If an IBM report is to be believed, about 90% of all data has been created within the last two years, with 2.5 quintillion bytes of it generated around the world every day. You have access to more data than ever before and, thanks to technology that allows us to collate, scrape and analyse it. Your business is able to glean insights and use the knowledge gained to give you a competitive edge.
But what does this mean in principle for your accountancy, financial advisory firm or finance department?
- The value of data is in knowing how to turn it into actionable advice
- Predictive analysis tools combined with client data can lead to better forecasting
- The future accountant will have expert analysis skills, like a data scientist has
From paper to the cloud
In its simplest analogue form, accounting data was traditionally all a company's receipts, spreadsheets and financial statements. They used to be recorded on paper, then along came desktop software, and now you have cloud accounting.
The cloud has a few benefits. Traditional paper-based accounting can often lead to “people making assumptions and mistakes” says business advisor Amanda Hoffmann, writing for Xero. And while cloud accounting isn’t error-free, you have access to sophisticated tools to improve accuracy that you didn’t previously. Second, it frees you from your desk and your data is no longer chained to a certain computer – you now have access to it anytime, anywhere, as this Zoho Books blog points out.
Cloud accounting, though, is more than just about fetching transactions automatically, scanning receipts and extracting other data, pushing all the information into one easy-to-access system. Advances in technology mean that data analytics can help you make forecasts, identify blind spots and change and improve the services you provide to your client.
Mining for data isn’t anything new
Analytics is nothing new. Back in 1997, an article appeared in Business Finance magazine highlighting how software is an effective way to “spot relationships and predict behaviour in a sea of data”. Twenty years on and the nature of business has simply changed, the volume of data has got much bigger and you have better tools to mine and understand it.
Thanks to software today, you can aggregate data from all your clients, even within a specific sector area, and use it to set realistic performance benchmarks.
But there are still challenges. When you’re trying to deliver a great service to your clients and keep up to date with regulations and tax laws, it can be difficult to keep on top of technology and innovation in the first place, says Matt Jagst, writing for Thomson Reuters’ tax and accounting blog.
If you find your firm is in this position, a possible solution could be to create a new role and assign someone the responsibility of making sure the firm is on top of the latest trends and has the latest software updates installed.
Think about big data
Another advantage of the cloud accounting software options on the market today is that they can handle bigger sets of data, both structured and unstructured.
A basic example of unstructured data is a bunch of emails. Whereas previously you may have gone through them with a red pen or highlighter, you now have tools that can scan them for keywords and extract the information you want.
“Big data has started creating ripples in business, and it is only a matter of time before a new accounting paradigm emerges in the form of big data accounting,”
Suresh Sood, a data scientist at Chartered Accountants Australia and New Zealand.
Look at the even bigger picture
Having access to an unprecedented volume of data is all well and good, but you need to know what to do with it. You need to work out its value, says Andrew White, an industry analyst at Gartner.
So how do you get value out of an intangible asset like data? You have to understand how it can be used and how much it can contribute to the revenue of an organisation. So, rather than simply collating it – which is only part of the equation, says Jason Bramwell, editor at AccountingWEB – need to turn it into actionable advice and help your clients make better business decisions with it.
For example, you may have a small gardening or horticulture client who isn’t overly concerned about gross margins. By using data to show them how other businesses in their area of work are performing, they may start to take more of an interest in their costs.
The birth of the ‘connected accountant’
As software continues to become more sophisticated, you’ll be finding yourself working with, and not against, intelligent tools and algorithms, says Bernard Marr, a business and data expert, writing for Forbes.
Ultimately, as clients become more demanding, wanting better insight from data collated, the skillset of the future ‘connected accountant’ (or financial professional) may be very different. They will be required to have expert analysis skills and be software-savvy, a bit like data scientists and engineers.