By Mike Yeager

How do you make business decisions? Some go by gut feel. Others reach out to consultants, peers, or experts. And some of us, especially those in finance, look at the numbers.

In a competitive landscape where agility, flexibility, and quick decision-making are critical, timely and accurate data analysis is more important than ever. In other words, business intelligence is no longer negotiable: it’s a must-have for ongoing success.

What Is Business Intelligence?

Business intelligence is the result of collecting, analyzing, and presenting business data in a way that is easy to understand. When you have a quick, easy way to review and evaluate your data, you have the information you need to make better business decisions.

It’s important to understand that business intelligence is more than list-driven reports. Business intelligence is …

• Visual, to quickly and easily process and understand the information in front of you.
• At-a-glance, to gain insights quickly instead of spending hours reading reports.
• Real-time, to have the most current data, not last month’s or last quarter’s.
• Deep, to have drill-down capabilities so you can dig into the details when needed.

Business intelligence also refers to the tools that support this process. It may be tempting to associate business intelligence solely with technology, but it’s important to remember that good business intelligence relies on good people and processes to ensure the data is timely and accurate.

How Companies Use Business Intelligence

Evaluate performance – Business intelligence gives you everything you need to evaluate your business as a whole or to look at smaller components, such as entities, divisions, or locations. Companies use business intelligence to track and evaluate key performance indicators, such as sales by product or location or profitability by customer or contract.

Track progress against goals – Part of evaluating your business’s performance is setting and tracking goals. However, forward-thinking companies are taking this a step further. Today, organizations are engaging and motivating their workforce by setting goals and giving employees access to the data they need to track their progress. Role-based goals such as sales revenue, customer retention, and billable time help employees understand where they’re going and motivate them to get there.

Identify and correct problems – Business intelligence helps you spot and correct problems before they’ve had the chance to negatively impact your business. For example, you can monitor expenses to prevent overages or avoid a stockout by monitoring inventory levels against sales orders.

Identify and track trends over time – Your data has lots to tell you about year-over-year results, seasonal trends, return on investments or assets, and customer retention. Business intelligence gives you a more visual way to analyze this information so you can more easily spot trends and take advantage of them in the future.

Strategic decision-making – This is probably the most common reason organizations implement business intelligence tools. When you have a way to bring together all of the information across your organization and analyze it effectively, it becomes easy to answer strategic questions with confidence. Can we consolidate assets? Should we close or add a location? Should we stop selling this product or service? Should we diversify with other offerings?

By using business intelligence for these purposes, your organization gains a competitive advantage. Compared to other companies, you will understand your business better, have an engaged and motivated team, be poised to take corrective action sooner, be equipped to make more accurate predictions, and be able to make strategic decisions quicker and jump on new opportunities faster.

Top Business Intelligence Metrics for CFOs

Key performance indicators for your business are based on your needs and what’s important to you. But when it comes to a CFO’s needs for financial decision-making and strategy, here are the top 10 essential metrics:

• Working capital
• Operating cash flow
• Current ratio of assets versus liabilities
• Payroll headcount ratio of full-time labor assets versus part-time versus contracted services
• Return on equity
• Quick ratio or acid test
• Debt to equity
• Accounts payable turnover
• Accounts receivable turnover
• Inventory turnover

Types of Business Intelligence Tools

Business intelligence comes in different forms with a range of functionality and flexibility. Here are a few.

Embedded tools – Many of the software products you use will have some form of business intelligence embedded directly in the system. One example may be the dashboards available in your accounting software. It’s up to you to decide whether or not you can get an accurate picture of your organization by using the business intelligence tools available in one product.

Artificial intelligence – Many products offer some form of artificial intelligence, whether it’s smart alerts and notifications or pop-up suggestions. While it’s not a dashboard, it is an embedded form of business intelligence. The software independently analyzes your data and makes suggestions to you and your team based on that information.

Integrated tools – If you use multiple systems to manage your business, you may be able to take advantage of integration (syncing two software products) to consolidate your data. For example, your organization might use an inventory management system and an accounting system. By integrating the two, you can send information from your inventory management system to your accounting system for analysis or vice versa.

External tools – When consolidating your data through integration is not possible or becomes too complex, you may be ready for a standalone business intelligence tool like Microsoft Power BI. Business intelligence products are designed to consolidate multiple data sources so instead of pulling information from multiple systems, you have one place to go for reporting, dashboarding, and data analysis.

Developing Your Reporting and Business Intelligence Strategy

Many organizations see the value of business intelligence but may not be sure how to get started. Our clients see the most success when they select a project sponsor or leader. This gives dedicated focus to the project and establishes ownership and accountability.

Start with the data you want to see – What metrics do you want or need to track for your business? High-level metrics for executives and managers will probably be the first that come to mind, but don’t forget to consider role-based metrics to support your team or performance metrics for individual employees.

Figure out how to get it – Once you know the data you’re after, you can work through the best way to access it. What software or business systems have the information you need? Can you easily get the data out of those programs? Do they already have tools built in to help you analyze the data? If not, can you send the information to another program with better business intelligence capabilities? Do you need an external business intelligence tool to gather data from multiple systems?

Decide how often you want to see it – Set up dashboards or visualizations for the most critical information that needs to be reviewed frequently. Create reports for information that you want to review regularly. Many business intelligence tools can email reports or other information to you on a schedule you establish.

Scrub your data – Before you jump in and start analyzing your business data, make sure it’s accurate. You may need to review or clean up your data so you can be sure of its integrity.

Evaluate your processes – Don’t forget that behind every bit of data is a person or process that put it there. Now that you’ve gone to the effort to clean up your data, make sure it stays that way. Is your team on the same page about data entry? Do you have processes in place to automate manual data entry or reduce errors? How quickly does information get into your systems? Are there ways to speed up the process so your data is more current? Do you regularly review or spot-check your data to ensure integrity?

Test and refine – Once you’ve gone to the trouble of setting up your reports and dashboards, don’t forget to use them! Pay attention to what happens when you do. Is data being entered into your systems fast enough so you have the most current information? Are the reports and dashboards you created delivering the insights you need and expect? Have they uncovered other questions that you’d like to answer?

Start small and scale – Implementing a business intelligence tool doesn’t mean you have to set up dashboards for every team member in the first week. Start with the top three metrics your executive team needs. Work through the process and test your results. See how much time it takes and what is required. When you have a system that’s working, expand the number of metrics you’re tracking, or bring in your management team or department heads to find out what they need.

Consider a dedicated role – If you’re a large organization that tracks a variety of metrics across departments, business units, or locations, you may want to consider a financial analyst – someone dedicated to reporting, dashboarding, and data integrity at your organization.

No matter what information you use for your business, finding a way to make it easier and faster to understand can only help you. When properly implemented, business intelligence can support the strategic goals of your organization and keep you ahead of the competition.

Mike Yeager is vice president at Cargas, a software company in Lancaster, Pa. He can be reached at myeager@cargas.com.

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