Accounting on Us
Data analytics can help you identify new tax savings opportunities and help you steer your organization towards new opportunities.
Make your data work for you
What big data can tell you, why it's valuable to your organization and why it's worth the cost
Kevin Bach, CPA, CVA, Partner
Your business is awash in data that, if displayed and mined properly, can help you grow and profit. Make that data work for you. Through Data Analytics, you can better see trends and patterns to help your organization improve performance and identify risks and red flags. Building analytical models can allow you to forecast where your organization is going, and help you create a plan to optimize and direct that growth.
So, what is Data Analytics? Data Analytics is defined as the science and art of discovering and analyzing patterns, identifying anomalies, and extracting other useful information in data, and identifying a question or problem and utilizing the data, both financial and non-financial, to determine an answer or solution. Practically speaking, Data Analytics is turning your run of the mill data collection into a plan for the future of your company.
There are four main areas of data analytics:
- Descriptive Analytics – What happened?
- Diagnostic Analytics – Why did it happen?
- Predictive Analytics – What will happen?
- Prescriptive Analytics – What should be done?
When you think about practical applications for big data, the obvious go-to is marketing. When you order from Amazon, you’re giving the company all the information they need to better market to you in the future. They tailor their message based not just on demographics but on what you’ve looked at and purchased. With enough data they can drill down even further, presenting you with colors, sizes and products tailored specifically to your tastes. Use them enough and Amazon can even predict when you’re ready to reorder. They know you’re out of fishing lures before you cast your last line. The data serves Amazon on several layers. On one level, big data fuels marketing efforts and leads to additional purchases. On another, it allows Amazon to become invaluable to its customers, instilling loyalty by improving customer service.
The applications are as boundless as your imagination. The beauty of Data Analytics is the ability to gather data across a variety of platforms, whether it is a point-of-sale system, accounting package, website traffic, or even inventory movement on a production floor. The ability to combine these data points and look at historical events and patterns is a start; but using these events and patterns to model what-ifs for the future is the vision.
Companies across a variety of platforms using data in their everyday function. American Express uses data to analyze and predict customer behavior, allowing them to better forecast who will close their accounts. Henry+Horne analyzes our data to spot risk and fraud during audits. General Electric uses sensors in equipment to identify product improvement and reliability.
The question your organization needs to answer is what question you want answered. Once you arrive at a question, the key is to ascertain what data is available to solve the question and if the data is not currently available, what changes can be made at the organization to collect the right data. Quality data is critical for effective data analysis as it will be relied upon to answer questions of the past and build models into the future. Evaluate the data you’re currently collecting and think of additional data you can collect that will help you answer the question.
In the accounting world, Data Analytics can be used to improve audits, creating a better experience for you, and providing valuable insight into your company’s business and accounting functions. Having a clear understanding of where you are will help you see where you want to go. Data Analytics can help you identify new tax savings opportunities and help you steer your organization towards new opportunities.
From a managerial standpoint, Data Analytics is invaluable. The right data can help you identify risk and provide tools to manage it. It will help you pinpoint where you can make operational improvements and even assist in pricing or eliminating products and services that are not generating positive cash flows. Forecasting models can help you plan for the future under different scenarios
The cost benefit is clear. Even if you only use your data to improve audits, streamlined, efficient audits resulting from improved processes due to analytics will save you time and headaches. Taking your data analysis to its next level will also lead to improved customer relations, corporate compliance and better communication with stakeholders. In short, can you afford NOT to dive into data analytics?
Feel free to contact your Henry+Horne tax adviser with any questions.