Finance Analytics: A Comprehensive Guide for 2021

Introduction to Finance Analytics

Finance Analytics is a subset of Enterprise Performance Management and Business Intelligence. It creates a customizable Analytics plan to provide a satisfactory answer to particular business questions and predict possible financial scenarios. The goal of Finance Analytics, therefore, is to make business decisions obtained through actionable insights from the financial data as opposed to banking on intuition. This is an essential step in an increasingly digital world, where businesses are rapidly adopting the data-centric model for increased efficiency of their business operations.


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Understanding the Importance of Finance Analytics

When you talk about financial services, you are referring to not just businesses, but also investment banks that generate more data than so many other businesses due to the fact that finance is heavily reliant on transactions. The data being analyzed these days is not merely the structured data but also data from sources like social media, news outlets, and marketing materials. Business transformation and the advent of technology have spearheaded the move to Finance Analytics.  

Here are a few key pointers that highlight the importance of Finance Analytics:

  • Risk/Budgetary Assessment: Finance Analytics play a crucial role in helping companies understand the risks involved in their operations, and assessing the budgetary allocations to ensure that the company’s investments are being put to use in an effective fashion.
  • Profitability Assessment: It also allows the businesses to look at the profitability of their products spanning across sales channels and customers. It helps them identify the market segments that are more profitable than others, which translates to increased investment in these segments. By measuring the impact each segment can have on the business in the future, company leaders can make informed decisions and boost the company’s value.
  • Performance Assessment: Finance Analytics helps companies not only with decision-making but also understand the problems employees are facing and deploy measures to improve performance and prevent costly turnover. This is possible through increased visibility regarding the processes that support the decision-making process.
  • Data Entry Improvement: It provides the companies with the improved electronic linkage of records spanning the supply chain. This means that Data Entry would only have to be done once, increasing the efficiency of this operation. 

Understanding the Types of Finance Analytics

Finance Analytics mainly focuses on balance sheets, income statements, and cash flow statements. It also proves useful for the formulation of long-term business plans, evaluation of economic trends and profitability, and setting a financial policy to zero in on the projects that need investments. 

The various types of Finance Analytics are as follows:

  • Vertical Analysis: This talks about the proportional analysis of a financial statement. Every item on a financial statement is given as a percentage of another item. For instance, each item on an income statement is presented as a percentage of gross sales. For a balance sheet, every item is represented as a percentage of total assets. 
  • Short-Term Analysis: It talks about the working capital along with the inventory and payable accounts and the calculation of turnover rates for accounts receivable.  
  • Horizontal Analysis: It refers to the parallel comparison of an organization’s financial performance for consecutive reporting periods. The central idea is to locate the major shifts in data. This information can then be used for a deeper analysis of financial results.

Best Finance Analytics Tools for 2021

  • SAS Business Analytics: SAS Business Analytics provides an environment conducive for text mining, data mining, simulation, and predictive modeling- a mathematical model that is used to predict future outcomes. 
  • IBM Cognos Finance: IBM Cognos Finance is instrumental in providing the Data Analysis capabilities for supply chain procurement, sales, and workforce management functions. 
  • Oracle Financial Analytics: Oracle Financial Analytics is a central component of the Oracle suite of Business Intelligence software applications. It provides key insights into the performance against budget, general ledger, and the impact of staffing costs and employee or supplier performance on revenue and customer satisfaction.  


Finance Analytics has helped businesses understand their top and bottom-line performance, manage and measure their assets, and predict the variations in the industry in which they compete. This article covers the basics of Finance Analytics while highlighting its importance, types, and the main tools to look out for in 2021.