Data analytics has been integral to the finance industry for quite some time now, and its role is growing profoundly with each passing year. Using data science and machine learning, data analysts are creating solutions that minimize risk in decision-making and helping managers build data-driven workflows.
According to highlights of a study, the adoption of data analytics in enterprises has risen from 17% in 2015 to as much as 59% in 2018, translating to a compound annual growth rate of 36%.
Although marketing, healthcare, and insurance are the three major industries harnessing the power of data analytics, finance has started making most of the data-driven insights provided by data analytics. In this article, we will discuss the growing role of data analytics in finance.
The Future Role of Data Analytics in the Finance Industry
After the digitization of ledgers and the adoption of automated processes instead of manual ones, data analytics has become the next big thing for the finance industry. With robust tools such as SQL, Python, and Tableau, it’s become ridiculously easy to impute, track, analyze, and present vast volumes of financial data.
In the digital age, every business leader requires first-hand and timely information about their business workflow to stay relevant in a fiercely competitive market. Without sound financial planning and forecasting, no business can plan strategies effectively and successfully grow.
Using financial analytics, business leaders can effectively measure and manage the tangible assets of the company, including machinery, cash, and other vital assets. Analytics provides businesses a deeper insight into the financial status of their workflows, helping them devise strategies to optimize cash flow, increase value, and maximize profitability.
At the same time, data analytics, along with machine learning, is being used to automate many processes in accounting, helping businesses optimize their workflows. Here are three ways data analytics is transforming the finance industry.
Changing Role of the Financial Department
Due to the emergence of data analytics in finance, most financial functions are automatic and need fewer resources to be managed effectively. This allows the financial executives and their teams to focus more on business goals and various high-level task, instead of spending the bulk of their time processing and reconciling transactions.
With so many technologies available, many business processes are extremely complex unless you have technical expertise. Data analytics enables the business leaders and top executives to gain real-time, summarized, and accurate financial information, which lets them have an in-depth and comprehensive overview of the entire organization.
Data analytics can help executives identify critical risks the business is exposed to while also letting them implement ways to enhance and extend business processes to make them more effective.
Similarly, the data can let managers find out if their investments are paying up in a particular venture, or which safe channel or customer segments is providing the most profit. Using data analytics, any business can identify factors that directly or indirectly affect the company’s financial capabilities.
Because of the numerous benefits of financial analytics, countless companies are turning to integrated financial analytics to make most of this technology. Integrated financial analytics focuses on implementing data analytics on a granular level, allowing managers to analyze and share the information in internal processes and eliminate processes that undermine efficiency.
Data-driven financial management helps companies manage their assets efficiently, accurately forecast growth, and develop effective strategies for the future.