In a recent article titled Accounting’s Big Data Problem, published on CFO.com by David M. Katz, the author dives into the world of Big Data and how its use is slow to be adopted in the accounting profession. His underlying belief is that generally,
we as accountants, are behind the curve in utilizing Big Data, most specifically unstructured data. While the jury is still out on its impact in the financial reporting and audit functions, the use of unstructured data in Financial Planning and Analysis (FP&A) is critical.
As many experts will tell you a financial model is only as good as the inputs. True as that might be, it is the process of identifying the inputs through review and analysis of unstructured data which can identify the strategic correlation between the drivers and KPIs.
Key stakeholders from operations, sales & marketing, R&D, etc. should be viewed as important resources during the process, not only to provide easily identifiable data such as customer churn rate, but equally as important insight into unstructured data such as the customer onboarding process. Through this process an organization might identify a strong correlation between certain aspects of the onboarding process of a customer and their churn rate. Below are a few examples of structured data which has an equally important unstructured data component.
Structured Data:
Average Sales Cycle
Churn Rate
Employee Turnover Rate
LifeTime Value of Customer (LTV)
Unstructured Data:
Length and Complexity of Customer Contract
Customer OnBoarding
Employee Engagement
Customer Satisfaction
In summary, FP&A is an evolution not an endgame. Through the implementation of a FP&A process which is more inclusive than exclusive, an organization has the opportunity to incorporate unstructured data and be seen as a strategic partner to the entire organization.
Our CFO Advisory practice includes professionals who have deep experience in successfully managing the financial and accounting needs of numerous businesses. We are dedicated to helping early stage and middle market companies with a cost effective solution to meet your their needs on a as-needed basis, for special projects, or in a ongoing strategic and comprehensive role. For more information about our CFO advisory services, please contact Scott Cotter at 703.852.1060.