In today’s fast-paced business landscape, data-driven decision-making is essential for gaining a competitive advantage. The process of gathering and processing data is much easier with the aid of specialized systems or software applications in what is described as data analytics.
Data analytics involves analyzing data sets to find trends and draw conclusions about the information they contain. Data collection is the first step for any analytics application.
For instance, accounting data analytics extracts data from financial transactions such as bank statements, invoices, payments and sales receipts to obtain meaningful insights for timely decisions. Indeed, data analytics is becoming increasingly important to business executives because it has become a strategic tool for improving decision-making.
Key Tools in Data Analytics
In data analytics, users including business executives can utilize predictive analytical tools to make projections and estimates, and to enhance business intelligence. The choice of a tool for data collection depends on the source and type of data being gathered and processed.
There are analytical software applications for data mining and visualization to present data in the forms of graphs, charts and maps to help discover facts behind figures.
Statistical analysis tools can also be utilized to perform statistical analyses on large sets of data to identify relationships between variables such as sales volume and price changes over time or sales volumes across different regions within an organization’s market area.
Apart from that, advanced reporting tools can also be used to create customized reports based on specific criteria. There again, accounting software is the most common tool used by businesses to record and analyze the financial data of a company.
It helps in automating tasks, reducing errors, and improving operational efficiency. Some examples of accounting data analytics include stock price analysis which allows users to see how a company’s shares have performed over time.
There is also cash flow analysis which shows receipts (how much cash is coming in) and payments (expenditures going out) each month. Thus, it is very important for accountants to take advantage of these technological advancements and harness the benefits.
Key Strategies for Leveraging Data Analytics
- Managers must define clear business objectives and align them with data analysis and set of strategic plans.
- Developing a data-driven culture. Inculcating a culture in managers and employees with a conduct that values data-driven decision-making.
- Training and Skills Development. It is important for businesses to train or hire ethical professionals with expertise in data analysis and interpretation.
- Investing in Applicable Data Analytics Tools or Software. Businesses need to leverage tools that add value to their decision-making process. Generic tools include business intelligence software, statistical models and machine learning algorithms. The nature of business and strategic plans must inform the type of data analytics tool a company invests in.
- Keep abreast with Industry Trends: To respond to emerging trends and remain relevant, businesses must continuously monitor changing dynamics of the industry and adjust strategies accordingly.
Benefits of Data Analytics
Data analytics initiatives support a wide variety of uses in business operations. Some of them are the following:
Streamline Financial Operations
Data analytics is a powerful tool that provides an insight into a company’s operations to ensure efficiency and financial performance even in the midst of economic crises. For instance, a data analytics can provide an insight into sales and expenses with faster access to key metrics.
When you identify an increase in sales but not enough profit, data analytics can help you identify which products are selling well and which ones are not. This will allow you to make changes accordingly and improve transparency into financial performance. Similarly, accounting data analytics also helps to make sense of a company’s financial data by providing insight into how it relates to other aspects of the business.
Reveal Data-driven Insights
Businesses can leverage innovations in data analytical tools to identify trends and patterns in their financial information that may not be apparent at a first glance. Depending on the application, the data that is analyzed can consist of either historical records or new data for real-time analytics.
The outcome of real-times analytics can empower organizations to respond quickly to emerging market trends and gain a competitive edge over business rivals through informed decisions and strategies. It is worth re-emphasizing that data analytics provides an accurate prediction of future market and industry trends. Hence, data-backed decisions eliminate over reliance on intuition or guesswork at critical times.
Improves Audit and Assurance
In other applications, data analytics can help auditors to improve the risk assessment process, substantive procedures and tests of controls. Audit Data Analytics (ADAs) help auditors to perform a variety of procedures to gather audit evidence.
They are able to discover and analyze patterns, identify anomalies and extract other useful information from audit data through analysis, modeling and visualization (graphs, charts). For example, banks and credit card companies analyze cash withdrawals and spending patterns to prevent fraud and identity theft by relying on data analytics. These software tools have the potential to provide further evidence to assist with audit judgements and provide greater insights for audit clients.
Better Customer Insights
The most important aspect of any business is its customers. The more you know about your customers and their needs, the better it helps to be responsive to serving those needs. Businesses can, therefore, deploy data analytics tools to gather data about their customers’ behaviour and preferences.
A business can obtain insights relating to customers’ demographics and spending habits that can help to make an informed product development and marketing campaign. For instance, mobile network operators (MNOs) can use analytics to examine customer data to forecast churn.
Strategic Planning
Data analytics can help businesses to set future goals and plans accordingly. Analytics helps extract valuable insights from data and make better decisions. For instance, with analytics, the finance function no longer serves only as a provider of financial reporting but a strategic partner for strategic planning.
Data analytics has necessitated a transformational move from the conservative transactions to the support function of decision making by using both financial and non-financial information. As book-keeping and financial statement preparation require less human interventions and manual processes, there is indeed, a paradigm shift towards spending more time on management drilled down to strategic planning and decisions-making.
Challenges in Integrating Data Analytical Tools
It is imperative business leaders appreciate the enormous benefits of implementing data analytics. However, there are some challenges which must be thought through by organizations willing to integrate it into their operations. Some of these challenges include:
Budget Constraints
In fact, the benefits of integrating data analytical software applications really outweigh the investments costs. Furthermore, the enabling infrastructure to support the integration of data analytics software requires significant investments. However, due to budget constraints or limited resources organizations are yet to tap into this innovation. That said, data analytics is feasible by using cloud services that offer better scalability and cost-effectiveness compared to traditional on-premise solutions.
Insufficient Skills-Set
It is also revealing to note that many organizations do not have personnel with expertise in data analytics. This also makes its implementation quite difficult for them to exploit the full benefits. The crux of the matter is that gathering and analyzing data requires expert knowledge and advice. In this regard, organizations need to explore training options to empower their personnel to develop the skills or competences in data analytics.
Conclusion
It has been established that data analytics offers more promise for delivering innovative sources of value to businesses. Considering the fact that users can analyze very large volumes of data from all business units within a short time, data analytics improves accuracy of outcomes and invariably increases productivity. In effect, the use of data analytics can boost profitability by ensuring efficiency or reducing waste through resource optimization of operations.
BERNARD BEMPONG
Bernard is a Chartered Accountant with over 14 years of professional and industry experience in Financial Services Sector and Management Consultancy. He is the Managing Partner of J.S Morlu (Ghana) an international consulting firm providing Accounting, Tax, Auditing, IT Solutions and Business Advisory Services to both private businesses and government.
Our Office is located at Lagos Avenue, East Legon, Accra.
Contact: +233 302 528 977
+233 244 566 092
Website: www.jsmorlu.com.gh
