryx Engine Works blog here: https://community.alteryx.com/t5/Analytics/A-Culture-of-Analytics-in-Finance/ba-p/918652
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Today, the way financial information is handled has changed immensely. Finance managers have started using different management systems at their companies like ERPs and many have applied data analytics or advanced analytics technology in finance. The reason behind this change is that there has been an expeditious rise in business data that is hard to handle but analysts have proven that once dealt with the analytical capabilities, managing data has become a piece of cake. Analytics in finance has done wonders in the establishment of the data-driven enterprise. Data analytics brings with it advanced artificial intelligence algorithms that not only allow you to keep track of data history but also make innovative predictions about your company’s future in the finance market.
In this article we will take you through the changes the culture of analytics has brought in the field of finance.
Key motivators of bringing data analytics into finance
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The world has not only become a global village, with people always in contact with each other but has also been introduced to mind-blowing business ideas. Due to this, there has been an explosion of data in the business world and with advancement in technology, this data has become more complex and harder to handle with every passing second. This is the reason why data analytics was brought into the field of finance.
Traditional financial analysis vs data analytics in finance
A systematic computational analysis of financial data has made analytics center-stage in the finance world. But unfortunately, even in this modern world, many CFOs and finance managers prefer the traditional ways of dealing with financial information. They still prefer acquiring and processing data manually, which is much more time-consuming and inefficient as well.
Analysts today realize the need for the finance industry to keep up with the developing world and the only way to make sure it does, is to keep bringing advancements in this field. Analytics in finance can bring advancements in the form of insights and revolution for businesses still running on conventional methods of accounting and finance management.
A company’s past financial indicators make it appealing for investment. This shows the importance of financial stability. Financial analysis through advanced data analytics can bring a competitive advantage for businesses in the finance market.
Benefits of using data analytics in finance
A culture of data analytics in finance can also be referred to as a culture of complete financial truth. Why? We’ve collected the following points to answer this question.
- Financial data analytics can ease the process of making company goals and ambitions and assessing their reality.
- It helps build dynamic systems containing the company’s statements regarding profits and losses.
- Besides analyzing data history and predicting future performance, advanced analytics helps in budgeting and forecasting validation processes.
- Using analytics in finance can significantly improve risk analysis and analysis of anomalous data, which makes it very easy to detect fraudulent transactions and money laundering.
- Easy access to data, and a single, common location of a database for everyone makes the work easy but accurate.
- Analytics helps financial managers to organize income statements, balance sheets, cash flow statements, and budgets.
Thus, if data analytics becomes a permanent part of finance, it can revolutionize the finance industry.