How to Gather and Leverage Big Data to Drive Business

As we continue to explore the top middle market CFO challenges for 2017, it is clear that the CFO’s role is changing to focus more on providing strategic guidance to support the organization’s growth and decision making. Last week’s blog addressed how CFOs need to optimize working capital and to effectively accomplish this requires executing real time data analysis and predictive analytics to make the best decisions from the information that is available.

Some executives may assume that reviewing big data is an IT function, but we see the positive outcomes when CFOs analyze big data and incorporate the results in strategic business decisions. Gone are the days where the financial and IT roles can operate independently of one another. The CFO and the IT department will need to work together as the need for big data analysis becomes more crucial. 

We all hear about big data. But what makes it “big”? 

Big data is a term that describes the extensive volumes of data that inundate a business on a day-to-day basis. The concept of big data started in the early 2000s when an industry analyst, Doug Laney, defined big data as the three Vs:

• Volume – Organizations have massive amounts of data they obtain from a variety of sources ranging from e-commerce transactions to social media.
• Velocity – New data arrives at an accelerated speed and must be processed timely.
• Variety – Big data is available in a structured format (i.e., traditional accounting data in your general ledger) as well as in an unstructured manner such as hashtags on Twitter.

Stay Agile to Compete

Adopting more sophisticated big data strategies can enhance the decision making process. It can also help you respond more rapidly to customer needs and thus, improve the organization’s competitive position in the market. With the CFO’s role expanding, it is necessary to evaluate meaningful data on a continuous basis in order to incorporate the insights learned into the business plan. If this information is not utilized in a timely manner, companies risk being left behind by competitors.

Focus on the Future

The CFO’s role is changing from focusing on past financial results to now using conclusions reached from big data analysis to plan for their company’s future. For example, a simple review of major customer buying patterns can help determine whether your company may have an inventory shortage in the coming months due to seasonal demand. Reviews of major customer payment patterns could also help forecast whether future cash flow problems may be of concern.

How to Get Started

Taking advantage of big data has a beneficial payout for CFOs that leverage its power. It can result in an increase in top line growth, more defined focus in areas that add value, automation of processes and a reduction in risks if managed appropriately.

For organizations that want to get started using big data, here are some steps we suggest:

• Train your employees how to analyze the data and how to distinguish what data is most useful to your organization and industry. This could involve investing in new technology. Many companies are even hiring data specialists to sort out the volume of information available to enable the CFO to focus only on what is the most meaningful.
• Review/analyze the data on a continuous basis. Real-time reviews can lead to more proactive rather than reactive steps taken.
• Implement the results in your business strategy and forecast. Action items may include acquisitions, cost reductions, and improving accounting or business process flows just to name a few.

HORNE PMM is focused on helping companies develop a more anticipatory mindset that is focused on current trends and findings from big data.

If you would like to learn how we can help you, contact us. 

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