One of the top trends in the financial sector is big data analytics and data-driven decision making. Finance and accounting teams have always turned to numbers to solve problems, but most have more information and data than ever before. As a result, many companies are bringing in the data professionals, tapping business analysts to become permanent fixtures on financial teams.
What part do BAs play in the numbers-driven world of the finance department? How can they use data to move the business forward? Let’s continue our series on the essential role of business analysts in your organization by looking at the importance of data analysis in finance.
Data Can Quickly Overwhelm an Organization
Over the past five years, there has been a flood of data into the financial services industry. From finance-specific companies to accounting teams in small businesses, everyone has more data than they know what to do with. Financial writer Trevir Nath says data analysis and analytics professionals are having a hard time keeping up.
“The sheer volume of data requires greater sophistication of statistical techniques in order to obtain accurate results,” he notes.
Professor Gregory Saxton at York University’s Schulich School of Business agrees, saying the vast majority of time spent in accounting analytics is dedicated to “data munging,” transforming date into a usable and digestible format. “data wrangling is something any social scientist or other type of researcher is familiar with — with Big data there are just additional challenges in terms of scope and nature of the issues you’ll be dealing with,” he explains.
It’s true that the challenges facing companies using big data in accounting are more unique than they could have expected. In the world of finance, the three Vs govern big data: volume, velocity and variety. Volume addresses the sheer amount of data available; velocity covers the speed at which the data arrives; and variety refers to the different sources and formats in which the data is presented.
Business consultant Jennifer Trelewicz looks at these three Vs and says few companies and sectors fit perfectly into the guidelines and recommendations for data. Oftentimes, the three Vs become a “pick two” situation. You can have a lot of diverse data, but it won’t be fast. Or you can have a lot of data fast, but only from one source. Companies are always trying to reach the three Vs.
Data Reporting and Analysis Needs to be Immediate
In addition to collecting and sorting data as soon as they can, more executives want data immediately. They are sensitive to changes within the organization and want to track trends as they happen.
data scientist Igor Bobriakov shares several use cases of big data in finance. One that stands out and speaks to the nature of business analysts in accounting is real-time analytics.
With real-time analytics, companies can identify problems or trends within a matter of minutes. Companies report daily, if not hourly, on their progress, and the demand for information is high. Bobriakov says real-time analytics are applied in three areas: fraud detection, consumer insights and algorithmic trading.
“The era of preparing periodic accounts – month-end, quarter-end, etc. – will be over,” writes business coach Aubrey Joachim. He also believes that reporting will be less backward looking. As executives follow day-to-day changes, they don’t want insights on what happened in the past month. They need insights that predict that is going to happen in the coming week.
CFOs and Other Executives Are Guided By Financial Insights
The need for financial analysts and business insights in the accounting department will increase as the chief financial officer takes on more of a leading role in the company. The team at Sisense says CFOs are moving from the “corporate backyard to the boardroom,” becoming more essential in daily operations as real-time data is increasingly used.
Now, CFOs advise CEOs and are tasked to help COOs and CIOs accomplish their goals while staying on budget and within the constraints of the company’s ability. The analyst who provides insights to the CFO can impact decisions rippling through the company.
Elizabeth Milne at SAP says chief financial officers often lead the way in navigating and analyzing the “digital boardroom.” This digital boardroom uses data to provide a clear view of the organization, allowing other executives to take high- and micro-level views of the organization. Milne says that the days of “I’ll get back to you later” in regard to digital questions are ending, as teams can look up the answers right then and there.
Companies that currently lack this “digital boardroom” are left wondering how they can leave outdated insights in convoluted spreadsheets and instead use data in a way that is valuable.
“The challenge for finance is how to develop an enterprise view of analytics,” says Allan Frank, cofounder The Hackett Group. “The first thing is to realize you can find out more. You can ask questions you couldn’t ask before and frame them in the form of business outcomes.”
data is meant to be probed, analyzed, and turned on its head. Business analysts almost become professional handlers taking control of this resource and presenting it in a way that answers executive questions. Interestingly, with CFOs sharing financial data with other executives, there’s more demand across the company for access to the information. Soon, the entire company becomes data-driven.
“Where data — especially financial data — was once collected and analyzed in a departmental vacuum, smart companies understand that the more informed their employees are, the better bottom-line decisions they will make,” writes Betsy Bland, vice president of corporate strategy at Workday.
Companies with a collaboration-focused culture can use financial data to improve their processes and make arguments for changes in existing company structures and processes. Similarly finance teams can use data from other departments to look for waste or inconsistencies within the numbers.
Many Finance Professionals Fit Into Business Analyst Roles
While demand for financial insights and business analysis in accounting certainly exists, the skills and workers often aren’t there.
One study by Robert Half and the Institute of Management Accountants found that there is a significant skills gap between the ideal finance candidate and the available talent pool. Companies need financial professionals who are comfortable with big data and business analysis. These people need both hard and soft skills to identify data trends, conduct operational analyses, and use strategic thinking to develop and execute solutions.
Business analytics and data management are increasingly becoming skills that accounting firms are demanding, agrees Sarah Ovaska-Few in the Journal of Accountancy. They are reaching out to colleges and requesting these skills be taught to better prepare the next generation of students how to use AI tools and how to conduct advanced analytics. Business analysts with knowledge of accounting are in high demand, at least in the short run as schools and colleges scramble to keep up.
Fortunately, there is a strong overlap between accounting and business analysis. People who like solving puzzles in numbers can do well in both fields.
“Accountants are used to aggregating information to create a picture of an organization that summarizes the details contained in each transaction,” says Professor Wendell Gilland who teaches operations management at the UNC Kenan-Flagler School of Business says. “Working with descriptive analytics, predictive analytics, and prescriptive analytics comes more easily to people who already possess excellent quantitative skills.”
Essentially, many accountants are already prepared to meet the needs of modern business analysis.
Business analyst Tracy Smitheram is an example of a professional who switched from finance to a business analysis role. “I absolutely loved working as a functional analyst and the role introduced me to business analysis,” she says. “Suddenly I realised that there was a whole world out there that involved everything that I loved to do.”
Eventually, Smitheram might use her BA skills to return to the finance department and use her experience from both ends.
Business Analysts Need More Than Accounting Skills
The main issue facing the skills gap between accounts and BAs is strategy. CPA consultant L. Gary Boomer writes that the vast majority of accounting firms are investing in technology consulting, with almost 75 percent increasing their investments in 2017. These CPAs are using business analysts to increase their efficiency for better operations. He says that a few ways BAs help accounting professionals involve:
Consensus building and leadership influence.
The last speaks to the soft skills required in the world of business analysis. BAs have to take concrete data (a language many CPAs speak fluently) and present it in a way that wins over senior leadership and brings everyone on staff onto the same page. This is where tools like emotional intelligence and negotiation are essential.
“Before beginning any analytics program it’s vital to develop clear, quantifiable metrics that align with the stated basic objectives and goals or else you risk spending time on fishing expeditions that are less likely to produce any real insights that can be implemented for cost savings,” says Kevin Price, host of the Price of Business. This means that BAs need to develop a roadmap for the analytics process and use their insight and strategy to move the company forward.
Business analysts have the power to drive companies forward. They can create clear data pictures for executive teams, solve problems with their critical thinking, and work with other parts of the organization to understand how accounting affects their teams. As data becomes more prevalent in the finance world, the need for BAs on staff for the finance department will become increasingly important for a company to thrive.