A business becomes successful after implementing effective strategies arising out of strategic decision making that is influenced by valuable data insights, especially financial data. This makes the role of accountants and finance professionals extremely important in an organization since they are the ones, who maintain and present this data to the management. However, in the present scenario, their role is not just limited to maintaining financial data as they are required to provide valuable insights into the financial data to enable management professionals to make better business decisions.
This is where big data and analytics step in! With the availability of a huge volume of financial data, data analytics help professionals study the financial data wisely to find the most useful and valuable information. This is the reason most of the accounting firms, CFOs, internal audit and finance functions are enhancing their capacity in data governance, data analytics, and data science.
The Role of Data Analytics in CPA Firms
CPA firms are beginning to realize that merely providing accounting services to clients is not going to make them lead from the front in this competitive business era. They need to utilize financial data more than just completing tasks to provide their clients with actionable insights. Ideally, after receiving the previous year’s financial data from a client, a firm clarifies things over certain speculations and prepares the tax return or performs an audit. Firms should make use of the raw data to understand the specific needs of their clients and serve them accordingly.
For instance, when Rehmann, a top CPA firm surveyed its more than 2000 clients, it learned that clients preferred them over others for its ability to understand their business, and this understanding comes from data analytics only! One more thing that this firm did upon the passing of the Tax Cuts and Jobs Act on December 22, 2017, was that it used tax software for running reports and analyzing the clients that were likely to get affected by this act. Rehmann didn’t wait for the year-end but instead developed strategies during 2018 after reaching those clients directly.
Such types of initiatives help firms in making clients identify opportunities for cross-selling and optimizing business performance. Data analytics software helps in recognizing and analyzing trends, along with using financial data for position, revenue, compensation, and spending comparison with peers. It also aids in dealing with ‘future probabilities’, enabling firms to have a 360-degree view of every client, leading to an enhanced client experience.
In short, data analytics help CPA firms with:
- Understanding unique client requirements.
- Providing accurate financial insights to clients.
- Helping them make strategic business decisions.
- Serving their clients with more than just accounting services.
- Overall client satisfaction and retention.
The Importance of Data Analytics for CFOs
CFOs have always been a valuable asset to their organizations, and with data analytics, they can become even more valuable. This is so since they are able to devise better financial strategies based on in-depth financial insights achieved as a result of analytics. This is the reason that in the last five years, almost 50% of the CFOs are dedicating more time on using advanced analytics so that they can guide their CEOs in an advanced manner.
To make the best use of financial data, CFOs need to focus on the following:
- Identify the proof of concept projects to make it an integral business decision-making part.
- Deliver as per business needs on priority through the alignment of data analytics.
- Instill the right work culture and leadership.
- Provide training to individuals in recognizing psychological assumptions that often lead to making poor decisions.
- Provide convenient data tools to users.
- Transform analytical insights into actionable ones, and align rewards, incentives, and measurement consequently.
How Big Data helps Finance and Accounting Professionals?
As per the Institute of Management Accountants, technologies such as blockchain, data analytics, machine learning, robotic process automation, and artificial intelligence have a bigger role to play in the lives of finance and accounting professionals in the present scenario.
Analytics and data science are being embraced by management accountants to leverage technology in enhancing the overall business performance through improved data analysis and governance potential. As per the report, the usage of big data by organizations is likely to increase in the coming future.
The following considerations will help businesses and their accountants in implementing big data into their processes successfully:
- Start with the basic implementation and move onto bigger projects gradually.
- Explore data usage potential, both internally as well as externally.
- Provide real-time financial information to specific professionals.
- Take initiatives for buying and incorporating the use of big data and analytics at the department as well as the executive level.
- Develop strategies for the proper implementation of these data technologies.
- Build advanced infrastructure and robust data governance to ensure the highest level of quality and integrity.
How do Firms Need to Get Prepared?
One of the major obstacles faced by firms in leveraging data science and analytics is nothing but finding the right talent. Management accountants do not really need to transform into data experts; they just need to work on their analytical skills to be able to derive meaningful information in a much better way for refined decision-making.
The future accountants must hold skills and competency in the following:
- Statistics- To find the patterns and gain insights into the financial data.
- Business applications and domain, including deep business understanding to recognize problems and opportunities, leading to enhanced insights and smart solutions, using tools for improved workflow integration and visualization.
- Data applications- To cover multiple areas like data transformation (extraction and transformation), data governance, data manipulation and modeling, data creation and storage, data architecture and skills in technology, including algorithms and machine learning.
These enhanced skills will help accounting professionals in the following:
- Accountability and clarity in the areas of audit and attestation, fraud, etc.
- Planning and analysis to make supply chain, driver-based pricing and profitability modeling, and forecasting better.
- Data supervision and governance to achieve consistency, comparability, and reliability.
- Decision making and guaranteeing understanding and benefit/cost, relevance, etc.
Data science and analytics is not just an option for finance and accounting service providers, it is a necessity in the present times. To meet the increasing customer demands and stay ahead of the competition, it is imperative to streamline the internal and external process to provide personalized and enhanced solutions to customers, and this is only achievable when firms leverage such technologies. So, if accountants need to become future-ready, they need to incorporate the use of data science and analytics at the earliest!