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We’ve all heard the saying, “A picture is worth a thousand words.” Frederick Bernard said this over 100 years ago (before the advent of digital technology), but it still holds true today. Humans are wired to process images more quickly and efficiently than words alone. 90% of the information transmitted to the brain is visual. People who follow illustrated instructions perform 323% better than those who follow text-only instructions. Additionally, the Wharton School of Business found that while only half of an audience is convinced by a verbal presentation, that number jumps to more than two-thirds when visuals are added to the presentation.
How does this apply to the world of finance? Actually, quite a bit. Finance departments are preparing for a transformation in how they process and visualize data. How are finance teams visualizing data today, and how can they improve it to drive more meaningful business decisions?
Related: A guide to visualizing data in presentations
The current state of data visualization in finance
Finance teams traditionally rely on spreadsheets and static reports to visualize data. While these tools have their benefits, they often fall short in providing the dynamic insights needed for real-time decision-making. Excel remains a staple, but its static nature can make it difficult to quickly spot trends. Standard financial reports are typically dense and require strong financial literacy to effectively interpret.
Imagine a monthly financial report created in Excel, full of tables and numbers. A CEO reviewing this report has to comb through rows and columns of data to identify key performance indicators (KPIs). This is a very time-consuming method that is prone to human error and misinterpretation, yet is quite common. Even CFOs who are used to spreadsheets don’t have the time to pore over tables. Data visualization combined with automatic data refresh makes it easy to skim through reports and pull out relevant data quickly.
Why now is the time for a change
Regardless of industry, advanced technology has made it easier than ever to collect data for analysis, but that doesn’t mean the data is automatically understood or accessible. By incorporating data visualization and automated data delivery (and data updates) into their operations, finance departments can gain a competitive advantage in an industry where knowledge is power.
The benefits of improved data visualization
Improved understanding: When data is effectively visualized, it is easier for everyone in the organization to understand. Certain tools allow finance teams to create interactive dashboards that display data in real time, making it easier to track performance metrics and financial trends. This makes the data understandable to various teams across the organization, from marketing to sales. It is beneficial for teams who want to better understand how their work is impacting the organization’s financial health. Improved collaboration: Data that is easy to understand means that everyone can join in the discussions about that data. Visual data is attractive and accessible even to non-finance experts, which encourages collaboration across departments and stakeholders. For example, a visual representation of vendor spending across different retail stores can help the CFO and management identify where excessive costs are being incurred, providing valuable information for cost-cutting measures. In contrast, traditional spreadsheets provide detailed breakdowns of vendor payments, expenses, and costs per location, but these reports can be difficult to interpret for non-finance stakeholders and can hinder cross-departmental collaboration and decision-making. Strategic real-time insights: Real-time data visualization allows finance teams to focus on strategy and spend less time on manual data analysis. With tools that automatically sync and update with the latest numbers, finance teams can analyze and interpret data quickly, so they can spend more time on strategic initiatives that drive business growth, rather than wasting time retrieving and reviewing outdated numbers.
Related: Dealing with Data: 5 Steps to Building More Effective Teams
How to Implement Data Visualization
Implementing effective data visualization in finance requires careful planning and execution, so here are some steps to get you started.
1. Assess your current capabilities
Before you begin improving how your business approaches data visualization, evaluate the current state of your data practices by assessing the software your business currently uses for data analysis and reporting. This will allow you to identify any limitations or gaps in functionality.
Next, ensure that all relevant data sources are identified, accessible, and updated regularly and automatically. This includes financial data from ERP systems, CRM data, and other relevant data streams – data quality is key.
Finally, you need to have a clear understanding of your users’ needs. Gather input from stakeholders, including finance team members, executives, and other departments, to understand what data users need access to, and in what format.
2. Define clear goals
A successful data visualization strategy requires setting clear goals. Goals should align with your overall business objectives and address your specific needs. Goals could include improving decision-making, increasing efficiency, or fostering collaboration, but every business’s goals will be a little different depending on their needs.
3. Choose the right tools
When searching for the right tool, consider which one can best support the goals you have set. Look for a platform that has powerful data visualization capabilities that are easy to use, can integrate with your existing systems, and can scale as your business grows. The tool should also offer customization options to tailor visualizations to your specific needs and preferences.
Examples of data visualization tools include:
Unified Business Intelligence (BI) Platform
Integrated BI platforms are comprehensive tools that offer a wide range of data visualization and analysis capabilities. These platforms enable finance teams to create interactive dashboards that provide at-a-glance visibility into key financial metrics. They also enable finance teams to perform advanced analytics, such as predictive modeling and trend analysis, to gain deeper insights into financial reports.
AP automation tools are a great complement to a finance department’s BI platform. These tools streamline invoice processing by automatically capturing, validating, and storing data, providing finance teams with always-up-to-date information and eliminating the need for manual data entry. When integrated with a BI platform, AP automation tools enhance financial reporting by feeding dashboards and visualizations with real-time, accurate data for more accurate strategy and analysis.
Online Tools
Online data visualization tools are growing in popularity due to their accessibility and ease of use, and many are available for immediate download. These tools are often cloud-based, making them ideal for businesses that need a flexible, scalable solution. They often integrate with a variety of data sources, including cloud-based financial systems, ensuring data is always up-to-date. Online tools also have the advantage of being accessible from any device with an internet connection, providing flexibility for remote or distributed teams.
Professional financial visualization tools
Specialized visualization tools within financial technology platforms are designed specifically for the needs of finance teams. Online tools may be cost-effective (often free or low cost) but have limited functionality, so specialized tools can be built within software platforms with broader capabilities to accommodate complex and large data sets. These tools provide functionality tailored to financial data analysis, including detailed financial reports, scenario planning and forecasting, and compliance reporting. These specialized tools often come with pre-built financial models and templates to make it easy for finance teams to get started.
Unlocking the stories behind your data empowers everyone
The power of data visualization lies in its ability to transform complex data into easy-to-understand insights that non-finance members can understand, allowing for more strategic action plans. For finance teams, this means moving away from traditional spreadsheets and reports and embracing dynamic, interactive tools that make data more accessible and understandable, driving strategic decision-making that empowers your team and ultimately helps grow your business.
