Using Data Analytics to Shift from Compliance to Advisory Services

by Andrea Morhardt, Akseshen – March 13, 2020
Using Data Analytics to Shift from Compliance to Advisory Services

Significant pressure exists throughout the accounting industry to shift from providing clients with low-margin compliance work toward more strategic advisory services. To offer more innovative consulting work and move into a genuine advisory relationship with clients, not only must firms develop the requisite skillsets but, more importantly, they need to retain their best and brightest people to provide these new services. Firms that properly adopt and deploy data analytics can meet both of these needs and successfully make the shift from compliance to advisory.

Many firms are not treating their clients’ data as an asset. As a result, client engagements are much less efficient and effective than they could be. Every year, firms report information to clients that their clients already know. Data analytics can help shift that perspective from the rear window to the front windshield and begin telling clients things they don’t already know. Along the way, accounting work becomes much more interesting and attractive to the best and brightest individuals.

Start with Low-Hanging Fruit

When firms submit requests for client data, they are often provided with information in a less-than-useful format. CSV and PDF files are difficult to work with. More often than not, audit teams spend much more time preparing data for analysis than actually analyzing that data. 

But data analytics can often be simpler than expected. The first step is data transformation: extracting, transforming and presenting information for analysis. Even when attempting to test 100 percent of transactions in a large set of data, just a few manipulations can convert data into a more usable format within Excel and can prep the data for automated analysis. 

Use formulas to automate the following steps:

  • Reposition columns
  • Remove subtotals and unneeded rows
  • Parse combined information into separate data points (such as account number and name)
  • Remove or fill blank values as needed
  • Reformat values so the number of digits are uniform

There will now be an aesthetically pleasing set of data that is ready to use and easy to handle. This will allow you to investigate unfavorable customer patterns or concentrations within a department or type of service. An investigation into which environmental factors contributed to these trends is the next step. 

Now begin a meaningful analysis to examine the following questions:

  • Have average days to pay increased over time?
  • Has the outstanding accounts re­ceivables (AR) aging trend changed? If so, can the change be linked to a specific product line, service type or department?
  • Do sales trends support changes in AR at the customer level? Are these changes supported by the business plan?

Natural Byproducts

Taking the leap into the future of the pro­fession with data analytics will accomplish the two most important goals of most managing partners: attracting and retaining talent and driving profitability.

It’s no surprise that the youngest staff people often come equipped with the strongest technical skills. Career fairs and interviews conjure visions of putting those skills to work in exciting careers. Instead, new staff are often met with mundane tasks like carrying forward prior year procedures. This needs to change. A data analytics training program will attract, engage and likely catapult these new staff into satisfying, challenging and long-term career paths. They naturally become their firm’s future thought leaders.

Data analytics transforms traditional audit procedures and naturally drives profitability. For example, while work­ing with newly organized procurement data, insights naturally materialize. Staff might notice many invoices are paid weeks in advance of the due date and begin to wonder, “Could we increase working capital if we stopped paying bills early or began negotiating length­ened payment terms with vendors?” At this point, one is just scratching the surface of the opportunities that come into focus as data-driven procedures are adopted.

Investing in an initiative like this will be a cost center at first, but firms will be poised to experience an exponential return on investment in the near future. Once staff have acquired the skills and experience, the sky is the limit. 

Next Steps

Going forward, here is some advice to help foster growth:

  • Look for clients with plentiful data and procedures that can be automated.
  • Begin by driving efficiency inside com­pliance testing and naturally progress to providing insights that present as advisory services.
  • Realize you’re on your way to new service offerings since some of your clients may refer others to learn about your advisory insights.
  • Acknowledge your firm is becoming a data driven leader.

Andrea Morhardt

Andrea Morhardt is the general manager of Akseshen, LLC, a full-service data analytics firm.

This article appeared in the March/April 2020 issue of New Jersey CPA magazine. Read the full issue.