Data Visualisation for FP&A: Is it a Game Changer?

Data Visualisation for FP&A: Is it a Game Changer?

By Larysa Melnychuk, Managing Director at FP&A Trends Group

“There is a magic in graphs. The profile of a curve reveals in a flash a whole situation — the life history of an epidemic, a panic, or an era of prosperity. The curve informs the mind, awakens the imagination, and convinces.” 

― Henry D. Hubbard

They say a picture is worth a thousand words… “Telling the story” is one of the most important tasks facing the FP&A professional, and data visualization is a powerful tool to reveal this story.

Data visualisation is vital for FP&A analytics: it can help to reveal hidden trends and patterns, to filter out the noise and to generate valuable business insights.

In other words, there are two types of data visualisation:

  1. Narrative visualisation which tells a story to the audience
  2. Explorative visualisation which helps to corroborate a story through analytics

Narrative Visualisation

Narrative visualisation is important for the decision-making process. I know a lot of examples where FP&A processes proved ineffective because the results of their valuable analytical work were not well communicated.

People have different preferences, perceptions and expectations towards how information should be presented. Not everyone would value data visualisation. In my practice, I have worked with a few CFOs, who preferred information to be displayed in numerical forms. However, for most people, it is more intuitive to view a graphical presentation of FP&A information than it is to see rows of numbers.

A recently growing trend is moving towards real-time visual dashboards, which can display KPIs instantly, automate the preferred reports and adjust them to the audience.

The days of static and inflexible PowerPoint presentations are numbered. In a modern FP&A environment, different scenarios could be modelled right there in the boardroom, with instant display of the results in a visual form, for quick and easy decision-making processes.

Explorative Visualisation

“For companies to adequately analyse data and identify emerging trends or opportunities for growth, users must be able to quickly and intuitively interact with visual representations of the data”, notes Gartner Inc.

It is popular among FP&A professionals to present trends graphically. I know from my own experience, that the graphical representation of the “Hockey Stick” forecast quickly reveals all unrealistic assumptions and helps to improve overall forecasting quality.

Visual Analytics

According to J. Thomas and K. Cook, “ visual analytics is the science of analytical reasoning supported by interactive visual interfaces”.

Modern data visualization solutions with in-memory architecture are designed to scale and handle large amounts of data. Therefore, they can help FP&A professionals to discover information from large volumes of data, quickly spot patterns and outliers and to generate insights that can drive more successful business decisions.

Are these the first steps for FP&A on the big data analytics journey?

Some Tips from Data Visualisation Experts

At one of the AFP FP&A Clubs in London, a guest speaker Andrew Mosely, director of Metapraxis, summarised how visualization can actually "make us smarter" by helping us:

  • Distribute the mental workload
  • Filter out the noise
  • Recognize patterns
  • Follow lines of thought
  • Spot exceptions and
  • Perceive the unexpected.

Additionally, effective design is very important. To communicate well graphs, charts and tables need to be designed effectively, noted Mosely. The key design principles include:

  • Minimizing distractions
  • Encoding data effectively
  • Effective colour palettes.

Visualization matters for FP&A because it has an important role in improving the business control cycle, Mosely concluded.

However, poorly designed visualization can trick the audience and send the wrong messages, so it is essential that FP&A professionals follow some simple rules to avoid common pitfalls.

Limitations of Data Visualisation

Most finance professionals agree that FP&A analytics have not matured sufficiently inside of the organisation. Poor quality of data continues to be a problem for many data visualisation projects.

Another limitation of data visualisation is the fact that it relies on human perception and evaluation to extract insight and knowledge.

According to technology company Emcien, “it’s human nature: we see what we are conditioned to see and miss the fact that a gorilla just danced through the living room”.

The three-dimensional nature of visualisation is limiting by its nature: it is difficult to represent the complexities of the multidimensional business world through only three dimensions.

Conclusions

We should not underestimate the role of modern data visualisation for FP&A. It helps to tell the stories, to analyse the data and even to grasp the world of big data for better and quicker decision-making process.

The new generation of visual presentation and visual analytics tools will continue to challenge the status quo of traditional finance departments. It is a time to move away from static PowerPoint presentations toward dynamic real-time dashboards. This is a time to start using modern visual analytics for big sets of external and internal data. 

I am convinced that modern Data visualisation is a game changer for FP&A.

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