Addressing Low Adoption in Finance with Predictive Analytics
CFO.com just published an article that sheds some light on the low levels of BI and analytics adoption that often plague finance and accounting departments. Finance has yet to fully embrace analytics the way operations, marketing, and other functions have, the writers claim, in spite of the quantitative nature of the field. They go on to say that this issue can be addressed if finance professionals delve into more advanced analytics, and promote their use across other departments and units within their organizations.
"Descriptive analytics don’t tell the user anything about underlying patterns in the numbers, and they only describe the past," say authors Thomas H. Davenport and Adrian Tay. "More advanced approaches involve predictive analytics, which use statistical models of past data to make predictions about the future, and prescriptive analytics, which use data and analytics to recommend decisions and actions for workers."
Companies like NextGear Capital (formerly known as Dealer Services Corporation) demonstrate how predictive analytics can positively impact financial operations. WebFOCUS solutions help America's largest independent inventory finance provider for used automobiles to tap into enormous volumes of transaction data generated as loans are initiated and maintained. Operational reporting is combined with predictive analytics to provide managers with leading and lagging indicators that anticipate loan volumes from each dealer based on past lending behavior. This improves borrowing and lending decisions, and enables more accurate forecasting of future financial conditions. Risk is reduced, which ultimately drives greater profitability.
Most importantly, the environment has been embraced by managers and staff across multiple NextGear departments.
To learn more about the right way - and the wrong way - to implement predictive analytics to improve financial operations and other important business activities, check out our white paper, Worst Practices in Predictive Analytics.