When asked where innovation is most needed in the finance function, more than 80 percent of finance leaders responded that it was most needed in the delivery of business insight, and this is a recurring theme of FSN’s recent research, “Innovation in the Finance Function.”
Yet for many organizations, insightfulness, i.e. the ability to glean new nuggets of information about their performance and prospects, remains stubbornly elusive. For example, around 70 percent of finance professionals say that their forecasting process is respected, 72 percent say it is inclusive, and 74 percent strategic, but only 42 percent say that it is insightful.
Leading Characteristics of Insightful Organizations
Exploiting non-financial data and deploying rolling forecasts are leading characteristics of insightful organizations, but from a technology point of view, it is the use of cutting edge technology—especially data visualization—that enables real insight. Businesses that use advanced charting, graphing, and data visualization outperform other organizations in terms of forecast accuracy and how far into the future they can predict, often by a very wide margin.
“Finance professionals place a premium on ‘insight through data visualization,’ yet for many organizations, insightfulness remains stubbornly elusive.”
In fact, in terms of impact on forecasting performance, data visualization trumps some of the more experimental and fashionable technologies such as machine learning and AI (artificial intelligence). So the obvious question is: Why should data visualization drive the greatest insight?
It was Frederick R. Barnard in Printer’s Ink who in December 1921 first coined the famous saying, “A picture paints a thousand words.” Fast forward about 100 years and we find that a well-crafted pictorial dashboard, value tree, or waterfall graph can say far more than a two-dimensional grid of numbers. Spreadsheets and pivot tables, the staple solution for most finance departments, are static and provide very little in the way of insight.
Fruitful and Engaging Data Visualization
The importance of data visualization has come to prominence for a couple of reasons. Firstly, because of the modern finance function’s drive toward better business partnering, and secondly, because of its more collaborative approach. Business partnering is a two-way street. Clearly finance must convey the meaning of numbers to non-financial personnel, but equally any analysis of performance is enriched by the views of other functional areas. And it is here that the use of graphics and data visualization techniques is so fruitful and engaging.