Power BI is a powerful Business Intelligence platform by Microsoft that offers data visualization and data warehousing services. It also provides multiple tools for business users for collecting, visualizing, and sharing business data. The application Power BI Desktop is best suitable to download for Windows 10. Moreover, it also supports various mobile apps for Windows, Android, and iOS devices.
Here in this blog, we will discuss why Power BI is much useful for finance professionals in the current ecosystem.
The application also provides several data analytics services like data preparation, data discovery, data reporting, etc. Furthermore, Power BI is a cloud-based platform and also available across different platforms.
Power BI for financial analysis
The term financial analysis denotes the process of describing the profitability and risk of a company by analyzing reports. Generally, these reports include profit and loss statements, balance sheets, and other financial data. Moreover, this data gives complete information about the company’s business and its stability & health.
The Power BI dashboard helps very much in the financial analysis of any business’s financial reporting. The uses of the Power BI dashboard are many. Such as;
Data visualization
Data visualization helps in analyzing data and gets the benefits of various insights like KPI’s and metrics. Users can track their records of finance and related things.
Locating problem areas and rectifying
The Power BI financial dashboards are useful to locate the problem areas like P/L statements, sales, revenue information, etc. Within every business unit, these issues are common and they are addressed commonly and rectified. Moreover, through data visualization experts identify these problems at a higher level & intervene to solve them.
Working with updated data
Using Power BI dashboards one can work with updated financial data available via different sources. The analysts can view monthly, quarterly, and annual data very easily and with updates. This updated data helps in to get the right data at right time. It leads to making better business decisions for the better financial advantage of the business.
Moreover, by using the Power BI dashboard in financial analysis, users can do the following;
They can apply better cost and cash management strategies to the business.
Users can track their business expenditure and sales revenue frequently.
The dashboards provide a regular overview of the cash flow into the business and their liquidity status.
Moreover, users can track account payables and account receivable’s status also. This is because they can finish all their outstanding due payments and owed payments easily.
Finally, they can achieve the financial goals set for their company.
Get more insights into using Power BI for finance professionals from the Power BI Online Course at Onlineitguru.
Uses of Power BI in Finance & Financial Services
There are many uses of Power BI in finance and related services. The following uses we will discuss here;
Consolidating large data sets
Power BI tool offers to organize large business data and its consolidation in easy terms. Generally, there are certain limitations with respect to various fields of organization. Thus, Power BI provides extraordinary data management services in finance. There are no limitations to any financial data reporting even the business unit size is bigger or has complex data.
Exceptional Forecasting
Power BI provides exceptional forecasting features that are an integral part of any business unit. Based on these forecasts a business can draw vital decisions for its operations. The data forecasting functions like “what-if-parameters” helps to build interactive financial forecasts. Thus, exceptionally it’s the best tool for financial forecasting.
Power View
This is an important feature of Power BI that enables us to produce interactive graphs, charts, tables to have Power View. Moreover, this is useful to generate visually attractive charts from the available financial data. Further, helps to make informed decisions for the business.
Changing data trends
All we know that data is keeping grow on with changing trends and patterns that need more updates. Having an in-built time intelligence feature, Power BI leverages the arrangement of data trends according to the various parameters. Using this feature, a business can easily locate the change in data patterns over the years. Furthermore, it helps in drawing important sum up of financial reports regarding profitability, budgets, etc.
Collaboration
The power BI platform is very collaborative. This is easy to share and accessible for everyone across the organization for multiple users. Using Power BI dashboards and other interactive features of data visuals, users can share important data with others and management. This provides coordination among the people working at the same place.
Power BI DAX Financial functions
There are more than 50+ functions activated around the time of the July 2020 release of Power BI Desktop. The Power BI DAX financial functions are largely obtained from those found within Excel. Most of these functions are very familiar to the users. A big amount of this significant number of functions is most useful in comparatively specialized scenarios.
Thus, we will focus on the following DAX financial functions within this blog:
PMT ()
RATE ()
NPER ()
PV ()
FV ()
Anyone of these values is computed by using a DAX financial function along with other parameters. The following data will explain the operation of each function efficiently and with examples. If you work to practice these functions in an exercise, you will get hands-on experience along with the other parameters.
Rate –
This denotes the rate of interest per period.
For Example, An individual takes out a thirty-year mortgage loan to buy a primary residence at a 2.5% annual interest rate. Let us assume, on the regular monthly payments, the interest rate is 0.25/12, or .020833 pm. This rate would be added into the formula as the “Rate” for the calculation of interest.
Pmt –
Pmt function denotes the payment made in each period. And this typically stays the same period over, the life of the annuity of mortgage or else. Moreover, this payment generally consists of principal and interest but no hidden taxes or fees.
Nper –
The Nper in Power BI DAX denotes that the total number of payment periods within an annuity. If it’s less than 1 then there is a chance of occurring error.
For Example: Suppose a person takes out a 30-year mortgage loan with monthly interest payments. Then the number of payment periods would be 360 (i.e. 30 Yrs. * 12 months). Besides, this 360 would be added to the formula as Nper function in this DAX function.
Pv –
The PV () denotes the present value, or the total amount that a series of future payments will benefit in the existing time. Moreover, the present value is often called the “principal” amount.
Fv –
The term Fv denotes the future value or cash balance within Power BI DAX functions. This is an optional function or value. In this, a person expects to achieve after he makes the last payment.
For Example: As an example, an individual thinks to save USD 30k for a project. And he expects to start it in seven years. USD 30,000 shows the future value of the project. He could forecast a conventional range for the available interest rate. And based upon that, he can ascertain how much to save per month.
Type –
This function is optional in nature as the number could be 0 or 1. The “Type” function indicates when payments are due or still need to pay.
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DAX Functions explained
The following are the various DAX functions in Power BI in detail.
PMT function
The PMT() function in DAX helps to calculate the loan payment based on regular payments and a consistent interest rate (IR). Furthermore, PMT() is the most popular function within MS Excel where finance professionals use it highly within real estate and other lending models. Besides, its formula is the logic commonly found within loan payment computations.
The syntax for this;
PMT (
The PMT function returns a value that includes principle and interest value only. Furthermore, we should note that all the units for “Rate and Nper” must be in regular.
Rate function
The Power BI DAX RATE() financial function returns the rate of interest per interval of an annuity. RATE() function is useful to calculate the interest rates in the plots ranging from ascertaining the Avg. annual return rate. This one may earn from a bond purchased, to decide the percentage of depreciation per period to consider. The rate of depreciation is useful for calculating given collateral’s yield to maturity – and many other settings among them.
The syntax for this;
RATE(, , [, [, [, ]]]) Here, it is to note that the units for stating “Guess and Nper” functions must be constant.
Moreover, the functions “Rate and Nper” also must be regular.
NPER function
The function NPER() in DAX Finance functions within BI returns the number of intervals for an investment based on recurring, regular payments, and a regular IR. Besides, NPER() function is useful, within amortization or savings plots to compute points within a time where interest is accrued.
Syntax for this;
NPER (
PV function
The PV() function or present value helps to calculate the current value of a loan or an investment. Besides, this calculation is based on a regular rate of interest.
Moreover, the present value() is useful with either a future value or interval, regular payments (mortgage loan). Further, in the case of an investment, PV() returns the basic investment that a user made.
Syntax of the function;
PV (
It denotes that PV() returns the existing loan or investment value.
FV function
The Power BI FV() function helps to calculate the FV of a deposit based on a regular interest rate. Besides, this value or function is useful to compute the future value in plots involving intervals, consistent payments (loan payments e.g.), and/or a lump sum payment. This value reflects the principal + interest received or paid within the given period.
The syntax for this;
FV (
c_FV =
FV(
Loans[Rate],
Loans[Nper],
Loans[Pmt],
Loans[Pv],
Loans[Type])
Financial functions in Power BI
The following functions are the most useful financial functions within the Power BI application.
ACCRINT
This financial function returns the accrued interest for a security that pays interest at regular intervals.
The Syntax for the same includes the following things -
IssueDate – It refers to the Issue date of Security or investment.
FirstInterestDate – this field within the function refers to the Security’s 1st Interest pay date.
SettlementDate – This is the “Date of Security’s Settlement”. Furthermore, this is the date that comes after the issue date when the collateral is traded to the buyer.
Rate – The rate defines the “Rate of security’s annual coupon”.
ParValue – The par value represents the “security’s par value”.
Frequency – This is the number of coupon payments made per annum.
Basis – This value is optional. The default value here is “0”, it refers to the US (NASD) 30/360 day count basis. 1 means Actual/actual. 2 mean Actual/360. And so on.
CalcMethod – This is also an optional value like basis. Moreover, if the same is removed then it becomes “TRUE”.
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DOLLARDE
The function converts a $ price revealed as an integer and a fraction part. Like 1.02, into a $ price revealed as a decimal number. Besides, the “fractional $” numbers are sometimes useful for security/investment prices.
The syntax for this is – DOLLARDE (Fractional_dollar, Fraction)
Fractional_dollar - A number revealed as an integer & a fraction part, divided by a decimal (.) symbol.
Fraction – This denotes the integer/number is useful within the denominator of the fraction.
DISC
The function returns the discount (DISC) rate of a security/investment.
Syntax is – DISC (SettlementDate, MaturityDate, Pr, Redemption[, Basis])
SettlementDate– It denotes the settlement date of security or deposit.
MaturityDate – The value denotes the “Maturity date” of security or the expiry date of security or deposit.
Pr – This refers to the price per $100 Fv of the security or deposit.
Redemption – This refers to redemption value per $100 Fv of security/investment.
Basis – This value is optional in nature.
DOLLARFR
This function helps to convert a $ price revealed as a decimal number to a $ price revealed as an integer and a fraction part. Like 1.02. Moreover, the fractional $ numbers are sometimes useful for security prices also.
The syntax is – DOLLARFR (Decimal_dollar, Fraction)
Here, Decimal_dollar – Denotes a decimal number.
Fraction – Fraction is the integer useful within the denominator of the fraction.
YIELD
This function returns the yield on security or investment. The value pays interest at intervals.
Syntax is– YIELD (SettlementDate, MaturityDate, Rate, Pr, Redemption, Frequency, [Basis])
SettlementDate – this refers to the settlement date of security in the function.
MaturityDate – refers to the maturity or the expiry date of the security.
Rate – It’s an annual coupon rate of security or investment. Pr – This is the price per $100 FV of security.
Redemption – this value refers to the redemption value per $100 security’s FV.
Frequency – the means the number of coupon payments p.a.
Basis – This is an optional value and the default value is Zero.
Summing Up
Thus, we reach to conclude the topic of using Power BI for finance professionals. The above functions reflect the values calculated for the securities or investment. These functions are much useful for every BI professional. They are useful to ascertain values like loan interest, etc. If you want to become a Power BI professional in finance, go through the Power BI Online Training.