While every accounting practice will collect, manage and deliver their data in ways that are unique to their specific needs, the building blocks of data analytics are more rigid. If you truly want to get the most value out of your data streams, it’s important to understand how different analytics can be parsed and applied to your practice’s decision-making.
Here, we look into what descriptive, diagnostic, predictive and prescriptive data analytics offer to both accountants and their clients, so you can glean the most value from every piece of data you collect.
- Answers the question: “What happened?”
- Value for your accountants: Descriptive analytics include things like traditional reporting (e.g. monthly report packs), standard list reporting (e.g. workflow to-do lists) and staff utilisation reporting.
- Value for your clients: Use these to deliver higher-level reports for your clients.
The value of descriptive analytics is in the type of insights they can provide from the past. Dealing with raw data from multiple sources, this type of analytics can tell you whether something is correct or incorrect. While on the whole they provide low data complexity and offer low business value compared to others on this list, they can still deliver value to your staff and clients.
- Answers the question: “Why did this happen?”
- Value for your accountants: Diagnostic analytics monitor changes in data, and are useful for variance/trend analyses (e.g. budgets from previous years).
- Value for your clients: Alerting based on variance indicators.
Like descriptive analytics, diagnostic analytics also provide value by focusing on the past. They explain the cause and effect of why something happened, which can be useful for practices that want to identify patterns and relationships in their data. Internally, diagnostic analytics can be used to improve your data visualisations, dashboards, scorecards and KPIs.
- Answers the question: “What will happen, when and why?”
- Value for your accountants: Predictive analytics will help your practice determine relevant trends and predict future outcomes.
- Value for your clients: These analytics can position you as an authority and a trusted advisor, particularly when you are able to warn clients about the potential impact of future changes.
While no amount of data can forecast the future with total accuracy, predictive analytics come very close – with their value in showing you what is likely to happen. Ideal for analysing what-if scenarios, predictive analytics take advantage of data from multiple sources to illuminate future trends and deliver sophisticated analysis, often with the support of machine or deep learning.
- Answers the question: “What should we do about it?”
- Value for your accountants: Prescriptive analytics take predictions and turn them into recommendations for what actions you should take in a given scenario. This ultimately improves your practice’s decision-making.
- Value for your clients: By making smarter decisions, you can help your accountants strengthen their relationships with clients.
Off the back of predictive analytics, prescriptive analytics go one step further to help you understand the best course of action when you want to achieve a specific objective or eliminate a future problem. Bolstered by artificial intelligence, continual learning and prediction models can help inform your actions in order to boost your practice’s performance or mitigate potential risks. While the data complexity of prescriptive analytics is high, the business value it delivers makes it a worthwhile investment.
APS is a product of The Access Group. We develop the software used by the best accounting firms in Australia and New Zealand to run their businesses and advise their clients.