Challenges in Digital World for CFOs
Challenges in Digital World for CFOs:
Chief financial officer Job in an organization is always a critically important one; the CFO role has evolved as “strategy thinker”. In order to take critical financial decision, CFO needs one uniform view of enterprise data. A CFO must act as a strategic enabler to the business. CFO adheres to find all possible opportunities in order to add values to the customers. All financial decisions are fact based utilizing financial KPIs. HFS Research reveals with 160 F&A service buyer, 84% percent of respondents agree that enterprises that embrace digital transformation across business units will outperform their competitors within two years.
Tableau Role in Financial Analysis:
Tableau empowers CFO and financial decision makers in order to gain deep insights of financial data; which in turn help them in improving service experience, open door for new opportunities, and provide an added edge to competitors. Data visualization over heterogeneous sources along with live streaming data adds unprecedentedly advantages to CFO’s decision making capabilities. Data from ERP applications cumulatively with social networking help CFO in identifying trends and anomalies. CFO can estimate company-wide risks and uncover relationships inside your business, so you can react faster and reap the rewards. Top 5 KPIs in financial analysis.
1. Current Ratio
2. Working Capital
3. Current Accounts Receivable and Average Debtor Days
4. Current Accounts Payable and Average Creditor Days
5. Total Cost of the Finance Function as a Percent of Revenue.
Holistic view of financial data which includes Balance Sheet Metrics, Key Financial Measures, Budget vs Sales, Month Over Month view for Top Customers using Tableau, Revenue and Earnings Before Interest By Division.
Working capital:
One of the critical pieces of information CFOs need is working capital metrics: Cash and cash equivalents are part of the current assets section of the balance sheet and contribute to a company’s net working capital. Net working capital is equal to current assets, less current liabilities. Standard aging reports built on top of enterprise data doesn’t cater current CFO needs, CFOs still lack the visibility they need to make proactive decisions. Critical financial decision requires drill down reports to identify root causes and bottlenecks. Tableau enables users to see summary and detailed data with multiple dimensional view using single mouse click.
Adding variance analysis (Budget vs Sales) data that owners and managers need to do that critical variance analysis. CFO and financial team planning improve by looking variance data pattern from over the period. Excel is widely used tool among financial user community and large portion of the reports are developed in Excel. On the other hand Tableau empowers of self service report to finance and operation teams. Nevertheless to say that also saves time for those using reports as we co-build and collaborate on them to increase interaction and understanding. Live data connection and ease of use are two major merits Tableau has and it wins over Excel. Along with sourcing data from distributed file system adds another unmatched feature other data visualization tool can offer. User community support saves your research time you may needed while you stuck up in some issue and need quick support.
Case Study#1 :Income Statement Analytics:-
Income statement analysis is a qualitative and quantitative financial data in order drive some important financial decisions. The analysis of the income statement involves comparing the different line items within a statement, as well as following trend lines of individual line items over multiple periods. The break even calculation is all fixed costs divided by the contribution margin.
Operating margin: This is the profit earned after all operating expenses have been subtracted from the gross margin, divided by revenues. It reveals the amount that a business has earned before financing and other costs are considered.
Net profit margin: This is the profit earned after all operating and non-operating costs have been subtracted from the gross margin, divided by revenues. This is the ultimate analysis item — can a business earn a profit when all deductions are considered?
Case Study#2 Income Statement Analytics:-
Case Study 2 focuses on Net Profit Growth: Understanding how fast a company is growing is a critical component of any investor and CFO. Selling a product or service is the most fundamental factor in the success of any business, and revenue growth rates are a direct way to assess how successfully a company is doing exactly that. To calculate total revenue growth, subtract the most current period’s revenue by the revenue number from the same period in the prior year. This could be the current year’s annual revenue and last year’s annual revenue, this quarter and the prior quarter, or this quarter and the previous year’s comparable quarter.
Case Study#3: Monthly Performance Report.
Case Study 3 focuses on Monthly Performance Report. This case study consists of monthly expense and revenue trends. This critical piece of information account team needs in order analysis organization performance with respect of financial figures. A summary view of expenses and revenues can quickly drive values from transactional account system which other be difficult to draw.
Case Study#4: Cash Flow Analytics
Case Study 4 CFOs agree on one common fact that creating a cash flow statement is a great first step, but if you don’t know how to read or analyse it, it’s not incredibly useful. The given case study focuses on analyzing cash flow elements using Tableau. A cash flow analysis gives you a well-rounded picture of your business’s financial health. Just as keeping an eye on your personal checkbook balance tells you whether you can afford certain personal expenses, regularly analyzing your business cash flow will tell you whether you’ll be able to make payroll, pay your suppliers, buy the materials to fulfill orders, or carry out expansion plans.
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