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At one time or another, we’ve probably all been in the same predicament: longing for nuggets of operational guidance, trying to find rewarding answers, and not realizing that they’re already in our hands – albeit buried in mountains of disconnected data. Right now, it’s never been easier for CPAs to gather and combine rich information – both financial and non-financial – from diverse sources.
In the past, millions of records were once encased in their own separate and unyielding databases. Technological advances now make it possible to bring the records together in one robust database for discovery and correlation. That’s when true data mining begins.
Once aggregated, the data can then be analyzed from many different angles and perspectives. These capabilities are within quick reach of multiple users, enabling them to identify patterns and relationships and correlations that can be transformed into practical intelligence.
Consider the positive impact on your firm if you could efficiently mine your existing data and uncover the answers to questions such as these:
- Which industry segments account for your greatest profits?
- Which types of clients are generating your greatest growth (and should be developed)?
- What segments of your client base should you no longer target because of the low realization rates among those industries?
- Are there sub-segments or niches that are particularly profitable?
- Based on their consumption of your firm’s services, which clients are good candidates for cross-selling or up-selling efforts?
- Are some partners using successful methods or strategies that can be duplicated by others?
- Is there a way to share regulatory knowledge to benefit clients and partners?
Applying the same sort of exploration into your clients’ data, you can analyze and report on their revenues, margins and performance metrics. Your ability to efficiently summarize the intelligence in easy-to-understand charts and graphs brings measurable value to the table. Also, instead of merely presenting a financial statement, you can enlighten clients with insights about factors ranging from occupancy costs and expenses per unit to salaries and cost per FTE.
Keep in mind, however, that a firm’s ability to optimize the benefits of data mining rests on two critical components: a highly robust database and a well-thought-out data strategy, so let’s look at both must-haves.
A single, centralized data repository offers many advantages and is essential for the standardization that allows you to fuse very different data elements – structured and unstructured, financial and non-financial. This standardization lays the foundation for converting volumes of information into knowledge about historical patterns, future trends, improvement opportunities and other meaningful intelligence.
Similarly, a clear data strategy ensures that all of a firm’s data collection activities are done in a standard manner using a common system. Why is that so important? Individual partners often collect non-financial information on an ad-hoc basis from clients and use it to analyze their performance. Such data has great value, but is often not available for any subsequent analysis – or accessible by the rest of the firm.
With a clear data strategy, the usefulness of that information can be greatly extended. It will also be possible for the firm to share one partner’s best practices to encourage adoption by other practitioners.
Outperforming companies in any industry can be characterized by the extent to which they access, analyze and draw insights from the data available to them and accounting firms are no exception. Regardless of their size or the nature of their practices, data mining can help CPA firms, and their clients, excel.
Rob Ganjon is CEO of iLumen, a business intelligence provider whose offerings are designed to help accounting firms and businesses automate the collection, standardization and analysis of client financial data.