The size of your practice should not prevent you from using data analytics. In this article, I look at how accountancy firms of any size can use it to stay ahead of their competitors and enhance the service they offer their clients.
All the large accounting firms are embracing big data analytics, robotic process automation and machine learning. They recognise that this drives efficiencies and growth in their own and their clients’ businesses. The question is why aren’t the small and medium-sized practices (SMBs) doing the same?
Scale may be one reason, both in terms of the perceived scale of investment required and the perceived scale of data. The familiar refrain is: “Where do we start?”
The fact is that large investment is no longer required in order to make a big difference to your practice. This is due to the reduced costs of storing and transferring data, and the explosion in excellent (and affordable) business information software.
Reasons why you may need data analytics
There are five reasons why you may need data analytics. Across your practice, some or all of them will be relevant:
- Inform decision making.
- Understand clients and trends.
- Provide smarter services and products.
- Improve internal operations.
- Create additional revenues.
Underlying all of these reasons should be your desire to compete against your peers more effectively. And, deliver more added value services to your clients, particularly when margins on pure compliance will be squeezed more and more.
Where do you start?
To address the issue of “where do I start?”, consider the following:
- What are the problems that you need to solve? In other words, what are the major challenges currently stopping you from achieving your plans?
- What data may you need to solve these problems?
- What resource might you need to address this?
Starting with these questions deals with the scale issue. You can define exactly what data project you need to carry out, and this in turn will allow you to work out its projected return on investment.
We find when first working with clients there are two connected areas that need to be addressed:
- systems and processes, and
- data analytics.
Systems and processes
In many cases, systems and processes need to be reviewed and updated in order to improve efficiency and enable better data collection. Once this is done, the data analytics part of a project can become far more effective.
The good news is that there are always some quick wins that can make significant improvements to your practice.
Recently, a client came to us with a problem I see in most businesses – management reports that are pages long with line after line after numbers. Management doesn’t have time to read and digest them, let alone get the insights they need to help them run their business.
We worked with the client to understand the critical metrics they needed. We then implemented business information reporting linked to their current reports, which extracts the important information. In some areas, we use visualisation to help them quickly understand what is going on in their business. The system is designed so that the reports are automatically updated. In this way, they can have meaningful real-time information. Plus, they don’t need us when they need to run the reports.
Arguably, the sexier part of data analytics comes from the client insights that are generated.
To give a recent example, we had a client who wanted to know how their clients had come to them (i.e. referral or marketing activity?). By analysing the data that they already held in various places in their practice, they uncovered some patterns and correlations that they didn’t know existed. This enables them to focus their marketing and business development activities towards areas that they know already deliver a return.
Once an accounting practice is comfortable that data analytics works within their own practice, they are then able to offer this as a value added service to their clients. This mitigates some of the risk attached to the practice arising from margins on pure compliance work being squeezed to zero.