95% percent of financial institution CFOs say their organizations should do more to leverage financial and operational data and analytics to make better business decisions, according to a recent Kaufman Hall survey.

Considering that finance executives have access to more data than ever, this is a powerful measurement of the very real struggle to use data to understand business trends and drive actionable insights. But leveraging financial and operational data to guide decisions is a function of having the right tools and processes, and knowing which key data can deliver valuable, actionable information.

Here are three ways financial institution leaders can advance profitability analysis and planning functions.

1. Gain visibility into relationship profitability

Does your institution measure the profitability of each relationship and customer? If not, how hard is it to do so? Profitability is at the heart of any institution’s long- and short-term strategies, so determining key profitability drivers should be a mission-critical priority for any CFO.

Nine out of 10 CFOs say monitoring relationship and customer profitability is important, but only 43% monitor relationship profitability, and only 41% monitor customer profitability.

Understanding the total value of a customer’s relationship is essential for frontline managers, who can then price loans and deposits appropriately, more effectively market products and services, retain the best customers through appropriate service, and more.

Finance leaders should consider profitability measurement systems that:

  • Actively manage complex relationships and portfolios
  • Aggregate sourced and derived data in a single repository
  • Provide a robust calculation and modeling engine
  • Offer actionable insight on ways to improve financial performance

Read about Axiom Relationship Profitability & Pricing to learn more.

2. Leverage high-quality data and analytics

65% percent of CFO survey respondents are only somewhat confident in their institutions’ abilities to manage the financial impact of industry disruption. This may be due to challenges with data and reporting accuracy, which in turn hinders effective business decisions. Therefore, leaders should embrace tools that will improve accuracy and help them make better strategic and tactical decisions in the organization.

Successful finance teams understand the need to differentiate descriptive analysis (what are my results?) from diagnostic analysis (why did I get these results?). These analyses support decisions that enable sustained competitive performance and require:

  • Access to clean and consistent data
  • A robust database with sophisticated modeling and analytics capabilities
  • The ability to integrate data from any source to perform calculations, create and monitor plans, measure profitability, and conduct other types of reporting and analyses
  • Automated reporting and report distribution

Learn how Axiom Reporting & Analytics makes this possible.

3. Empower employees

In addition to providing the right tools and improving the accuracy of results, financial institution leaders must make the right investment in people, resources, and processes to drive better performance.

In the survey, 72% of CFOs say their institutions are experiencing resource constraints, up from 61% in last year’s results. Outdated processes further hinder 39% of responding institutions, while 33% note that personnel skillsets need improvement.

Access to the right professional development, training, and resources is the first step to empowering teams to overcome challenges and drive success. 

Basing incentive compensation on profitability metrics, not just volume, further supports both individual and institution success.

Learn how Axiom Incentive Compensation Management can help.

This is not the time of “business as usual” for financial institutions. Continuing to invest in people — and the tools, processes, and infrastructure that support them — to retain intellectual property and drive performance is the new normal in today’s economic climate.
 

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