The efficient use of data can make or break the future of a business. Enabling companies to make decisions based on genuine stats over human assumptions can lead to a greater understanding of the past. Additionally, it can influence future strategies.
Here we’ll answer the question ‘what is data analytics?’ and see the impact that such a process can have on the life of the external auditor.
· The importance of data analytics
· So, what is data analytics exactly?
· Data analytics: general uses
· Types of data analytics
· Value for auditors
All business leaders want success, which means working to continually improve performance in all areas. Back in the pre-digital days, those making decisions had to base strategies upon data samples. This data was combined with the benefits of professional experience.
Nowadays, software tools have erased the need for guessing games. Data analytics enables analysis from complete data sets, enabling business leaders to make decisions based on 100% of the evidence.
So, what is data analytics? Well, it’s the key to the doorway of knowledge, to put it poetically. In layman’s terms, data analytics uses software tools to locate, collate and analyse raw data, of a size that’s simply beyond human comprehension.
Here’s a quick summary of what data analytics can do for you:
- It’ll help you base decisions wholly upon data i.e. cold, hard facts – not opinions.
- You’ll be able to analyze data sets in a timescale that even a vast team of humans could not achieve.
- The best data analytics’ tools not only provide analysis, but they’ll deliver this in reports.
The best tools will provide visuals of the data in forms that anyone can understand.
‘Data analytics’ is a generic term that can be specially-moulded to suit individual business needs:
1. An E-Commerce business might use it to accurately map their customer journeys. How are their customers finding the site? What pages are their customers landing on and why are they leaving without making a sale?
2. The analysis of such statistics can help a business tweak its website. This is in order to better match the needs and behavior of its customer base. Likewise, a physical store might use data analytics to measure the likes of footfall.
3. A factory might use data analytics to check the performance of its machines. Is everything working at its full capacity, and if it isn’t, why not? Data can provide insights into whether there are faults affecting projected performance.
4. An external auditor or accountant might use data analytics as a digital buddy throughout the auditing process. A benefit of auditors using analytical software is that it’ll enable an analysis of complete data sets. This is opposed to the traditional model of basing decisions on data samples.
See our post on who uses audit analytics for more information.
While not exclusive, analysts may look at data analytics from three different perspectives:
These are your results. For example, how many sales have been made? How many customers have walked through the door? How do these figures compare to last year?
Why are the results as above? If sales are up, what has caused this? Could this be down to business changes, industry trends, or simply shifts in the weather?
Based on past evidence, what results can we expect in future? This analytical approach can assist businesses in making decisions. Should the business consider ordering more stock at specific times of year?
A combination of these three approaches enables analysts to gain full insight into business performance. This allows them to make the most educated business decisions when moving forward.
So, what’s in data analytics for the external auditor or accountant?
Well, just as e-Commerce or physical stores might use data analytics to improve performance and enable better business decisions, auditors can employ dedicated software tools to do the same.
Enabling the auditor to analyse complete data sets takes quality control to another level. There’s no longer the reliance on data samples and educated judgement. Risks to quality management can be more easily identified.
Data visualisations can allow for a better understanding of results for business leaders, stakeholders and customers alike. As a result, auditors give more accurate findings. They provide better value for money, and the industry as a whole becomes more transparent and reliable.
For further information, find our post on what is audit data analytics.
Granting the analyst access to greater quantities of data, data analytics allows auditors to perform with greater scope than before. It’s no replacement for human involvement, as the software does require initial guidance from its human master. But it also needs you to make assessments and the decisions that can make a difference to a company’s future. Think of it as a work buddy, not as a replacement.
For a deeper understanding of companies and their processes, adopting the best and latest technology is a must. Inflo software is used by more than 1000 accounting firms worldwide. It can act as your 24/7 assistant, analysing and mapping out audit data analytics for any company, big or small.