Accounting data analytics: discover the skills and tools needed to succeed

Back in 2006, British mathematician Clive Humby famously claimed that “data is the new oil”. Almost 20 years later, his bold statement has proven true. 

Like oil, data is incredibly valuable and has the power to drive businesses and industries forward. But also like oil, raw data alone is of little use. It must be refined and processed in order to be useful. This is where data analytics comes in. 

In this article, we’ll explore how data analytics can be applied in accounting, focusing on the key skills and tools you’ll need to harness the power of data in your accounting practice.

What is data analytics in accounting?

Data analytics is the process of turning raw data into useful insights. This process typically involves the collection, processing, and analysis of data to identify patterns, correlations, and trends. These insights are then presented using data visualizations such as charts, graphs, and other graphics.

While data analytics can help businesses in any industry, it’s particularly useful for accounting firms, where it can help you provide insights into everything from financial analysis and fraud detection to team performance and profitability. 

Armed with these insights, accountants can make smarter decisions that give them a competitive advantage. For example, data-driven businesses are: 

• 23 times more likely to acquire new customers
• 6 times more likely to retain them
• 19 times more likely to be profitable
• 58% more likely to beat revenue goals

And that’s just scratching the surface of the value data analytics can bring to your accounting practice.

Key applications of data analytics in accounting

So now we know what data analytics means in general, let’s look at some specific examples of how it can be applied in accounting. 

Financial reporting and analysis

With the right tech, accountants can not only generate financial reports automatically from their accounting data, but they can also use that data to generate powerful insights into financial performance, including:

• In-depth analysis: accountants can spot patterns, outliers, and correlations, helping to uncover areas for improvement or concern
• Predictive analytics: accountants can predict trends before they happen, allowing them to forecast future performance with greater confidence

All of this can be done in real time, providing accountants with an accurate picture of their company’s financial position at any given moment.

Fraud detection

Traditionally, accountants had to scour large data sets to detect fraud manually. This not only took time, but it was also prone to error. With data analytics, you can analyze huge amounts of data instantly, providing greater accuracy and thoroughness during financial audits. Data analytics enables you to:

• Detect anomalies, unusual patterns, and outliers in financial data
• Monitor financial activities in real time — and flag suspicious transactions as they occur
• Analyze historical data to understand risk factors and put strategies in place to mitigate them

Audit and compliance

Data analytics can also streamline virtually all aspects of the audit process, enabling accountants to:

• Analyze large datasets instantly and detect discrepancies
• Monitor regulatory compliance
• Create detailed audit trails

Again, this saves accountants an incredibly labor-intensive manual job while increasing accuracy and thoroughness.

Firm performance

Besides actual accounting work, firms can use data analytics to understand how effectively their firm is operating, uncovering insights such as:

• How teams and individuals are performing
• Which clients are the most or least profitable
• Which services bring in the most revenue
• Where time and money can be saved

This can help accounting practices to identify inefficiencies and bottlenecks, fine-tune processes, and allocate resources more effectively. The result is a higher-performing and more profitable firm.

Tools and technologies for accounting data analytics

Your ability to harness the power of data will depend on the tools you use. In this section, we’ll explore some of the technologies that will help you sprinkle a little data magic over your accounting firm.

Business intelligence (BI) tools

BI tools gather, transform, and present data from across your organization, providing you with powerful insights that can drive smarter decision-making. There are plenty of BI tools on the market, but some of the most popular options include:

• Microsoft Power BI: the market leader in the BI industry, Power BI is a powerful platform that offers interactive dashboards, a range of data visualizations, predictive modeling, and several AI-powered features. It’s only available on Windows, however.
• Tableau: another leading BI tool, Tableau excels at advanced data visualizations and handling large data sets. Unlike Power BI, it’s available on any operating system.
• Looker Studio: formally Google Data Studio, Looker is a free tool that enables you to create customized dashboards that connect to all sorts of different data sources.

Microsoft Power BI – the market-leading BI platform.

Accounting and practice management platforms

While BI tools are a great option for most businesses, they aren’t aimed at accounting firms specifically. Thankfully, most accounting software comes with analytics and reporting capabilities designed with accountants in mind.

Market-leading accounting platform QuickBooks Online, for example, offers a dedicated tool for segmenting and analyzing your clients, allowing you to understand how best to serve them. Xero, another popular accounting software, also offers an analytics tool that allows you to predict future cash flow, track financial performance, and identify trends.

The best practice management platforms also offer robust analytics and reporting tools. Take TaxDome, for example, which provides AI-powered analytics that uncover insights into your firm’s performance and profitability. 

TaxDome combines all the tools you need to manage your clients, staff, tasks, documents, and workflows — all in one place. This means it houses a lot of data, which makes for powerful insights that span team performance, client value, revenue, time and billing, and much more.

TaxDome’s reporting and analytics feature, showing data insights relating to revenue.

Artificial intelligence (AI) and machine learning (ML)

Advanced tools leverage the power of AI to deliver even smarter analytics. For example, by leveraging AI and ML algorithms, analytics platforms can analyze historical data to predict future trends and performance. This transforms the way your firm plans for the future. 

Most of the platforms we mentioned above leverage ML models to deliver AI-driven insights. But AI can enhance the reporting process in other ways, too. For example, TaxDome’s reporting feature offers an AI-powered search engine. You can type in queries about the type of data you’d like to see. The AI then interprets your query and delivers highly relevant insights in an instance. This saves you time looking for insights manually.

TaxDome’s AI-powered search feature enables you to access data insights faster.

You can also use AI tools such as ChatGPT and Claud AI to analyze data sets, spot trends, and provide summaries, but these tools are still in their infancy, and the limits of their capabilities are still being uncovered.

Skills required for accountants in the age of data analytics

The good news is that technology can do most of the heavy lifting when it comes to data analytics. That said, us humans still have a role to play in making data analytics work effectively. In this section, we’ll explore some of the core skills accountants will need to ride the data wave. 

Statistical analysis

Understanding the basics of statistical analysis will help you interpret data insights more effectively. Grasping basic concepts such as mean, median, variance, and standard deviation, for example, will give you a head start, especially if your job involves presenting data findings to others. 

Data visualization

Again, analytics tools can easily turn data insights into data visualizations, but understanding how best to present data can be a valuable skill. 

Often, analytics software comes with customizable dashboards where you can pick and choose the data visualizations you want to use. Understanding the merits and limitations of different charts, graphs, and heat maps will help you present insights in the clearest, most powerful way possible. This can be a big help when it comes to crafting clear financial reports and communicating with internal and external stakeholders.

Critical thinking and problem solving

Technology can present you with insights, but it is up to you to think critically about how to use those insights to solve problems, improve processes, and gain a competitive advantage. The ability to see the bigger picture and connect the dots between data insights and real-world accounting issues will help drive your practice forward.

Continuous learning and upskilling

This one’s more a requirement than a skill, but the willingness to learn and adapt is essential to harnessing the power of cutting-edge technology, whether that’s data analytics, automation, or AI. Accountants who stay one step ahead of the curve will have a clear advantage over those who refuse to change with the times.

Learning can be done informally on the job by exploring different analytics software. Alternatively, accountants can embark on a more formal learning journey by studying for different certifications, such as: 

• Certified Analytics Professional (CAP): a professionally recognized designation that demonstrates that you have the expertise and soft skills required to be an accomplished data professional
• Power BI Data Analyst: this Microsoft-certified qualification proves proficiency in Power BI
• Tableau-Certified Data Analyst: if Tableau is your go-to analytics platform, this qualification will ensure that you’ve mastered Tableau’s capabilities

If you want to learn more about data analytics without committing to one of the qualifications above, there are plenty of courses on platforms such as Udemy and Coursera. These might not be recognized professionally in the same way, but they will provide you with some of the fundamental skills you need to get to grips with data analytics. 

Whichever route you choose, gaining a solid understanding of data analytics and its applications will add a powerful string to your bow. 

An example of the data analytics courses available on Udemy.

The future of accounting with data analytics

Data analytics has been a mainstream practice for a decade or so now, with an increasing number of accounting firms taking a data-driven approach. But despite its huge impact, data analytics is still in its infancy, and its impact and importance will continue to grow. 

In this section, we’ll take a glimpse into the future by looking at some key trends and predictions that are likely to unfold in the coming years.

Increased analytics automation

Automation will continue to transform all aspects of accounting, liberating accountants from time-consuming manual tasks and allowing them to focus on more strategic, high-value work. This will also be true in the field of accounting analytics, where the process of data analysis, visualization, and reporting will happen seamlessly, with fewer human inputs. 

In the future, AI and ML algorithms may run quietly in the background, monitoring data in real time, and providing relevant insights and alerts as they arise. Accountants may even have personal AI assistants that keep them in the loop. 

Improved predictive analytics

The accuracy and impact of predictive analytics will continue to grow, giving accounting firms more confidence in their strategic decision-making. Analytics will offer more sophisticated insights, spanning everything from financial trends and revenue forecasts to client satisfaction and churn rates.

More personalized client services

According to a recent Forbes study, 81% of customers prefer companies that offer a personalized service. Data analytics will make it easier for accounting firms to deliver on this expectation. 

Advanced AI models will gather data from all customer touchpoints, providing insights into clients’ needs, preferences, and risks on a personal level. This will enable accountants to deliver truly tailored services that boost client satisfaction and loyalty. Most of the communication with clients will take place automatically, ensuring that clients are always kept in the loop at all stages of their journey with your firm. 

The evolving role of accountants

As data analytics reshapes the accounting landscape, the role of accountants will be forced to evolve. Armed with deep real-time insights, accountants will spend less time on manual tasks and more time strategizing, optimizing processes, and identifying new opportunities for growth. As a result, there will be a greater focus on soft skills, such as communication, empathy, and the ability to explain complex ideas in simple terms.

To sum up

Data analytics isn’t a trend or a buzzword, it’s a crucial process that’s here to stay. With virtually all business processes now involving technology, the amount of data we can collect and analyze is growing exponentially — and with it, the power of data analytics. 

Accountants shouldn’t fear the changes brought about by an increasingly data-focused world. Rather, they should embrace it. After all, data analytics will allow them to do their jobs even better than before, providing them with the insights they need to make informed decisions, grow their business, and serve an increasingly demanding clientele. One thing is clear, however: accountants and accounting practices that embrace data analytics will have a significant advantage over those that don’t. 

To see how TaxDome can help you turn raw data into actionable insights that drive performance and profitability, request a demo today!