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Best Practices for Analytics

It does not matter what industry or profession you are in, analytics can play a vital role in making a business decision. Whether it is to determine collectability in accounts receivable or project future revenues, analytics can help with the decision making process. However, what makes a good analytic, or perhaps more importantly, what do we do with the information that the analytic provides? The following are some basic steps to follow when performing analytics for any area:

  1. Plan – As with any situation, we need to take a step back and look at what we are trying to achieve. You must understand what the purpose of the analytic is in order for it to be useful in a business sense. This will help determine what information we actually need instead of just jumping in and possibly overcomplicating it. Also, there are many different types of analytics (i.e. ratios, year-to-year comparisons), so decide what method would be best for what needs to be accomplished.
  2. Compile – Once the purpose is known, you need to compile the information in order to perform the analytic. Keep in mind, not all relevant data is restrained to the finance and accounting department. You may need information regarding the number of employees from HR or other departments that have non-transactional data. Keep an open mind as to where you can pull information from as all areas of an organization can be relevant.
  3. Apply – Now that we have all the data, we can follow the steps that have already been planned as noted in Step 1. Now is another good time to take a step back, as you may have received information that could be used to perform additional or potentially even enhanced analytics.
  4. Report – Finally, the information you have obtained should be communicated to the end-user, typically management. It is important to have a clear understanding of all the prior steps for any questions management may have regarding what the information reveals or why you decided on a certain analytic.

By following these steps for analytic procedures, you can ensure that sound business strategies and decisions are made within your organization.

By Andrew Gill