There has never been a more uncertain time.
COVID, supply chain issues, looming inflation, labour shortages and the war in Ukraine are all contributing.
How can businesses prepare so that they are properly equipped to successfully navigate this environment when it’s so difficult to forecast future performance?
Scenario Modelling
The key to being prepared is the ability to conduct rapid scenario modelling.
Because we can’t know what will happen, businesses need to be prepared for many potential scenarios so that when these occur, the organisation is ready and can respond appropriately.
Flexible financial models are a critical part of this process as they allow the organisation to adjust a range of levers and immediately see the results.
Organisations need a high-quality, flexible financial model that allows them to adjust pricing, volumes, input prices, overheads, funding sources, capital expenditure amounts and timing, plus whatever else is relevant to the organisation to see how these changes affect profitability, cash flows, key ratios, debt covenants, dividend payments and all applicable KPIs.
Business Intelligence (BI)
BI tools like Microsoft Power BI are the other critical part of being prepared as these tools provide the ability to extract, synthesise, visualise and analyse large amount of data from a variety of sources.
Well-designed BI reports provide data in easily understandable and digestible ways. They also add interactivity so that users can explore things that appear unusual, compare performance to prior periods, filter out irrelevant data, and drill into detail when required.
This gives businesses the ability to gain insights into their markets, customers, employees, and processes that can be used to make better, data-driven decisions. It reduces the risk that decisions are taken solely on “gut-feel”, ego or personality.
By gathering and analysing data to see if it supports or disproves hypotheses, organisations can dramatically improve the quality of their decisions.
Unfortunately, many organisations never progress beyond providing access to data in a variety of different ways, with the hope that the user will understand it, be able to interpret and analyse it, and so find at least some of it useful.
Adopting a scatter-gun approach to providing reports is somewhat useful but it is unlikely to achieve the full potential of the BI tools.
BI tools can do far more than simply provide faster access to data in a variety of interactive ways!
More Intelligent Business Intelligence
Smart organisations are deploying BI tools embed these into their corporate performance management processes and distribute them throughout their organisation. They take the corporate strategy, break this into goals and KPIs for each level and then develop reports and dashboards that focus the user on the precise activities they need to do to achieve their KPIs, and thereby help the organisation achieve its goals.
This equips management and staff at all levels with the tools they need to monitor their progress towards their goals and KPIs, discover trends that will affect them achieving these, and understand the actions they need to take to get things back on track when required.
Imagine if everyone in your organisation was aligned and focussed on achieving the goals and KPIs set for them!
You may already be using BI tools in your organisation, but how effective are they? Do they help to align management and staff with your corporate strategy and the achievement of your objectives? Or are they simply throwing reports at users, hoping some of it will be useful?
If you’d like to discuss your BI strategy, get in touch.
