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Business intelligence and financial analytics are two different fields of study. Basically, business intelligence (BI) deals with tools that provide insights into the current status of your business’s financial status. Financial analytics provide predictive analyses that give insight into a business’s profitability and sales performance.
Many business leaders have the misconception that outsourced business intelligence and outsourced financial analytics are the same. But having this misconception can have detrimental effects on the outcome of your business.
To get the most out of your business software strategy you need to incorporate both BI and financial analytics. Doing so gives you the current analyses you need to adjust your business appropriately, whether you need to address supply chain issues, operational inefficiencies, or labor inequalities.
What Is the Primary Distinction Between Business Intelligence and Financial Analytics?
The primary distinction between business intelligence and financial analytics is the focus on when events occur. BI focuses on current and past events. Financial analytics focuses on what’s most likely to happen in the future. The two practices use the same data, but the timeline for applying the results is different.
The difference becomes more apparent in the following definitions: Business intelligence asks the questions of what is happening now and what needs to happen to address the problems arising in the present. Financial analytics answers the question of what is likely to happen in the future and how your business should respond in order to affect future events.
In other words, BI makes current data available in a presentable manner so executives can derive information from the current state of affairs. BI software breaks down information into recognizable pieces so executives and leaders can make decisions and issue damage control directives.
Financial analytics, on the other hand, uses data insights from the past to form strategies affecting future operations. The goal in this case is to improve on productivity and other systems currently in place to increase profitability and sales in the future.
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Descriptive vs. Predictive
One of the major differentiators between business intelligence and financial analytics is that BI is directed more toward explaining current events. Financial analytics is directed more toward gathering insight that can increase productivity in the future.
Financial analytics can predict patterns in the future to suggest why things occur and where to expect similar results in the future. The primary aim of these predictive analyses is to make decisions about capital and other financial expenses with a clear picture of the company’s trajectory.
Managers vs. Analysts
Another main differentiator between business intelligence and financial analytics is that business intelligence operators are primarily data managers instead of analysts.
BI tools present data in a readily identifiable method to marketers, accountants, and managers. Many of these people don’t have the technical expertise necessary to comprehend everything the data shows. However, they are decision-makers, and decision-makers need to understand the data in order to make informed decisions.
Data professionals present critical information using BI visualization tools. This allows them to present complex data to stakeholders and executives who might not have a mathematical or statistical background. In other words, BI tools simplify the data and help decision-makers gain understanding.
Financial analytics, on the other hand, offer a more in-depth analysis of the data. In these cases, professionals with more specialized skills interpret the data so that decision-makers can use it in the future.
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Put simply, BI professionals are focused on presenting facts so they can be easily understood. But financial analysts who deal with business analytics must tackle the task of uncovering future, testable data fields that lead to actionable insights.
More work and more expertise are needed to uncover these insights. BI analysts do not need to consider the future effects that present data has on the future. This key aspect is what distinguishes financial analysts from BI managers. That is, BI focuses on managing currently generated data. But financial analysts must attempt to create a mathematical depiction of the future, a much more complicated feat.
Another way to conceptualize this is to consider that business intelligence requires end users to understand basic math and software operations. BI creates mathematical models, querying, machine learning, and AI to create directives. Therefore, with the proper tools and software experience, most mathematically minded professionals can create reports with business intelligence.
However, financial analysts need deeper skills. Anyone who understands machine learning can obtain actionable insights from business intelligence. But it takes a special skill set to predict the future with mathematical precision.
New vs. Old Data Analysis
Most companies approach analytics tentatively using a business intelligence strategy. However, taking the further step regarding your financial analytics will lead to more consistent results down the road. Once your business intelligence is underway, you should quickly turn to financial analytics. Then you can begin to implement an effective strategy that prepares you for the challenges ahead.
If you are considering implementing a financial analytics strategy, it helps to start with BI systems first, then work on creating a financial analytics strategy. In other words, your BI strategy should be the backbone of your financial analytics strategy. However, trying to start a financial analytics team before you have a business intelligence team in place will be unproductive.
However, while many businesses are leveraging business intelligence, far fewer are focused on financial strategy teams. The challenge with trying to implement a financial analytics team occurs because most companies don’t understand how financial analytics works. Since financial analytics professionals have such a unique skill set, many companies are still struggling with the skills gap.
Implement Both Business Intelligence and Financial Analytics
Even though financial analytics is in its infancy, you shouldn’t shy away from its capabilities. If you don’t have a business intelligence team already in place, start there. If you are already utilizing business intelligence and are looking for the next step, financial analytics is the area to focus your attention. These professionals can help you prepare for the future. They will help you craft financial directives that will protect your business from the challenges you might not be able to foresee without the help of financial analytics.
The main difference between business intelligence and financial analytics is that business intelligence focuses on what is occurring now and how to approach it. Financial analytics focuses on how businesses can prepare for the future.
Business intelligence requires skills, but financial analytics requires a particular blend of pragmatism and mathematical literacy, a rare combination. Effectively incorporating both on your team will give your company a strategic advantage compared to those that rely solely on business intelligence.
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