FP&A Best Practices: Three Steps to Data Visualisation

The final meeting of 2014, held on 16 September, by the London financial planning and analysis (FP&A) advisory board, focused on developing best practice data visualisation tips for fellow senior FP&A professionals. These recommendations join guidelines issued earlier this year for insight management; FP&A technology systems; and the key FP&A job skills required for the role. Plans for the evolving Association for Financial Professionals’ (AFP) FP&A certification https://fpacert.afponline.org/ programme were also discussed.

Andrew Mosely, a director of business intelligence (BI) at Metapraxis, provided the board with data visualisation tips. The software vendor produces tools for helping finance practitioners analyse data, explore it and graphically represent it in the best manner.

Mosely identified a three-step process for FP&A professionals to follow. Adapted from the ideas of Stephen Few – author of ‘Show Me the Numbers’ and other guides for getting maximum value from data – it consists of data discovery and understanding stages, ultimately leading to better-informed evidenced-based business decisions: 

1. Discovery: This exploration stage involves searching for significant facts and analysing data to spot trends, opportunities and patterns.
2. Understanding: Examination of the data discovery stage aims to make sense of the data and decide how best to use it to advance the business. Strategy is formulated at this stage of the data visualisation procedure.
3. Informed Decisions: This final communication stage is designed to convey the insights gleaned in the best possible manner to the chief executive officer (CEO), CFO, other boardroom participants and also colleagues in other non-finance departments. 

Defining Data Visualisation

Mosely cited author and information graphics teacher Alberto Cairo who defined data visualisation as a tool for communication, understanding and analysis. “It delivers visual representations of data and phenomena that reveal things the bare eye would not be able to see otherwise,” he said, adding that it is designed in ways the human brain can easily understand, for example through their shape.

“Visualisation techniques can make us smarter and quicker and help us to filter out ‘noise’ so that we can see the woods for the trees and identify key patterns,” said Mosely. “A picture or graph is easier to digest and see trends in. It can be used to spot exceptions, anomalies or other interesting phenomena – for example, via a heat map – and allows us to then use this information effectively. An iceberg analysis designed to reveal hidden variance analysis is a practical end use example.”

As former students can attest to from revision sessions, it’s true the brain works better when triggered and fired by visual aids and/or word associations. Data visualisation is merely the advanced application of this theory in a business setting, but whatever graphical aids are deployed – whether interactive clickable hyperbolic trees, narrative infographics, heat maps or 2D pie charts – it’s essential to remember that they can help to drive the analytical process and shouldn’t only be used to represent your findings.

In this way data visualisation techniques; software packages and data visualisation practices can link into insight management approaches, technology systems and professional development. There is an integrated approach here for those brave enough, and with enough budget, to pursue; rather than just relying on Excel or PowerPoint graphical aids for presentational purposes.

The PEERAT Principle

Mosely also identified six key roles and practical end uses for data in the ‘PEERAT’ model; so called as it can be used to: 

• Prompt: Data visualisation can act as a prompt to action, revealing problems or opportunities in the business that wouldn’t otherwise be exposed and which deserve greater investigation.
• Explore: Data visualisation techniques, people skills and software can help to spark and solidify ideas. For instance, are there any interesting outliers in our sales peoples’ performance, which can be encouraged or discouraged enterprise-wide for improved business performance?
• Explain: Visualisation can help better explain strategies to colleagues or win buy-in. For example, a graph could demonstrate that by increasing prices, a firm has grown revenue by holding volumes steady.
• Relate: Data relationships tell a story that the financial professional can link together. Whether your revenue forecasts align with your order or not is one possible instance that can be dynamically represented if so desired.
• Analyse: The ability to model data to emphasise points and win boardroom approval is vital. If, for example, you can graphically show how a 1% increase in the price of chromium adds £20m to the bottom line then you are more likely to get buy-in for your commodity hedging programme as a FP&A professional.
• Track: The ability to look at trends, cross-reference, and spot patterns is essential and aided by good data visualisation.

A collaborative approach, with each side contributing their respective skills, is probably the best way to approach the implementation of a data visualisation project. “This will have the added benefit of avoiding departmental data silos,” concluded a member.

See also the FP&A article ‘Are Fancy Visual Aids Worth the Investment?’ here.

• More information on the corporate FP&A professional certification is available here. AFP is the supporting organisation behind gtnews and the FP&A Club, which has already held events in London, Moscow, Kiev, Stockholm, Geneva, Dubai and various other international locations. You can also sign up to the AFP FP&A e-newsletter or visit the FP&A website . On the gtnews website, interviews are available with various London FP&A Advisory Board members on the dedicated FP&A section.
• To contact the FP&A Club about the free membership for finance professionals, or for more details on forthcoming international events, please email Larysa Melnychuk or join the LinkedIn FP&A Group. The London FP&A advisory board meets next on Thursday 22 January 2015 with possible topics under debate including risk-adjusted planning; big data; or how FP&A is developing differently in different regions. An announcement will be made on the Club website closer to the time. A FP&A conference is also scheduled for 19-20 May 2015 in Amsterdam, Netherlands, next year. Those interested in speaking should contact Larysa Melnychuk.