Building a Data Analytics Practice in Public Accounting

Thanks for having me, My name is Matt Keadle.?Im a CPA at WithumSmith and Brown where I primarily supervise audits of not for profits and benefit plans but my main passion is connecting accounting with analytics. I also love helping public accounting firms improve their audit processes by leveraging technology.

Next slide – overview

This presentation is geared towards helping small and mid sized firms learn about how we approach data analytics, tips on starting your own analytics department at your cpa firm and how to use analytics to attract at the next pipeline of talent because once you get to leadership positions at your firm and you will, you will need to think about recruiting

Here are the main points are going to talk about today:

1.??????Some background on analytics, An overview of our Internal Analytics team at Withum and what they do and a case study

2.??????Challenges of starting an analytics team at a CPA firm

3.??????How you can start an analytics team at your firm

4.??????The importance of strong communication between accountants and data analysts

5.??????How firms can use analytics to sell themselves to attract top talent to compete in this tight labor market

?Next Slide : the importance of data analytics

Background of analytics: from the MACPA statement

Data analytics is the process of manipulating raw data into actionable information for better decision making.

Because of our recent access and ability to process mass amounts of data very quickly, we now have the ability to use software tools that provide fast and diverse analysis of data. We also have huge advances in automation and artificial intelligence that help accelerate business processes with minimal human intervention. Here are the three main types of analytics.

?Financial analytics: the science of using near real time data to see how actual results measure against budgeted amounts. This information can then be used to make decisions much faster than before in the midst of changing conditions. Financial modeling is also a huge piece of financial analytics and can model a wide range of what if scenarios based on given variables. Dashboards are also a huge part of financial analytics and allow users that view a wide range of changing metrics to provide the most data for making key decisions. We here at withum use PowerBi for a growing number of our dashboards and I was previously working on a near real time partner dashboard for providing key data about various audits going on. In short financial analytics help people make strong predictions and assumptions on financial and other metrics.

Operational analytics: Operational analytics are concerned with more of the details that drive business performance. Operational analytics focuses on breaking down processes into their most granular components. I would think of operational analytics like a manufacturing firm’s processes, its kind of the study of the cost accounting behind key processes. However, the benefits are the same as for financial analytics; they are better utilization of resources, improved customer experience, and faster decision making.

For example with a manufacturing environment, data is gathered from many separate devices, enterprise resource systems, time tracking tools, and other measuring tools. The data is then validated, aggregated, and analyzed to improve productivity. Overall, the analysis should reveal potential improvements to business processes based upon the data gathered.

The third area of analytics is the area we will be focusing on today:

Audit Data Analytics: It’s Focused on software tools and techniques that perform analysis on complete datasets in order to reduce the reliance on small random samples. Hopefully, over time these tools can reduce the repetitive tasks and manual data entry. This will allow auditors to focus more on testing complex audit areas, and focus more of higher risk audit areas.

Key factors in audit data analytics are assessing the quality of raw data under audit, and extracting, transforming and loading the processed data into software tools.

However, audit data analytics is not about eliminating all judgment in the audit, it is about giving the auditor better data in a quicker manner for them to use their auditors judgment.

What are some ways to learn more about audit data analytics:

The AICPA has various data analytics education options from beginner to intermediate.

The MACPA also has various webinars on analytics software options throughout the year such as mindbridge and audit miner.

Lastly, an underrated option that I have personally chosen is the Google Data Analytics Certificate. It’s a great option for giving an overview of the data analytics world in a non accounting focused manner. The key skills that it will teach you are to: 1. Ask the right questions 2. prepare, process and analyze data for key insights 3. Effectively share findings with stakeholders 4. Provide data driven recommendations for thoughtful action

The google data analytics course is excellent at providing an overview of some key tools used in data analytics that you should be familiar with.

It gives a great overview of SQL, SQL is the language of querying and running reports and gathering data from large databases.?A lot of the time the software you are using is probably running something like SQL in the background without you even knowing it when you are querying some sort of data base and running various reports.

Also Google data analytics course gives a great overview of the coding language of R. R is an excellent tool for data visualization and statistical analysis. This can help greatly with advanced data techniques and making predictions about the future. One way to help promote learning a language such as R for a firm is by hiring a group teacher. Last summer at withum, we hired an R developer to host about 6 trainings for about 5 auditors to give an overview of the language and how to use R to perform basis analytics tasks for analyzing large amounts of data.

Lastly, google data analytics provides a great overview of tableau. If you are interested in the visualization aspect of data analytics then look into Tableau! Tableau is a tool used that makes great visualizations of large amounts of data. When you visualize data in meaningful ways it can truly impact the type of decision that stakeholders make, so don’t forget about the visual aspect of analytics. We as accountants sometimes forget about this aspect since we typically aren’t the “creative” types.

If you are looking for a great way to learn more about SQL, R ?and Tableau in a data analytics focused way, I highly recommend the google data analytics certificate. You can do the course online very cheaply using a learning platform such as coursera.

One other coding language that is very important in data analytics is python. Python is used to automate various types of processes for data analytics and is a great beginner coding language to try out. It can help you get your feet wet with coding for process automation purposes. I would recommend any course on linkedin learning as a cheap high value way of learning python for an accounting professional. It’s a versatile language to learn and can give you a great knowledge base as an accountant and help you communicate more effectively to data analysts when communicating your needs.

Is data analytics going away anytime soon or is it a fad? In my opinion its here to day, with the evolution of data processing due to the transition to the cloud for most everything, data analytics capabilities are continuously changing the standard operating processes in almost every aspect of business.

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Quote from recent MACPA article

“Decision making and management styles that continue to rely on guesstimates, gutfeel, and seat of the pants prognostication are destined to go the way of the dodo bird. Data analytics has emerged as a reasoned scientific method that will raise the level of business management in countless situations. Like any business, care must be taken to understand and work around potential shortcomings that arrive with any business science, including data analytics. That said, reliance on new tools, techniques and analysis will continue to proliferate throughout accounting, business, and every aspect of our lives”

Next Slide : Data analytics at withum

A case study and an overview of our Internal Analytics team and what they do:

At my previous firm, I pitched a cloud based analytics software that ingested the GL and TB and provided a risk based assessment of transactions and provided a list of key areas that may be perceived as higher risk for an auditor to focus on.

What did I learn from this? What is the best way to pitch analytics to smaller CPA firms?

Start small and provide data. When I first started pitching analytics software to my firm, I focused on two things. 1. Finding a key champion within the firm who would run with it and support it 2. Making sure I have relevant data about the software supporting it, such as articles about the software from MACPA and real world case studies about firms using the software. I focused on finding a key stakeholder at my firm who was very passionate about technology and analytics and I sent him an article about the software. Next, I made sure to show that the article showed that the software was fully endorsed by MACPA and also fully endorsed by a small CPA firm in southern Maryland that was having great success with it. Lastly, you have to have patience, for better or for worse, CPAs are very averse to change so no major changes are going to happen overnight. Find your desired stakeholder within the firm, give them the information and costs benefit of the new software and then let it go and relax. Part of championing any major change within a firm is having the patience to let key decision makers mull things over and make their own decision pressure free.

Withum’s Data Analytics

We have an in-house team of about 2-4 full time analytics members and about 30-40 volunteer analysts who specialize in developing custom solutions for audit teams. They primarily work on cleaning excel based GL details and extracting certain higher risk transactions for audit teams to review and perform additional testing. This really reduces the amount of time audit teams spend doing data manipulation. We have certain coding algorithms for each type of GL detail from different accounting systems so we can easily and efficiently extract certain high risk transactions allowing our audit teams to hone in on the higher risk areas and save time by doing less data entry and low skill tasks. We also do GL rollforward from prior year to current year making sure the current year TB flows correctly from prior year to current year as part of our normal suite of journal entry testing. Lastly, we are also working on a solution to convert large pdf reports from Third party administrators into excel for benefit plan audits. Our analytics team regularly meets with auditors and works on ways to better serve them and make their services more available to auditors.

Challenges of starting an analytics department within a?CPA Firm

1.??????What are the challenges of trying to grow an analytics department inside a CPA firm?

First hurdle is mindset, firms can be resistant to change, which is not always bad, but that attitude will leave things on the table, leadership needs to be open to trying new things and taking risks. Having a dedicated analytics department can be a huge perceived risk for smaller firms. But there is one key way to mitigating this risk. That is, using your existing talent and training them on analytics. Empowering auditors or accountants with a base skillset of analytics is likely the most efficient route. ?You really need someone that knows accounting and data analytics skills, training auditors on analytics is a great thing that withum does, accountants first, then honing in analytics skills, saves a lot of time.

2.??????How big of a team do you need?

Firm sizes of 10-100 – really only need 1 full time analyst who knows accounting and likes data analytics , to be the dedicated firm champion , and 1 part time auditor/part time analyst, firms do also need a partner champion

Top reasons why CPAs don’t think they need analytics

1.??????They think their data is unusable or too messy, which is often a false argument, more often than not, Data Analysts have software and tools to clean that data and be able to use it

2.??????Strong mentality of SALY, same as last year, we as an industry need to break that mold and encourage a culture of innovation ?

Lastly, here are the Major tools used by an in house analytics team

ACL and IDEA are the two main software tools, all of the other tools are much more expensive, capabilities that they add to ACL/IDEA are nice but not super necessary, bread and butter and best value are ACL/IDEA, python, programming languages are useful and can help you automate, ACL/IDEA will get you where you need to go, and are the best value

Chat GPT is big now, a great way to learn about other tools firms are using is going to digital CPA conference and talking to other firms, I know your young but definitely think about it over the next few years

Chat GPT is a open AI based service that mimic’s a human conversationalist. It has the ability to write and debug computer programs, to compose music, teleplays, fairy tales, student essays, answer test questions, and write poetry and song lyrics. It has a ton of potential in the business world so should be something on your radar for the accounting world!

How can you implement analytics at your firm:

Find something repetitive and try to automate it, there are numerous ways of doing this, but think about the various tasks that you perform on an ongoing basis and how they can be automated! Then start researching what other firms are doing, start researching different software platforms that can perform different types of tasks and start talking to leaders in the industry.

1.??????A great way of learning what other firms are doing is going to MACPA events like this and learning how other firms accomplish tasks and have automated certain things

2.??????A great way of learning about different software platforms is through social media like linkedin, going to conferences like the AICPA’s digital CPA and just trying to get plugged into the movers and shakers of the accounting technology world. One great guy to follow is Jim Bourke of withum, He travels around to different conferences and promotes technology in the accounting profession and how we can move this industry forward , Its all about cultivating a culture of innovation

Next think about if you want to insource or outsource, ive talked mostly about insourcing your own team today, but there are other great outsourcing options. Another one is simply using an out of the box (or out of the cloud these days) audit package to streamline or automate time consuming tasks. A great example of this is Auditminer which streamlines 401k audit tasks and creates custom workpapers, saving benefit plan auditors a lot of time.

Key Takeaways:

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-?????????Does your firm have a culture that is open to change and rewards innovation? If so, it will be much easier to start an analytics group. If not, it will be an uphill battle.

-?????????Start with accountants and give them training to be analysts, it will be way more efficient that taking analysts and teaching them accounting

-?????????Start with licenses for ACL and IDEA, that will give you 90% of what you need to do analytics for journal entry testing, GL rollforwards and converting pdfs to usable excel workbooks for audit teams for traditional and benefit plan audits.

Ok so high level now:

Start small, but be intentional! Start discussing your goals, with firm management. Be realistic, practical, but set definite goals for learning about new software and new tasks you wish to automate . Set realistic guidelines, let the firm leadership know about your goals and your progress and keep yourself accountable. Remember, start small, but be consistent, write down your goals, your progress, and keep track on an app or an excel sheet. Atomic habits is a great book about keeping your habits consistent with your long term goals. ?

?Next slide: Communication between analysts and CPAs

The importance of having strong communication between analytics and accounting teams:

One of my strengths that greatly helps this process is being a connecting liason between our coding developers and our traditional financial statement auditors. One of the things that separates our firm is our culture of innovation. How I help that is creating an inclusive and supportive line of communication between our coders/developers and our traditional CPA type people. The way firms can move forward in this technology driven age is having a strong level of communication between the what and the how.

The what is what we need technology and tools to achieve for us. Think actionable tasks like filtering and extracting high risk transactions from a GL detail, or extracting key data points from a large retirement plan investment statement from a third party administrator of a 401k plan. The how is using talented people that are well versed in key skills like using languages like R and Python to quickly and efficiently develop scripts to achieve these types of tasks for audit teams. Quickly communicating this information between the coders and accountants keeps the projects on budget and makes it easier for the partners and managers to "buy in" to analytics and keeps the overall audits on budget. If you can’t commit to doing new projects on a budget and in an efficient manner, then you will never get buy in from partners and be able to execute your vision. What firms need are CPAs that have a base knowledge of coding and analytics software in order to be an effective knowledge bridge between CPAs and the analytics team.

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The key is keeping an open line of communication between analytics teams and accountants. We are constantly surveying our audit and tax teams to figure out what they want to automate in the future.

Next slide: technology use at firms

How firms use analytics to sell themselves to attract top talent:

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With today’s extremely competitive labor market, how can firms differentiate themselves from each other and attract top talent from local universities?

Firms can use data and analytics in order to help position themselves for recruiting top talent. The top accounting students today want a few key things from their employer. 1. To feel like they are making a difference in a meaningful job. 2. To achieve a strong work life balance and have time to do meaningful personal goals like traveling and starting a family. 3. To work in a technology focused, cutting edge, innovation friendly environment. Nobody wants to push paper around anymore and just do audits like last year so top talent wants to utilize coding and technology to push the boundaries of audit and tax and try new things and learn and have fun doing it. Firms can use their analytics department to sell themselves to these top job seeking candidates and separate themselves from the old fashioned CPA firms doing tax returns and audits the old fashioned ways.

By showcasing your analytics team to prospective candidates you can differentiate yourself from other firms solely focusing on audit and tax. In today’s age, even smaller firms focused on tax, bookkeeping and non attest services need to start considering how they can incorporate analytics into their firm. You can use your analytics department to try and attract more accountants that have a background in information systems and analytics to help your firm innovate and stay ahead of trends. Hopefully these tips can give smaller firms around Maryland a basic road map for how to implement data analytics on an appropriate scale and stay competitive in the future.

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Next slide: Get out there and innovate!

In closing, we as CPAs have to think about data and analytics in a strategic manner. Wouldnt it great if the entire audit process can be automated using artificial intelligence and analytics. Yes, but that's not going to happen tomorrow. What we can do as leaders, is think about small actionable ways we can use analytics to improve certain audit tasks and start with that. If you're interested in that, feel free to shoot me a note by email or social media and let's get to work on changing the world!