Gartner: Finance analytics to motivate decision making

Analytic-driven decision making has become a vital tool for organisations, especially during the global pandemic, but the question now being asked is which business decisions should your financial planning and analysis (FP&A) team support?

According to a new report from Gartner , analytic-driven decision making across businesses have increased but finance analytics should now take centre stage and start to inform this process. 

“Leading organisations embrace a business-centric approach to finance analytics. To enable growth, generate finance analytics that significantly improve decision making,” comment Gartner whose statistics reveal there has been a 50% rise on analytic spending in the past three years.

However, only in every four decision makers do not use financial analysis as part of the decision-making process. Gartner are now calling to shift finance analytics from “passive standardised reporting to more engaging”.

“As more departments build analytic capabilities, finance analytics governance becomes unclear,” comment Gartner in the report, Finance Analytics, Deliver finance analytics that inform planning and decision making .

According to Gartner FP&A executives are now asking: What role should finance analytics play in this crowded analytics field and how can FP&A teams support these analytics?

“Finance analytics reporting and support account for almost one-third of finance function spend. But these investments are failing us: Finance data is not suited to modern decision making and managers lack the knowledge to use it correctly,” comment Gartner.

“Misuse of finance analytics can cost organisations as much as 1% of revenue per decision, adding up to dramatic business impact over time.”

Recapture the value of finance analytics

In a bid to recapture the value of finance analytics organisations should focus on their finance transformation, points out Gartner. “Business managers and finance staff should collaboratively define, develop and apply finance analytics. 

“Decision teams with clear data governance roles and responsibilities can brainstorm problem economics, co-create more intuitive reporting formats and push one another’s thinking.”

How to act on finance analytics

Gartner recommend organisations shift finance analytics from passive, standardised reporting to more engaging, relevant guidance that encourages dialogue and discussion by:

• Basing finance analytics on scenario analysis
• Building more commentary and opinion into finance analytics reports
• Making finance analytics reports more accessible

“Progressive organisations are reorienting roles for joint finance analytics decision making. To start, focus on business decisions first and finance analytics last. Then improve finance analytics problem-solving processes by anticipating and planning for failure early,” comments Gartner.

Gartner’s new report What’s In, What’s Out: Define the Scope of FP&A Support reveals the results from a recent survey looking at what should (and shouldn’t) be supported by financial planning.

Outlined what key business decisions should be supported by FP&A but are often excluded include these top five:

• Business case evaluations
• Capital allocation (day-to-day spend and Return on Investment)
• Compensation (bonus/incentive)
• Customer analytics
• Distribution channel analytics

According to Gartner these requested are not supported due to the following top three reasons:

• Business leaders have concerns/trust issues when it comes to sharing confidential information with FP&A
• Business leaders like control and are afraid or not ready to be challenged by FP&A
• Decentralised structures and greater autonomy in the business

When it comes to a focus on why FP&A’s support the wrong requests, Gartner says this is due to a “lack of knowledge about which analytics teams across the organisation have the expertise to support various requests”.