Finance professionals place a premium on “insight. When asked where innovation is most needed in the finance function, more than 80% 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.
Yet for many organisations, insightfulness, i.e. the ability to glean new nuggets of information about their performance and prospects, remains stubbornly elusive. For example, around 70% of finance professionals say that their forecasting process is respected, 72% say it is inclusive and 74% strategic but only 42% say that it is insightful.
However, the same survey, (The Future of Planning, Budgeting and Forecasting 2017) helpfully sheds light on the characteristics of insightful organisations. Exploiting non-financial data and deploying rolling forecasts are leading characteristics of insightful organisations, 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 visualisation outperform other organisations in terms of forecast accuracy and how far into the future they can predict – often by a very wide margin.
In fact, in terms of impact on forecasting performance, data visualisation 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 visualisation 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”. He was alluding to the fact that graphics can tell a story as effectively as a large amount of descriptive text. Fast forward about 100 years and we find that a well-crafted pictorial dashboard, value tree, waterfall graph or cascade 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.
The importance of data visualisation has come to prominence for a couple of reasons. Firstly, because of the modern finance function’s drive to be a better business partner, 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.