Introduction:
Most marketers understand the value of collecting financial data, but they also realize the challenges of leveraging this knowledge to create smart, proactive pathways back to the customer. Data mining (technologies and techniques for recognizing and tracking patterns within data) helps companies examine layers of seemingly unrelated data for meaningful relationships, where they can anticipate, rather than simply react, to the needs of clients, as well as financial needs. In this accessible introduction, we provide a technology and business overview of data mining and describe how, along with robust business processes and complementary technologies, data mining can strengthen and redefine financial analysis.
Aim:
1. The main objective of mining techniques is to discuss how custom data mining tools should be developed for the analysis of financial data.
2. Pattern of use, in terms of purpose, can be categories according to the need for financial analysis.
3. Develop a financial analysis tool using data mining techniques.
Data processing:
Data mining is the procedure to extract or mine knowledge for a large amount of data or we can say that data mining is “knowledge mining to obtain data” or we can also say Knowledge Discovery in Database (KDD). It means that data mining is: data collection, database creation, data management, data analysis and understanding.
There are some steps in the knowledge discovery process in the database, such as
1. Data cleaning. (To remove the nose and inconsistent data)
2. Data integration. (Where multiple data sources can be combined).
3. Data selection. (When the data relevant to the analysis task is retrieved from the database.)
4. Data transformation. (Where the data is transformed or consolidated into forms appropriate for mining by performing summary or aggregation operations, for example)
5. Data mining. (An essential process where smart methods are applied to extract patterns from data.)
6. Evaluation of patterns. (To identify the truly interesting patterns that represent knowledge based on some interesting measures.)
7. Presentation of knowledge (where knowledge visualization and representation techniques are used to present the extracted knowledge to the user).
Data warehouse:
A data warehouse is a repository of information collected from multiple sources, stored under a unified schema, and generally residing in a single site.
Text:
Most banks and financial institutions offer a wide variety of banking services, such as checking, savings, business and individual customer transactions, credit and investment services such as mutual funds, etc. Some also offer insurance services and equity investment services.
There are different types of analysis available, but in this case we want to give an analysis known as “Evolution Analysis”.
The data evolution analysis is used for the object whose behavior changes over time. Although this may include characterization, discrimination, association, classification or grouping of data related to time, it means that we can say that this evolution analysis is done through the analysis of time series data, the matching of patterns of sequence or periodicity. and data analysis based on similarities.
Data collected from the banking and financial sectors is often relatively complete, reliable and of high quality, providing the ability to perform data mining and analysis. Here we discuss some cases like,
For example, 1. Suppose we have stock market data for the past several years. And we would like to invest in stocks of the best companies. A data mining study of stock market data can identify regularities in the evolution of stocks for stocks in general and for stocks of individual companies. Such regularities can help predict future trends in stock market prices, contributing to our decision making regarding equity investments.
For example, 2. One might like to see the change in debt and income by month, by region, and by other factors along with minimum, maximum, total, average, and other statistical information. Data warehouses, offering the ability to perform benchmarking and outlier analysis, play an important role in mining and financial data analysis.
For example, 3. Loan repayment prediction and customer credit analysis are critical to the bank’s business. There are many factors that can strongly influence loan repayment performance and a customer’s credit rating. Data mining can help identify important factors and eliminate an irrelevant one.
Factors related to the risk of loan payments, such as loan term, debt ratio, payment-to-income ratio, credit history, and many more. Banks decide which profile presents relatively low risks based on critical factor analysis.
We can get things done faster and create a more sophisticated presentation with financial analysis software. These products condense complex data analysis into easy-to-understand graphical presentations. And there is an advantage: such software can take our practice to a more advanced level of business consulting and help us attract new clients.
To help us find a program that best meets our needs and budget, we examined some of the leading packages that represent, according to vendor estimates, more than 90% of the market. Although all packages are marketed as financial analysis software, not all of them perform all the functions required for full spectrum analysis. It should allow us to provide a unique service to customers.
The products:
ACCPAC CFO (Comprehensive Financial Optimizer) is designed for small and medium-sized businesses and can help make business planning decisions by modeling the impact of various options. This is accomplished by demonstrating the hypothetical results of small changes. A progress function prepares estimates or forecast reports in minutes. The program also generates a financial dashboard of information and key financial indicators.
BizBench Custom Financial Analysis provides financial benchmarking to determine how a company compares to others in its industry by using the Risk Management Association (RMA) database. It also highlights key ratios that need improvement and a year-over-year trend analysis. A unique feature, Back Calculation, calculates profit targets or the appropriate asset base to support existing sales and profitability. His analysis of the DuPont model demonstrates how each relationship affects return on equity.
Financial Analysis CS reviews and compares a client’s financial position with its trading peers or with industry standards. You can also compare multiple locations of a single company to determine which are the most profitable. Users who subscribe to the RMA option can be integrated with Financial Analysis CS, which then allows them to provide aggregated financial metrics from their peers or industry standards, showing clients how their business compares.
iLumen periodically collects a customer’s financial information to provide ongoing analysis. It also provides benchmarking information, comparing the client’s financial performance with its industry peers. The system is web-based and can monitor a customer’s performance on a monthly, quarterly, and yearly basis. The network can upload a trial balance file directly from any accounting software program and provide tables, graphs, and ratios that demonstrate a company’s performance over the period. Analysis tools are visualized through custom dashboards.
New Horizon Technologies’ PlanGuru can generate integrated, customer-ready balance sheets, income statements, and cash flow statements. The program includes tools for analyzing data, making projections, making forecasts and budgeting. It also supports multiple resulting scenarios. The system can calculate up to 21 financial ratios, as well as the breakeven point. PlanGuru uses a spreadsheet-style interface and wizards that guide users through data entry. You can import from Excel, QuickBooks, Peachtree, and plain text files. It comes in editions for professionals and consultants. A plugin, called Business Analyzer, calculates the benchmarks.
Sageworks ProfitCents is web-based, requiring no software or updates. Integrates with QuickBooks, CCH, Caseware, Creative Solutions, and Best Software applications. He also provides a wide variety of business analysis for nonprofits and sole proprietorships. The company offers free consulting, training and customer support. It is also available in Spanish.
ProfitSystem fx Profit Driver from CCH Tax and Accounting provides a wide range of financial diagnostics and analysis. Provides data in spreadsheet form and can benchmark against industry standards. The program can track up to 40 periods.