Data is exploding. There are more than 16 trillion gigabytes of stored data around the world, according to IDC, and by 2025, this will surge another tenfold. This is in stark contrast to the 360 billion gigabytes present just a decade ago.
While all this data can shed light on what’s working and what’s not in a business, it can also be quite overwhelming, especially if you don’t know where to start. As Marc Havercroft, COO and Vice President of Digital Strategy and Transformation at SAP SuccessFactors, explains, many CFOs get lost in the sea of data, thinking they need to use every data point. In reality though, some data isn’t useful at all.
With the help of advanced technologies like artificial intelligence (AI) and data analytics, executives can better sort through this information and determine what’s important to their organization. Armed with data and the tools available to process it, CFOs and finance executives can ultimately take on a more strategic and analytical role within their firms. This can happen both when data is being collected, such as faster responses to sales trends, and with the audit, when deeper insights of recent activity can be crafted. Here are three ways finance executives and audit professionals can put this wealth of data and the insights provided by advanced technologies to use today.
- Improve Processes: About one-third of every company’s business is unprofitable, says MIT lecturer and consultant Jonathan Byrnes. Given that, he suggests CFOs become more “chief profitability officers,” using data analytics to identify ways to boost their company’s bottom line. Byrnes says CFOs can use cloud-based systems to quickly see the profitability of every product sold to every customer every time, summed into any configuration (customers, products, operations). With this new data and improved ability to see end-to-end processes (something 30% of executives surveyed by Forbes Insights said was the most important benefit from advanced technologies), CFOs can identify inefficiencies and areas for improvement.
- Managing Bias: Finance executives have always had to plan in a state of uncertainty given the human bias inherent in decisions, from overoptimistic projections by fellow executives to misaligned incentives that can lead a manager to choose a costlier option for the company. Yet AI can, over time, identify and weed out biased behavior through statistical analysis. John Murdock, CEO of Centage, a software company, describes the benefit this way, writing recently in Accounting Today: “For instance, you may have a division head who always builds a cushion in some particular area of their budget, but AI can identify whether or not that spending level has ever been needed. If it isn’t, you can redeploy that resource to another department or business initiative.”
Identifying such anomalies and data outliers is seen as another leading benefit of advanced technologies by CFOs in the Forbes Insights survey. Still, AI is only as good as the people who design it. CFOs and other executives need to oversee AI to make sure it’s properly identifying trends and making recommendations in line with goals and policies. For instance, finance executives should ensure algorithms don’t reinforce racial or gender bias through either programming or the data sources they use, according to Jason Baldridge, co-founder of People Pattern, a predictive data consulting firm.
- Demanding (And Getting) Improved Audits: Deeper insights don’t end with the internal operations of finance departments. Data and advanced technologies can also improve the effectiveness and quality of the audit. After laying out the audit objectives and the data available, auditors can determine what would best help them design the strongest audit procedure. What’s more, in such a data-robust environment, it’s likely audits can be performed more quickly, enabling faster corporate reporting and ultimately boosting trust among stakeholders and counterparties.
“We’ll be able to ingest massive amounts of data, and we’ll be able to train a machine to be smarter at extracting key attributes we need to make more effective decisions in the audit, resulting in higher-quality audits,” says Bill Tomazin, Managing Partner, West Region and National Audit Solutions at KPMG US.
While technologies can certainly enable audit procedures, it goes without saying that auditors play the biggest role in designing and executing high-quality audits; technologies are just a complement to their planning and sound judgment.
With all of this data providing CFOs an opportunity to play a more proactive and predictive role within their organizations, it’s no surprise that the skills required to lead and succeed today are shifting. It’s no longer just a matter of keeping the books, but instead one of leveraging new technology and the right data to move their organizations forward.
As Eddie DeSalvio, Director of Finance for Jet.com, a division of Walmart, says: “In the future, finance executives are going to be partly data scientists, knowing what’s happening with all the data and being able to make inferences from it.”