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We've all heard the line, "A picture is worth a thousand words." Although Frederick Barnard said it more than 100 years ago (and before the advent of digital technology), the sentiment holds true today. Humans are wired to process images more quickly and effectively than words alone: 90% of the information transmitted to the brain is visual. People who follow instructions with illustrations do 323% better than those who follow text-only instructions. In addition, the Wharton School of Business discovered that while only half of an audience was convinced by a verbal presentation, the number jumped to over two-thirds when visuals were added to the presentation.
How does this apply to the world of finance? Quite a lot, actually. The finance sector is primed for a transformation in how it handles and visualizes data. How are finance teams visualizing data right now, and how can they improve to drive more meaningful business decisions?
Related: A Guide to Visualizing Data in Your Pitch Deck
The current state of data visualization in finance
Finance teams traditionally rely on spreadsheets and static reports to visualize data. These tools have merit but often fall short of delivering the dynamic insights needed for real-time decision-making. Excel remains a staple, but its static nature can make it challenging to spot trends quickly. Standard financial reports are typically dense and require high financial literacy to interpret effectively.
Picture a monthly financial report generated in Excel, filled with tables and figures. A CEO reviewing this report has to sift through rows and columns of data to identify key performance indicators (KPIs). It's a very time-consuming method prone to human error and misinterpretation, but it's still fairly common. Even a CFO, who's likely comfortable with spreadsheets, doesn't have time to pour through the tables. Data visualization combined with automatic data refresh makes it possible for them to scan reports and pull out the relevant data quickly.
Why now is the time to change
Across industries, gathering data for analysis is easier than ever before, thanks to sophisticated technologies, but that doesn't mean it's automatically digestible and accessible. Finance departments that incorporate data visualization with automatic data delivery (and data refresh) in their operations will position themselves competitively in an industry where knowledge is power.
Benefits of improved data visualization
- Enhanced understanding: When data is visualized effectively, it becomes easier for everyone in the organization to understand. Certain tools allow finance teams to create interactive dashboards that can display data in real-time, making it easier to track performance metrics and financial trends. This helps different teams across the organization digest the data — from marketing to sales. It's beneficial for teams who would like to better understand how their work is impacting an organization's financial standing.
- Improved collaboration: Understandable data means everyone can contribute to discussions about it. Visual data is more engaging and accessible to non-finance professionals, fostering greater collaboration across departments and with stakeholders. For example, a visual representation of vendor spend across various retail locations can help CFOs and leadership identify where excess costs are occurring, giving them valuable information for cost-saving measures. In contrast, traditional spreadsheets may break down vendor payments, expenses, and cost per location in detail, but these reports can be difficult for non-financial stakeholders to interpret, which can hinder collaboration and decision-making across departments.
- Strategic real-time insights: Real-time data visualization empowers finance teams to focus more on strategy and less on manual data analysis. With tools that automatically sync and refresh with the latest numbers, finance teams can quickly analyze and interpret data, allowing them to devote more time to strategic initiatives that drive business growth rather than getting bogged down in pulling and reviewing outdated numbers.
Related: The Deal with Data: 5 Steps to Getting a Way More Efficient Team
How to implement data visualization
Implementing effective data visualization in finance is a process that requires careful planning and execution. Here are the steps involved in getting the ball rolling.
1. Assess current capabilities
Before you start to improve the way your business approaches data visualization, assess the current state of your data practices by taking stock of the software currently used for data analysis and reporting in your business. This helps you identify any limitations or gaps in functionality.
Then, ensure that all relevant data sources are identified, accessible and regularly and automatically updated. This includes financial data from ERP systems, CRM data, and any other relevant data streams, and data quality is key.
Finally, you need to clearly understand user needs. Gather input from stakeholders, including finance team members, executives and other departments, to understand what data they need access to and in what format.
2. Define clear objectives
Setting clear objectives is necessary for a successful data visualization strategy. Objectives should be aligned with overall business goals and address specific needs. Some objectives might include improving decision-making, increasing efficiency, and fostering collaboration, but every business' goals will look a bit different depending on their needs.
3. Choose the right tools
When looking for the right tools, consider what will best support the objectives you've laid out. Look for platforms with robust data visualization capabilities that are easy to use and integrate with your existing systems and that can be scaled to grow with your business. Tools should also offer customization options to tailor visualizations to specific needs and preferences.
Some examples of data visualization tools include:
Integrated Business Intelligence (BI) platforms
Integrated BI platforms are comprehensive tools that offer a wide range of data visualization and analytics capabilities. These platforms allow finance teams to create interactive dashboards that provide an at-a-glance view of key financial metrics. They can also perform advanced analytics, such as predictive modeling and trend analysis, to gain deeper insights into financial reporting.
AP automation tools are an excellent complement to BI platforms in a financial office. These tools streamline invoice processing by automatically capturing, validating, and storing data, giving finance teams up-to-date information at all times and eliminating the need for manual data entry. When integrated with BI platforms, AP automation tools enhance financial reporting by feeding real-time, accurate data into dashboards and visualizations, leading to more precise strategy and analysis.
- Online tools
Online data visualization tools are increasingly popular due to their accessibility and ease of use, with several available for quick download. These tools are often cloud-based, making them ideal for businesses that need flexible and scalable solutions. They often integrate with various data sources, including cloud-based financial systems (this ensures that data is always current). Online tools also offer the advantage of being accessible from any device with an internet connection, providing flexibility for remote and distributed teams.
- Specialized financial visualization tools
Specialized visualization tools within financial technology platforms are designed specifically for the needs of finance teams. Online tools may be more cost-effective (often, they are free or have a small cost), but they have limited capabilities, so specialized tools can be built within software platforms, which have more extensive capabilities for complex and large data sets. These tools offer features tailored to financial data analysis, such as detailed financial reports, scenario planning and forecasting, and compliance reporting. These specialized tools often come with pre-built financial models and templates, making it easier for finance teams to get started.
Unlocking the story beneath the data empowers everyone
The power of data visualization lies in its ability to transform complex data into digestible insights that members outside of the finance team can understand for more strategic action plans. For finance teams, this means moving beyond traditional spreadsheets and reports to embrace dynamic and interactive tools that make data accessible and understandable, empowering their teams by driving strategic decision-making, and ultimately contributing to business growth.
