Use Data Analytics to Unlock New Opportunities in Productivity & Profitability
Written by Mike Kottwitz, CPA, CVA
What comes to mind when you hear the term “data analytics?” For many, data analytics is just a buzz-word commonly thrown around by various industry leaders, journalists, and consultants. Others may think of its more advanced capabilities such as predictive analytics and artificial intelligence. Regardless, it is not uncommon for some to fail to see the relevance of analytics to their own business or non-profit organization. The truth is that some level of data analytics can be used in nearly any setting and can help leaders gain a clearer picture and make more informed decisions.
At its most basic level, data analysis is tool that can be used for internal reporting and monitoring. Interpreting historical data to better understand changes and identify trends is known as descriptive analytics, answering questions such as “what happened?” or “how many?” Combining internal data with key performance indicators (KPIs) or industry benchmarks can provide a better understanding of a company’s standing and help drive strategic planning. Descriptive analysis can be useful in removing bias from the decision making process of management. It presents results for what they actually are, identifying areas of both strength and weakness. It is then up to management to make decisions based on the analysis given.
Descriptive analytics has other useful applications such as internal control monitoring and fraud prevention and detection. Modern, user-friendly, and cost-effective data analysis tools allow companies to quickly and efficiently identify transactions that may not be in compliance with internal policies or show other red flags based on parameters set by management. For example, companies with multiple credit cards often select a sample of transactions to test each year for potential abuse. With data analysis tools, all transactions can be tested on an ongoing or periodic basis in a quick and efficient manner, with outliers easily identified. A simple example of a red flag in credit card testing would be transactions originating on weekends, holidays, or when an employee is scheduled for vacation.
Other important internal control tests include comparing the company’s vendor master file with the employee master file to search for potential fictitious vendors. Vendors with incomplete profiles, especially those with missing phone numbers or tax identification numbers can be indicators of potential fraud. Working to identifying duplicate vendors will help clean up the vendor file and reduce the chances of duplicate payments being made on vendor invoices or fraudulent payments being made to a fictitious vendor. All of these tests can be done with basic analytics software commonly available, and most of these issues affect companies of all sizes.
Taking analytics outside of compliance and benchmarking, businesses and non-profit organizations often have a wealth of information on their customers and donors. This data can be used to identify top customers, recurring customers, their lifetime value to the company, and many other factors. This information is useful not only in gaining a better understanding of a customer base, but can help with financial projections and budgeting. Identifying lapsed customers gives companies a solid base of targets to market for reengagement. Customers or donors that have worked with a company in the past are typically more likely to do so again, so it makes sense to dedicate resources to these people before targeting new groups. Analytics tools help identify these people and can also track the results of a reengagement campaign.
As you can see, data analytics does not have to be complicated or too expensive for your business. In the end, data analytics is as simple as using your data to solve a problem. You do not have to be a technology expert or hire a data scientist for analytics to help improve your business. Due to the prevalence of technology, many of the examples above are being considered best practices.
HBE also has a team of professionals with the tools and expertise to help you with your needs. We can perform analysis of internal controls, customer data, donor data, or work with you on a custom solution. If you would like more information on how HBE can help you incorporate data analytics into your business or non-profit organization, please contact our office and ask to be connected with a member or our data analytics team.