By: Sarah Spoja
Finance is no stranger to using data in predictive analysis, forecasting, and more, but what can real-time data bring to the table?
Corporate financial teams have long relied upon data to drive innovation in the form of decisions, pivots, and priorities. Yet it’s hard to innovate and remain in high-growth mode with data that’s even slightly stale. A better solution—especially for companies determined to embrace full-scale digital transformation—is to leverage the power of real-time data.
Having access to accurate numbers presents a huge advantage to modern financial departments. For instance, staff and company reactions can move from impulsive to thoughtful when those responses are backed by real-time financial data. The result is more cost-effective, forward-thinking choices based on objective information that hasn’t lost its relevance.
Of course, some businesses are still reluctant to fold real-time financial data into their processes. There’s a myth that sharing needed data among siloed departments could lead to breaches of sensitive information. However, today’s tools allow for sophisticated user rights management, segregation of roles and access points, and other data protection measurements. The risks associated with making real-time data accessible have been greatly reduced—and the rewards enhanced.
Another common reason for otherwise innovative organizations to resist using real-time data is that they have not yet adopted cloud-based solutions and other tools that would make that data available. Yet most companies quickly realize the value of being able to see immediately whether merchandise is selling or inventory is sitting. Ultimately, real-time data offers an analytic potential that was not available to CFOs and other key leadership before. With that visibility, companies can focus on innovation—just like the 93% of finance leaders who told Gartner they want to transform their workflows with the help of data.
Real-Time Financial Data: Making Digital Business Innovation and Transformation Happen
Of all the benefits inherent in having real-time financial data, corporations tend to use this vital information in three key ways.
The first is to foster competitive intelligence. Understanding competitors’ moves right away (such as marketing or pricing) can allow for real-time positioning and repositioning. Delays are a hindrance to profitability, particularly in digital environments. Simply knowing early that a competitor is buying more raw materials or considering a merger gives companies information for innovative differentiation.
The second benefit to gaining access to real-time data is being able to forecast almost anything (sales, inventory, logistics, staff schedules, and marketing spend) with unbelievable precision. Consider the case of a retailer that uses real-time hourly sales data to diagnose issues and recommend solutions right away. Fixing revenue gaps rapidly helps avoid a sudden revenue plummet, not to mention losing momentum during prime selling seasons.
Finally, real-time data ensures that cash planning and cash flow management don’t go astray. Incoming data can be useful when determining if a working capital concern calls for an innovative solution such as issuing common stock, selling long-term assets, or replacing short-term with long-term debt. During the 2008 and 2009 recession, the corporations that did so used data as a springboard toward new ways of thinking. Thankfully, more data than ever is now available to assist CFOs and other C-suite executives determined to push their organizations through rough economic times.
Making Digital Transformation a Finance Department Responsibility
If your company is just tapping into real-time data, you’ll want to maximize the upsides of having multiple sets of fresh data at your fingertips to inform initiatives, lower risks involved in innovative thinking, and spur disruptive solutions. Below are several ways to apply real-time financial data to elevate everyday workflows:
1. Automate cash flow management with new technologies
Does your financial tech stack need an overhaul? Choose systems that rely upon real-time data to fuel automation. For example, you might want to introduce software that “learns” and makes recommendations based upon incoming data. The more you automate what happens throughout your department, the fewer steps are needed for each process.
You can take automation of your cash flow management a step further by looking at it from a long-term perspective. Specifically, consider the ways you might use real-time data in the future to achieve your multiyear goals. Maintaining a “forecaster’s focus” will help you and your team remain proactive.
2. Evaluate supply chains, improve contracts, and enhance working capital
Typically, supply chain managers aren’t asked to collaborate on financial department decisions. That has changed, though, with the advent and availability of real-time data. Make no mistake—having the insight of supply chain and procurement professionals can contribute to innovative financial and operational concepts.
Case in point: Real-time data might show normally imperceptible jumps in pricing around the supply chain ecosystem. Being able to see the way costs are changing right away (rather than months down the road) can lead to immediate relevant discussions and perhaps even renegotiations with vendors and suppliers. Similarly, working capital can be positively affected when inventory is more carefully managed to bump up corporate liquidity.
3. Invest in cost analysis and reduction through scenario planning
In a general sense, cost reduction is essential to businesses all the time. Currently, however, cost reduction has become a special focus for many companies trying to pull out of 2020’s fiscal hardships. However, cutting costs should always be handled with an almost surgical care and precision. This is where real-time data can put the spotlight on where money belongs and where it doesn’t.
Teams that can confidently fund new innovations and investments based on real-time financial data have an advantage. No, they can’t ensure their forecasts will come true. Nevertheless, they can create several viable road maps that will give them the ability to make shifts quickly no matter what happens in the market.
Modern businesses need data-driven business intelligence now more than ever before. As business accelerates, so does the need to quickly analyze and make rapid, complicated decisions. Real-time financial data will lay the groundwork for a more intelligent organization.
About the Author
Sarah Spoja is the chief financial officer at Tipalti, a payments automation software that helps businesses manage their entire supplier payments operations by streamlining all phases of the AP and payment-management workflow in one holistic cloud platform. Sarah joined Tipalti from KKR, a global private equity firm where she worked with portfolio companies in the finance and retail sectors. Prior to KKR, she worked at Bain & Company in Boston and Sydney. She earned a Master of Business Administration from Stanford Graduate School of Business and a bachelor’s degree in mathematics and economics from Williams College.
Featured image via Unsplash.