The importance of data analytics in accounting firms can be unlocked through accounting practice management software that leverages business intelligence tools (also known as BI), such as data management and analytics software.
Many accountants, tax accountants and bookkeepers are already successfully using accounting practice software with business intelligence capabilities to deliver value-added services to their clients, charging them a premium.
Accounting data analytics may give you the competitive edge you’ve been looking for. And the good news is, you already have all the data – you just need to utilise it properly through best-in-class accounting practice software.
What is meant by data-driven?
The result of becoming a practice driven by data analysis has numerous benefits, and practice managers should be driving these positives home, particularly with accountants who may be reluctant to step away from their familiar pen-and-ledger workstyle. Here are some of the outcomes you can expect:
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A single source of truth (SSOT): No longer are your data analytics accounting sources de-centralised and disconnected. Instead, your employees will have a platform that makes the use of data analytics much easier, as well as reporting and accounting practice decision-making.
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Accounting practice benchmarking: Set and reset your accounting KPIs to measure valuable insights from your data – and find out where any gaps need to be plugged.
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Tech-savvy team: When your people start using accounting practice software solutions in their day-to-day work lives, they will soon gain expertise in both accounting business and technical issues, allowing them to support their co-workers and train up new employees.
Where are the opportunities for accounting data?
For several years now, accountants have known that they will have to adapt to the digital age or risk becoming redundant. And while some of the more traditional practitioners may have been slow to accept this truth, the COVID-19 pandemic accelerated the real need for change.
But it’s not just hyper-connectivity that is driving change. The customer holds all the power with new technologies like accounting practice automation, AI in accounting, and big data analytics helping accounting practices eliminate time-consuming tasks.
In accountancy especially, business leaders understand how critical it is to place the right data in the hands of the right people at the right time. Beyond accounting data analytics benefits, visualisation can ultimately help you run a better practice while learning more about your clients’ needs so you can facilitate additional business advisory services on a more frequent basis.
It’s no wonder BI – and the tools that support it – is one of the most active areas for investment in information technology for accountants buying an accounting practice.
So how can you gain insight into your target market's needs while delivering them the exact service they are looking for? Through data analytics.
What are the concerns for firms with legacy accounting data software?
The issue for most accounting professionals in public practice – especially for those that have yet to begin, or are still in the midst of, their digital transformation – is that there may be legacy systems and siloed organisational processes that hamper progress. That requires an investment in the right technologies to consolidate your processes.
There may also be a talent gap. After all, if a practice never had to rely on digital tools for the majority of their tasks, they wouldn’t have known to hire an accountant with a background in data science and analytics – highly sought-after accounting skills these days.
Finally, there is the ever-present fear-of-failure culture. Experimentation is rarely rewarded within structured industries like accounting, yet it is the key to innovation. You want to develop a culture of creativity and agility in your team and encourage them to adopt new processes if they believe it will improve their productivity. The bottom line: for any major organisational shift, you’ll need buy-in from the whole team before the transition begins.
Learn more about switching away from legacy systems in our ultimate guide: Is it time to switch your accounting practice management software?
What is business intelligence in accounting?
Business intelligence (BI) is where accounting practice software turns accounting data into operational information a business can employ to make more strategic, tactical and practical business decisions.
Business intelligence may be a combination of:
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business data analytics;
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accounting data collection and large accounts of data storage;
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data visualisation (graphics);
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data mining; and
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workplace best practices.
Business intelligence software is one of the biggest investment opportunities for the accounting profession, taking business data and presenting it in a user-friendly way, such as up-to-date reports, dashboards, charts, graphs and summaries. Accounting businesses use these insights from business intelligence and data analysis to make data-driven decisions and identify opportunities or problems for their clients.
Choosing practice software for accountants with business intelligence capabilities
Here are four things to consider when choosing the right software for accountants with business intelligence. These will help you to unleash the full potential of business intelligence for your practice and your client data:
1. The initial outlay
If you’re running a modest accounting practice, the initial cost of data management and analytics software with business intelligence capabilities may be too much for your small business.
However, as the positive effects for your practice will be almost immediate, you should factor in the overall savings – or new revenue streams – for your practice in the long term.
2. Researching accounting practice software options
Choosing the right accounting practice software package for your practice may seem daunting.
That’s why it’s essential to do your research, understand the product features and choose a practice accounting software package with applications matching your business requirements and is purpose-built for accounting practices.
According to our 2022 survey of over 600 accounting practices in Australia, almost half (45%) couldn't easily access their client information, documentation and data from one place, so you should also consider the benefits of centralised client data through data management and analytics software.
3. Consider the user experience (UX)
It’s not uncommon for accountants to want to stick with accounting practice software they know, especially if new software means a major overhaul to processes and additional training.
Choose data management and analytics software that’s user-friendly and easy to integrate with existing software for accountants.
4. Integrating all your accounting data
An accounting practice may have data stored in various software, data systems and business applications.
To use and leverage this information effectively, it must be warehoused correctly, using accounting practice data management and analytics software.
Once data sources are centralised and properly warehoused, it is collated, and the BI tools are used to unlock and share the filtered data. This is one of the most comprehensive aspects of BI software and is especially useful for deploying new systems with full data integration.
The importance of the data-driven accounting professional
Rapid technological evolutions have changed the game for tax preparation and accounting services at large. Practices need to realise that how people in the accounting field access and visualise data has changed permanently – not to mention how a range of transactional tasks can now be automated.
Understanding the value of accounting data analytics for decision-making is easy, but taking that next step and relying on a data-driven approach to run your entire practice, as well as guiding your clients’ businesses, is a lofty but achievable goal to work towards in future.
When tackled intelligently, such an approach will not only deliver insights to drive positive outcomes but also free up time that can be utilised to greater effect across other disciplines, including the analysis of those insights.
Accountants can get a leg-up on the competition by breaking away from traditional measures and adopting valuable accounting practice solutions, including BI and data visualisation features, to streamline their firm operations.
Three data-driven areas your accounting practice should be focusing on:
If your practice has been slow to embrace digital tools, taking the idea of ‘data’ at face value may seem overwhelming. After all, accounting practices accumulate and store vast amounts of data every year - particularly those that leverage cloud-based client management software.
Most of that data will be wasted without the proper processes and technologies. That’s why you need to focus on key three elements of becoming a data-driven business:
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People: You want a team built on a culture of collaboration – one always seeking to learn new things and enable each other through new technologies.
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Processes: For any data-led initiative to succeed, a robust data governance program must be in place. Moreover, leaders must be collaborative rather than take a ‘top-down’ approach and use the data to make informed decisions instead of old-school ‘gut instinct’ management.
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Technologies: You'll want a cloud solution that can scale with your business and allow you to deploy various tools as and when needed. You should also seek a platform that can automate data preparation and other time-consuming tasks, thus freeing your team to focus on creative, customer-facing jobs.
To measure ways data analytics contributes to your ongoing effectiveness, read our article: The 11 best KPIs your accounting practice should be tracking.
The benefits of smarter data-driven decision-making in accounting practices
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Higher client retention rates: After the hurdle of winning new customers comes an even greater challenge: keeping them. Having to attract a new client costs five times more than what you’d spend retaining an existing client, and having valuable customer data analytics at your disposal can help you do exactly that.
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Accounting data analytics matters: Without the relevant data analytics on how your practice operates, how can you develop new ideas to improve your business model? From audience insights, A/B testing your marketing strategies and getting insightful visual data on how your people are performing their tasks, data analytics captured on a workflow solution through BI reporting can show you where you need to innovate.
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More skilful teams: In addition to revealing any gaps in productivity, and therefore allowing your team to streamline their operations, accounting data analytics can also provide insights on new opportunities. These may relate to eliminating time-consuming, repetitive accounting tasks, or even cross-sell/upsell opportunities to make your workforce more productive in future – and your workplace more profitable.
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Sustainable growth and higher profits: Thanks to rapid digitalisation, the accounting industry is becoming more competitive across the board – whether you’re a sole practitioner or a larger practice. The key to growth, then, is to build up your customer base. Using data to attract and retain more clients can help ensure your practice grows steadily and sustainably, with just a 5% increase in customer retention leading to 25%–95% greater profits.