Bringing analytics to life

By Jack Hagel

The use of analytics has been recognized as a crucial part of any decision-making process in businesses. The explosion in transactional and nontransactional data that organizations have access to has made the need for new tools and technologies vital for organizational success.

As such, finance professionals need to develop knowledge about analytics to understand and embrace the potential value of Big Data. A recent report by the Chartered Institute of Management Accountants and Infosys articulates how analytics can be integrated into the accounts receivable (AR) process to generate business-relevant insights that can help to improve decision-making.

Leveraging analytics within AR can provide organizations with a better understanding of their exposure through segmentation of their AR portfolio. This could lead to more effective collections and dispute strategies, thus improving cash flow and reducing nonpayment. Analytics could also provide insight into customer behavior that can result in bolder market-entry strategies with less risk to the organization.

As organizations move from descriptive analytics, which merely describe what happened, to more forward-looking predictive analytics and prescriptive analytics, more significant business benefits will begin to be realized. Business leaders need to have a clear analytics strategy that articulates key priorities and pathways from insights to business outcomes. This will lead to actionable insights. Without this, any analytics initiatives will fail to deliver the anticipated insights.

How to maximize analytics

A successful analytics framework needs to ensure that insights are action-focused and clearly identify the root causes of an issue. To maximize the value of analytics investments, organizations need to:

  • Understand the purpose of the initiative. In other words, why are you performing the analytics?
  • Ensure they have the right expertise and resources in place, understanding who is going to do it and how much it will cost.
  • Have a clear business case and road map for action from the insights.

Practical steps for implementation include:

  1. Understand and articulate the central problem. Take time to understand what the real issue is.
  2. Develop a model that explains the organizational processes and what factors drive performance. This will help to determine which data are important and which data are missing.
  3. Capture the relevant data across the organization. The necessary data may reside in different databases (e.g., HR, marketing, sales, or production) and would need to be integrated before any analysis can be done.
  4. Apply analytical methods. A range of methods can be used, including simple cross tabulations, regressions, stochastic process modeling, factor analysis, cluster analysis, and experimental design. It is important to understand the strengths and weaknesses of each method. Applying the right method to the right questions is critical to producing valid findings.
  5. Present analytical findings to stakeholders. For members of management to be able to translate analytical findings into action, they need to understand the information they receive. The results need to be specific and relevant to stakeholders. They need to be presented in a way that is consistent with management philosophy and language.

Management accountants are well-positioned to ensure that the right decisions are made to ensure success. By engaging in conversations around the analytics and ensuring business problems are articulated correctly, management accountants can ensure the data analyzed are relevant and that actionable insights are communicated in a relevant and influential manner.

The original version of this article, “5 Steps to Bringing Analytics to Life,” by Tarisai Masamvu, is available at tinyurl.com/pansnoy.

—Jack Hagel, editorial director, CGMA Magazine

Also at cgmamagazine.org

Internal auditors more satisfied with incentive pay

Internal auditors who receive incentives based on profits or revenue report higher job satisfaction and loyalty to their organizations without having their objectivity compromised, according to research published by the Institute of Internal Auditors Research Foundation.

Among the 1,600 internal auditors who responded to the survey conducted in North America, about 50% of chief audit executives, 56% of directors of internal audit, 48% of audit managers, and 39% of audit staff receive profit- or revenue-based bonuses.

On a scale of 1 to 5, those who receive profit- or revenue-based incentives rated their job satisfaction at 3.94, compared with 3.85 for those who do not receive incentives.

The full version of this article, “Internal Auditors’ Job Satisfaction Higher With Incentive Pay, Survey Finds,” is available at tinyurl.com/ktzs2lg.

Accounting salaries projected to rise again

Starting salaries for accounting and finance professionals in the United States and Canada across a wide range of positions are expected to trend upward again in 2015, according to forecasts in salary guides published by staffing services firm Robert Half.

Average starting salaries for corporate accounting positions are projected to rise between 2.9% and 4.4% in the United States, depending on the specific role. Increases of 2.7% to 3.9% are predicted for public accounting positions.

Overall, a 3.5% rise in starting salaries is predicted for accounting and finance positions in the United States. Higher-than-average starting salary increases are predicted for staff accountants, senior financial analysts, and business systems analysts—jobs that are in strong demand.

The full version of this article, “Continued Rise Projected for Accounting Salaries in 2015,” is available at tinyurl.com/qddfgyz.

VISIT CGMAMAGAZINE.ORG

CGMA Magazine is published in conjunction with the Chartered Global Management Accountant designation, which was created through a partnership between the AICPA and CIMA. The magazine offers news and feature articles focused on elevating and emphasizing management accounting issues.

SPONSORED REPORT

How to make the most of a negotiation

Negotiators are made, not born. In this sponsored report, we cover strategies and tactics to help you head into 2017 ready to take on business deals, salary discussions and more.

VIDEO

Will the Affordable Care Act be repealed?

The results of the 2016 presidential election are likely to have a big impact on federal tax policy in the coming years. Eddie Adkins, CPA, a partner in the Washington National Tax Office at Grant Thornton, discusses what parts of the ACA might survive the repeal of most of the law.

COLUMN

Deflecting clients’ requests for defense and indemnity

Client requests for defense and indemnity by the CPA firm are on the rise. Requests for such clauses are unnecessary and unfair, and, in some cases, are unenforceable.