Better Financial Data = Better Financial Decisions

“The world’s most valuable resource is no longer oil, but data.”

It’s the tagline to an article in The Economist from a few years ago, but the meaning is even more prescient today.

The phrase’s renewed relevance is evident in its use during a recent PwC Accounting Podcast episode, What’s Next in Tech for Finance? Data-Driven Decision Making, discussing the critical role data analytics and technology play in effective business decision-making these days.

“It’s the key to unlocking true digital transformation,” said Michael Baccala, a leader with PwC’s innovation lab - and podcast guest - in describing one of the value propositions of reliable data in today’s business landscape.

Data has always been an important factor in the decision making process, Baccala added, “but now more than ever we’re being asked to make decisions in high-stress, high-change environments” which has emphasized the need for decisions based on data in order to unlock these transformations businesses are undergoing these days.

“Highly data-driven organizations are three times more likely to report significant improvements in decision making compared to those who rely less on data,” noted Michael Shehab, another PwC principal and podcast contributor.

The duo corral data into four distinct categories in order to be helpful in deciphering underlying business needs: descriptive data, diagnostic data, predictive analytics and prescriptive analytics. In reference to today’s digital transformation efforts, the latter two are heavily relied upon to help determine future outcomes, including algorithms available that essentially spit out choices based on prior business decisions made.

No longer so dry and stodgy, a company’s financial transactions in particular - the pieces of financial data that go in and out of its business operations - allow company leadership, as well as outside investors and analysts, to better determine a company’s health and inform critical decision making.

To break it down even further, think along these terms: 

• Financial accounting is the recording, summarizing and reporting of all transactions and economic activities resulting from business operations over time.
• This end product of financial statements, including a company’s balance sheet and income statement, is governed by a standard set of required practices.
• These regulated financial statements can then be relied upon for informed decision-making by company managers, investors, analysts, lenders and other key stakeholders.

Governed by standardized practices, whether in the U.S. or abroad, this trusted data gives investors a baseline for financial health analysis and comparison among corporations. Creditors can use such data to help assess the solvency, liquidity and creditworthiness of organizations. And, just as importantly, this data helps managers make informed, internal decisions about how to best allocate resourcing.

Digging deeper into the value of data-driven decision-making (these days more commonly referred to as DDDM) with regard to a company’s inner workings, a reliable and detailed set of financial statements goes beyond the legal and regulatory obligations necessary for public corporations. Solid financial accounting can help leadership determine budgets, monitor efficiency, analyze product performance, build out strategies, both short- and long-term, and even gauge public perception.

With the technological capabilities available these days, organizations can access more data than ever before. But just having access to such information isn’t always enough as data left unused or in the wrong hands can degrade over time. Firms that properly leverage such data in their decision-making can not only gain competitive advantage, but cut down on business costs and fuel growth.

Speaking directly to leaders of such organizations willing to put faith in the data made available through today’s technology,  the PwC principals both state in the podcast, a need to “break down the barriers of getting to this data so people can go use it and drive better decision making with that data.

“You have to continue to invest in yourself.. and continue to spend time understanding not only the tools and the technology, but the principles of how to work with data and the science underneath of it,” according to Baccala on the podcast. “We aren’t going to go away from using data anytime soon.”

To make sure decisions are informed by the right data, companies are turning to more modern solutions able to capitalize on advances in technology. Just a few years back, the middle office - that sweet spot between a company’s front office (CRM) and back office (ERP) - wasn’t the object of affection for finance leaders that it is today. RecVue’s complete Order Lifecycle Management Suite was created specifically for the middle office, automating all aspects of order-to-cash processing to deliver billing, revenue management and channel partner compensation in a single solution. 

Contact us today to learn how RecVue’s OLM solutions can help you unlock middle office competencies and accelerate your organization’s digital transformation.