By Bernard BEMPONG
Decision-making can simply be described as the process of making a choice. In an organizational context, some decisions can be arrived at with ease while others particularly complex ones will look at other detailed considerations. Generally, decision-making involves gathering data or information and assessing alternative solutions.
In a business environment, for instance, the decision-making process must consider stakeholders’ opinions since their interest could be at stake. A decision is expected to result in measurable improvement in some indicators in the area of customer satisfaction, operational efficiency, revenue generation or cost optimization for profits.
Financial Decisions
A financial decision is very crucial for individuals and businesses. Indeed, financial decisions are choices regarding the management and allocation of one’s financial resources. A financial decision requires a priority attention because its impact can affect an individual or an organization’s health, stability or growth.
Indeed, financial decisions take the form of investment choices like stocks, bonds or real estate. Other financial decisions or options include budgeting and expense management, funding (loans or equity), tax planning, retirement planning and savings that require prudent risk management strategies. An effective financial decision-making involves setting clear financial goals, gathering relevant information and data, evaluating options and alternatives, assessing risk tolerance while considering long-term implications of those decisions.
According to Gartner survey of business executives, decision-making has become more complex in present times than it was in the past. Those complexities are due to the dynamics of rapid changes in business that require a data-driven and innovative response to adapt and stay ahead of the competition.
Technology provides the launching pad to navigate and deal with those growing complexities. It can optimize a wide range of processes and generate a huge amount of data to improve decision-making. For instance, data can be scanned from customer consumption habits, market trends, competitor analysis and an organization’s employees.
Thus, improving a financial decision-making with IT-based solutions involves leveraging technology to enhance financial data analysis for real time planning.
As a result, organizations need IT solutions to automate financial processes and reduce errors. Thus, when a digital tool is applied on available data, the decision-making process becomes more streamlined, faster and less prone to errors. Nonetheless, financial decision-making requires a managerial skill for the reason that it allows a business to take reasonable risks to drive performance.
Innovative IT-Solutions
Data-driven business decision-making process has witnessed remarkable improvement in efficiency with the availability of valuable and innovative tools for the generation, centralization and analysis of data. Some of the technological applications in use are the Big Data Analytics, Artificial Intelligence (AI) and Machine Learning (ML) and the Robo-Advisory Services.
Some other applications (software) are for Business Intelligence (BI) and financial modelling and forecasting. Blockchain technology has also advanced a completely new digital finance sector.
Technology has further strengthened the entire financial technology ecosystem and has become a powerful tool for investment decisions, wealth management. Businesses can leverage on modern finance-embedded technological applications to earn income from different streams because of the advanced financial complexities.
A shrewd investor can explore a digital application to determine the potential benefits of various investment options in real-time. A clear is example is the mortgaged-backed security (MBS) where investors could invest in different revenue streams within their risk tolerance. It is the case that cloud technology can be a central tool for the decision-making process by enabling faster number crunching and more accurate event probability calculations.
A part from that, it can provide color-coded graphs, charts and analytics where individuals can overlay patterns to gain better visual understanding of decisions and outcomes. In effect, cloud-based computer programs can create a three-dimensional graphical display of potential statistical possibilities.
In the case of Robo-Advisory Services, digital investment and wealth managers can deploy algorithms to give clients data-driven investment advice. They utilize robotic process automation to allocate assets optimally and maintain rewarding investment portfolios for clients.
It does so more tirelessly thereby allowing them time to focus on strategic analysis and other higher-value pursuits that call for human judgement and experience. Indeed, robot software can be integrated across a variety of accounting processes to improve efficiency and accuracy, increase productivity and control overall cost of operations.
By way of security and investment protection, machine learning for instance, which uses more advanced techniques to analyze vast amounts of data in milliseconds can detect patterns of fraud. The patterns help to identify susceptible behaviour and prevent fraud related to electronic payments, bank transactions and tax (evasion) among others. Thus, revenue authorities can also use machine learning to identify unusual patterns to enhance tax compliance.
This process is described as anomaly detection and relies on patterns to recognize legitimate financial transactions and flag suspicious activities. It is all encompassing that business executives can now rely on these indispensable support systems to make faster and timely decisions that will have a positive impact on their companies.
Technology & Data Quality
To arrive at a meaningful decision requires an interpretation of data with support systems. Hence, those cutting-edge technological applications are designed and programmed to perform tasks mainly based on “garbage in garbage out” where an input invariably determines an output.
Therefore, the data is only as useful as the human being who consciously inputs, aggregates and then analyzes said data. As a result, an over-reliance on technology can leave you grasping at straws. Hence, it is imperative to consider which data is relevant to use, how to organize it and what it means.
The crux of the matter is that technology is only an enabler and aims at making the financial decision-making process flow more smoothly with speed and convenience. Technology, therefore, cannot replace good leadership and decision-making skills but complements these attributes.
Brief Takeaways
IT solutions can help organizations and in essence improve financial decision-making through the following:
- Automate financial processes and enhance financial data accuracy and timeliness
- Improve financial reporting and compliance
- Identify areas for cost reduction and optimization
- Develop more accurate financial forecasts and models
- Enable real-time financial analysis, planning, forecasting and ultimate decisions.
- Enhance collaboration and communication among finance teams.
- Improve financial risk management and control
- Some key IT solutions for financial decision-making include Financial Planning and Analysis (FP&A) software, cloud-based accounting and financial management systems (e.g. FinovatePro® and ReckSoft® for big data/large corporate account reconciliation) and digital dashboards and reporting tools.
Conclusion
In today’s fast-paced market, organizations can make more informed financial decisions to drive business growth by leveraging on these IT solutions. In effect, technological applications can be become a fundamental resource to streamline an organization’s decision-making process towards achieving expected outcomes if fully exploited.
Time is of the essence with regard to decision-making and smarter decisions with the support of a gleaned data can be the cornerstone for an organizational success. Data is an extremely powerful tool that allows you to gain valuable insights by the application of using relevant digital tools. Investment in technology and decision support systems can help businesses to become agile and gain better control over their financial decisions.
Bernard is a Chartered Accountant with over 14 years of professional and industry experience in Financial Services Sector and Management Consultancy. He is the Managing Partner of J.S Morlu (Ghana) an international consulting firm providing Accounting, Tax, Auditing, IT Solutions and Business Advisory Services to both private businesses and government.
Our Office is located at Lagos Avenue, East Legon, Accra.
Contact: +233 302 528 977
+233 244 566 092
Website: www.jsmorlu.com.gh
