Leveraging Data – How CPAs Can Make Better Decisions
By Sean Stein Smith, CPA, Rutgers School of Business –
April 13, 2017
In the current business landscape, it is virtually impossible to watch a business program, pick up a magazine or paper, or even just speak with your colleagues without hearing about data analytics. Big data, analytics procedures performed on this data, and the implications for business can almost sound overwhelming.
Some of the most high-profile corporations — Amazon, Google, Facebook, Twitter, Uber — rely on analytics to drive operations. It is clear these trends are having a dramatic effect. Structured data, in the form of quantitative reports on internal operations, customer satisfaction and other competitive data is, arguably, easier to access and analyze than it ever has been before. In addition to the explosion of quantitative — or structured — information, the growth of unstructured data has also been rapid and dynamic. The sheer speed with which data is created and disseminated creates an increasingly dynamic, and almost frenetic, business environment.
Despite the increases in both information and tools with which to analyze and report this information, several structural issues continue to plague businesses. Failed testing procedures, inefficient uses of internal resources and personnel, and an apparent inability to get out in front of consumer trends are common management headaches. These internal problems, issues and misallocations of resources can, and often do, result in lackluster performance. Such a situation creates both challenges and opportunities for businesses at large, and specifically the accounting profession. The reality is that if accountants can more effectively leverage data there is a much higher likelihood that those accountants will gain increased opportunities for leadership and strategic planning.
Data and Accounting
When thinking about data analytics and accounting, it is important to not become overwhelmed by the allure of technology and the latest gadget. The underlying role of accountancy and accounting professionals is to analyze and distribute information throughout the organization. From point of sales reporting, to inventory replenishment, to the implications this data has on working capital, it is apparent that accounting-related information drives business decision making. Expanding this existing reality provides an opportunity for accountants to leverage competencies related to data analytics, reporting and communicating this information to stakeholders. While focusing on how closely analytics, even of unstructured data, is related to present accounting roles and responsibilities, it is important to remember the broader goal. Better use of analytics and analytical information will lead to a more proactive approach, which is critically important as the management decision-making process continues to accelerate. That said, it is not enough to simply know what the end goal is; accounting professionals must also be able to lay out a practical and logical road-map to get to that final point. Fortunately, accounting professionals can draw on existing skills to help facilitate this transition. To make the most out of analytics, the data and analytics reported must be linked directly to the challenges facing the organization. In other words, the data gathered and analyzed cannot simply be analyzed for the sake of analysis — it must have a clear and strong link to core business operations.
To make the best use of data and analytical tools, there are several factors other accounting professionals should take into account. First, what are the primary pain points of the organization? While standardization and process improvement have been enthusiastically embraced for manufacturing and service organizations, these mindsets are not usually implemented in back-office processes. In order to leverage the results of analytic procedures, the underlying accounting and other back-office processes have to be standardized, consistent and able to generate meaningful information.
Second, you need to select the best method to communicate the insights of business analytics by determining how internal and external stakeholders like to receive their information. This might seem like a qualitative approach and not truly related to business analytics, but it is an important piece. If the information is not formatted and presented in a method that is useful to the recipients, the validity of said information will immediately be called into question.
Last, and especially important when proposing new analytical and data-driven decision making, is to focus on early wins. Generating early wins that build the confidence of the accounting team and the faith of management in the accounting team is essential to successfully leverage data the organization produces.
Making better decisions and leveraging available information to make these decisions more efficiently is a key differentiating factor that will only increase in importance moving forward. By focusing on internal processes and procedures that are widely known to be pain points, and leveraging technology to streamline these tasks, management, colleagues and fellow accounting professionals are more likely to adopt analytical procedures. Arguably the most important part, however, is to acknowledge that as quickly as analytics and big data have changed the business landscape, the rapidity of these changes will continue to accelerate. Learning new skills, reinforcing current ones and looking for new opportunities to assume higher-level decision-making responsibilities represent ways for accounting professionals to remain relevant. Analyzing the broader business environment, current accounting roles and duties, and focusing on action-oriented steps toward implementation decisions with data.
Sean D. Stein Smith
Sean Stein Smith, CPA, DBA, M.S., M.B.A., CMA, CGMA, is an assistant professor at Lehman College. He is a member of the NJCPA Content Advisory Board, Student Programs & Scholarship Committee, Emerging Leaders Council, Nonprofit Interest Group and Accounting & Auditing Standards Interest Group.
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This article appeared in the March/April 2017 issue of New Jersey CPA magazine. Read the full issue.