Customers are crucial for any business. After all, sales drive growth. This is why the finance department has historically been so important to any company. But where once keeping track of customer related finances was a simple matter of managing spreadsheets and chasing late payers, today it is a much more complex affair.
The data companies collect to manage their customer relationships can now be augmented with a range of new information, both structured and unstructured. Traditionally, finance teams have been analysing correlations between payment behaviour, revenue and groups of customers – those that work in a particular sector, those that live in the same country, and so on. This has been performed with traditional sets of data aggregated over periods that coincided with reporting periods, be they monthly, quarterly, or yearly.
What’s changed is that companies are now looking at their latest finance information more often, and in some industries – retail and utilities above all – they do so by the day. They are also adding a whole set of new unstructured data to the mix, for example customer interactions on their social networks, and looking to pinpoint correlations between payment habits and where their customers live – down to the very neighbourhood they live in.
In this way the finance team has become better equipped to help guide the company’s wider customer strategies. Consider the way in which an energy provider deals with users who are regularly late paying their bills. By finding correlations between peoples’ demographic data, market conditions, and late payments the utility can better predict the billing habits of its customers and adapt its service to ensure each user pays in good time.
It is this unstructured and less easily quantified information that is enhancing the way organisations manage customers. The technology used to collect, store, and analyse this data has advanced. Traditional “hard” data can easily be combined with customer sentiment, environmental conditions, and even current events to give organisations a more complete picture of what is affecting their customers’ behaviour.
When it comes to corporate customers, this approach gives business better insight into a whole range of factors including reliability, credit-worthiness, and long term viability. For instance, some finance teams are exploring ways to factor in how news about a client company, such as share price fluctuations or a new product release, have affected its operations in the past to better predict how similar developments will affect its ability to pay in the future.
Some are also taking into account broader data relating to circumstances outside a customer’s control that could affect its ability to do business. For example, if a key customer works in solar energy and government subsidies for renewables are subject to new legislation, the company will benefit from being able to model that customer’s financial prospects more accurately.
Bringing unstructured data into financial models requires sophisticated analytics, but it is not beyond our reach. The technology is available, and it now falls to finance teams to grow their understanding of how new forms of information can help inform better customer strategies. Some organisations are also opening up to the idea of a Chief Data Officer, whose role it is to be the bridge between the web of data they collect and the needs of the business.
We have only begun to touch on what is achievable when unstructured data is factored into the customer relationship. Those organisations that have embraced this new way of working are already seeing returns – some have seen the accuracy of their planning rise as much 20% since starting to incorporate a broader range of data in their analyses.
The emergence of data as a form of capital is changing financial planning entirely. Data capital needs to be put under the control of savvy finance teams alongside traditional asset-based capital if it is to be best managed. At a time when so many factors lie outside the business’ control, being able to better plan and manage future challenges has never been more important.