Analytics can enable CFOs to extract insights from commercial finance for outcome-based decisions
Sales data analytics can enable Financial Planning and Analysis to make better decisions on sales cycle lengths and design creative sales incentive structures for maximum impact
Pricing analytics can provide ongoing intelligence on revenue leakage and missed billing opportunities
Financial Planning and Analysis (FPA) is already equipped with a basic multi-disciplinary thinking and analytical approach. If FPA could develop a deeper enterprise view of analytics, it may well become a truly strategic partner focused on business outcomes.
That leads to the question: What are the areas of commercial finance where data analytics can be used more effectively?
The controller’s office can go deeper than the conventional analyses they perform today. They can go beyond the history and performance in each of the data dimensions of region, channel or product, or even build demand forecasting validation processes. They need to identify and analyze data that CFOs and CEOs don’t normally get to see.
Smart data analytics on sales cycle lengths can provide incisive insights for better decisions and outcomes in many areas — sales friction, sales win and loss, discount effectiveness, customer retention and churn, growing and declining accounts, and payment patterns of key customers. A detailed sales analysis can drive impairment and obsolescence discussions upstream and early in the process when there is still a chance to salvage the situation. This could be more effective than reviewing the profit and loss charges in board meetings on the last day of the quarter.
Finally, designing sales incentive structures based on ‘hunting vs. farming’ analysis (as was started by technology service companies) can be adopted to improve accountability and direct business impact.
The smart analysis of contracts can reveal insightful information to benchmark variance in pricing to acceptable standards and also review discounting authority.
A more valid area where the data arising out of pricing audits can be made visibly impactful to the bottom line is on tax leakage. For example, tax authorities in many jurisdictions use taxes on a fixed price regime that changes, perhaps, once a year. Businesses who discount their products seasonally, cyclically or during frequent sales campaigns will find their net realizations disproportionate to the taxes paid. A pricing analysis can bring up the amount of excess sales taxes paid to optimize the frequency of pricing changes so that higher taxes do not neutralize any benefits.
Do organizations have the time or bandwidth to review the contracts with their customers and check against what they actually billed and realized? Chances are that the contract is never looked at until there is a dispute. What about the fiduciary responsibility to protect organizational assets? Should there not be an easier way to review billing against signed contracts to see if the business is charging for all that was negotiated?
Contract compliance analytics can certainly help the topline. It can enable on-the-ground teams to be smart enough to maximize revenues by billing customers for all that is part of the negotiated contract. Partnering with an analytics expert would be a wise move to efficiently do this. Such partners can unearth insights into missed billing opportunities and provide ongoing intelligence on revenue leakage, all of which will reflect on the bottom line. They can even conduct proactive analysis to efficiently provision for contractual liabilities in sales contracts that recognize only true costs and liabilities.
Digital businesses need to have razor-sharp focus on the cost of acquiring customers to strategize on customer lifecycle extension, maximizing retention rates, upselling, funnel management, lowering cost of leads and maximizing revenues per lead. The number of customers lost and refund rates are vital metrics that should be looked at operationally, and analytics can ensure they do not escape the attention of corporate FPA groups.
Finance professionals are well positioned to help translate data into commercial insights and outcomes. There is tremendous value to be unleashed in revenues and profitability if they integrate their knowledge of finance and business to translate new analytical insights into commercial impact.
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Finance and Accounting
21 February 2022
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