Previous articles have set out the move toward data analytics and the way successful projects are structured and set up. Now we look at how we create value in the business.
Every accountant knows the importance of presenting data in a clear and consistent way. It’s the reason we produce profit and loss, balance sheet and cashflow reports in a standardised way, so information users can compare company results internally and across industries.
Change has to happen
The world has become a much more uncertain place to do business in. From global trade wars, and political instability, to austerity measures and climate change, uncertainty apparently reigns.
Your business, stakeholders and clients are living in this world and making decisions about what to buy, sell and invest in every day. It’s getting harder to find a clear direction in this complex world.
Traditionally, businesses would turn to their finance team and accountants to manage and control the financial operations of the company and report on the financial performance of the company.
This focus would be purely internal to the business, looking at past performance only, and corrective action would be reactive and occasional, say monthly or quarterly.
Today, this approach simply doesn’t help the business improve in a complex environment, so the reasons why the business is coming to finance are changing.
Be the answer to the business need
Businesses now need industry-wide information and competitor information. They need to consider external sources as well as internal data. They need to think about future trends, not just historical patterns. And they want this information as often as possible and pushed to them when trends change.
Whether this demand amounts to a conscious move to build a data-driven organisation or a response to growing business issues doesn’t matter.
The demand is still there if you look hard enough. But who is going to provide this extra business information and decision-making support? Who is going to put their hand up and say, I’ve got this?
The role revolution will not be telegraphed
The great thing about being an accountant in business is you get to see the whole of the business. There are no limitations on your reach as you need to manage and control the whole business.
This means we are in a great position to answer this business demand and to fill the information gap that is opening up.
But no one is asking us directly, and no one is paying for us to do this today, so we need a plan to shift into this data-enabled role – one that will take our customers and business users with us.
The good news is, not only are we in a good position to fill this new role, we have many of the skills as a domain expert, and as analysts and data translators. All we need to do is embrace the next generation of information needs, the exciting new talent and tools available to us, and focus on communicating their value.
The rise of the data-driven finance business partner
All finance professionals are grappling with this need to add more value. Whether a commercial finance manager in a large corporate trying to add more insight to their line of business, or a small business accountant trying to sell in advisory services linked to providing more information, insight and decision support, we are all wanting to move up this partnering value chain.
Whether you believe “robots will take over my role” or grind down margins in compliance work, you can see technology is leading to change. There is a clear need to be more collaborative, communicative and impactful.
General employability trends can give us an indication of what we need to be focused on. For example, complex problem-solving, critical thinking and creativity topping the list of the World Economic Forums Future of Jobs report.
How does this affect me as a business accountant?
It means building a different relationship with your clients and stakeholders and getting much deeper into the business to be able to help the business in two critical areas.
- Forecasting and performance management.
- Growth strategy.
Traditionally accountants have been employed to manage and control, which was both a statutory requirement and a necessary evil for the business.
The shift towards forecasting, performance management and growth strategy means we are providing insight and increasing value in the business
When you start to create value, you are no longer seen as a cost, but an investment.
Creating value that people will invest in
Let’s look at forecasting and performance management. When was the last time you asked your business whether the information you provided was valuable to them? Was the response an excited high five, or a mediocre handshake?
As we have already laid out, businesses are asking for more with a new external, forward-focused view and that means we need to get better at forecasting, get better at using multiple sources of data, and get better at talking about how this impacts the performance of the business.
But the real value add comes by using predictive analytics.
Depending on the size of your business, that could be a data science approach (as explained) or a driver-based financial modelling approach. Either way, partnering up with the business as a data-savvy domain expert wanting to proactively support the running of the business and answer difficult questions using data, will be seen as a valuable, albeit an intangible, data information asset.
What about small companies that don’t have lots of data?
Arguably, analytics is less valuable to smaller businesses with less data, but what if you look to external sources? What if they are dependent on the weather, on a type of customer, or on a particular supply chain? What data is available in online apps and in open source databases?
Applying the secret sauce for a barbecue business
Let’s take the example of working with a specialist butcher. This company focuses heavily on supplying marinated barbecue packs, and these need to be made up one month in advance to marinate and age.
Forecasting sales and cashflow is very difficult with only historic trading patterns to go on. This is where you could use data science and predictive techniques to help transform the business and its processes.
As a domain expert, you would work with a data scientist and explain how the business works, its inflows of meat, production time and revenue which is highly dependent on good weather.
The data scientist would work with you to define the cashflow in mathematical and statistical terms and model the business problem.
In this case, probably using weather temperatures and past sales as components and classifiers of revenue, and the supply chain lead time and past supply history as a component of your operations.
Together you would agree what makes up the model, what is critical – namely, the weather – and not so critical – say, the marinade supply, which could easily be substituted. You would consider data availability: is weather in your area available? If you supply France, is that weather data available? You may also overlay sporting events and national celebrations that could create a surge in demand. From this, you could build a model that would accurately predict sales and forecast cashflow.
In this scenario, as the accountant you could be a catalyst for changes that could transform business decision making, allowing better decisions about managing everything from logistics to working capital.
Start with a simple approach
If you choose to keep your forecasting capability simple, you can add a lot of value by managing data better and making it available to the business in an easily accessible way.
You can also improve communication about the business with simple data visualisations that are developed with users so they get what they want, but the analysis is not the high value insight we associate with Analytics, business partnering and paid work.
The second area of critical focus is around growth strategy for the organisation.
The way we help business create value, invest and grow is a very much neglected area by most finance business partners, but is the ultimate in value adding activities.
To really add value in this area, we need to be talking to the business regularly, develop a symbiotic relationship, becoming the “go to” person for investment decision support.
In addition to this, if you embrace a data-driven Analytics approach, your own work will be adding to the value of the business, as you will be creating a data information asset that will purchased with a value if or when the business is sold.
Business Analytics is going to be one of the key enablers of our future business roles and certainly a way of staying relevant in our changing world. Our aim as finance business partners and accountants isn’t to become a developer or a data scientist. It is to work differently, to think differently about our roles, and work in partnership, with businesses and clients in developing new capabilities, tools and techniques.
The upshot is a highly satisfying career in accounting and finance, creating value and leading the data-driven role revolution.
What to read next:
Chris Argent Chris Argent has overseen digital finance transformation projects for Vodafone, Amazon and John Lewis. He is the founder of Generation CFO – an online resource for finance professionals..