Use predictive analytics to drive advice for business clients
Changes in the ways that accounting firms collect, transform and report data provides a real opportunity to focus on predictive analytics to drive the advisory role with clients.
Predictive analytics is the use of data, statistical algorithms and machine learning techniques to identify the likelihood of future outcomes based on historical data.
Over recent years, there has been a massive increase in the availability and use of data across all industries, with over 90% of all data in the world created during the past 2 years. Data isn’t a meaningless group of numbers. Understand what it is telling you and you will see a wealth of information that can help you and your clients predict future trends.
A recent TDWI Business Intelligence report identified the top 5 reasons companies should use predictive analytics:
- Predict trends
- Understand customers
- Improve business performance
- Drive strategic decision making
- Predict behaviour
Predictive analytics has the potential to add enormous value to the management accounting function for accounting firms. It can assist accountants move from a focus on the collection, transformation and reporting of data to using data to stimulate investigation, influence behaviour and support decision making.
Accounting firms are already using analytical tools to help their business clients predict the future with budgeting, cashflow forecasting, scenerio modelling, benchmarking and strategic planning. Simple ‘what if’ analyses lie at the heart of all client engagement strategies. When your clients can see the impact of future decisions, it’s far easier for them to commit to actions to achieve their goals.
At a business development level, accounting firms are starting to use CRM strategies to drive engagement with clients. CRM platforms can assist with data mining to extract patterns and knowledge relating to client groups. These patterns can then be used to target specific messages to clients through face to face and online marketing activities. Marketing automation can provide a further layer of nurturing and engagement to prospect and client relationships.
At an industry level, practice management software is becoming increasingly sophisticated in analysing client financial data.The recently launched CCH iQ allows firms to target over 300 tax events each year and identify which clients will be affected by each event. Its then up to the accountant to contact the client, explain the situation and propose relevant solutions. Standard Business Reporting is likely to open up further opportunities to analyse and benchmark client data to predict future trends.
In December 2015, ICAANZ announced a collaboration with Micrsoft and Westpac to develop a new predictive analytics platform ‘CA Kairos.’ This platform will provide accountants with a single source of data through a collection of tools, dashboards, and predictive models supporting different client scenarios. This will save time and allow for more meaningful insights, leading to richer conversations and more reliable business forecasts.
Les White, the CEO of ICAANZ, recently stated that “there will be a huge demand for professional advisers who are commercially astute and data-savvy and who can use predictive analytics to make better business decisions, particularly from small to medium sized enterprises.”
What can progressive accounting firms do NOW to start using predictive analytics to enhance client relationships and add value through the advisory role?
- Move away from simple spreadsheets and start exploring the power of forecasting tools such as Cashflow Story, Castaway, Calxa and Bstar’s viba to give clients an insight into their financial future. Then help clients use this information to drive strategic decision making.
- Start segmenting clients on the basis of their personal profile and financial needs to then target them more effectively in relation to specific services. Use CRM software linked to your firm’s practice management platform to provide an integrated approach to client relationship development.
- Ask your software suppliers what they can do to help you sift through the data to identify trigger points for further action. Look at tools like CCH iQ that can alert you to the impact of external events on client needs and advice requirements.
For today’s accountants in public practice, merely looking back at what happened for their clients is no longer sufficient. They should be able to look beyond the numbers to provide feedback on the future based on past trends. Smart business owners are expecting their financial advisers to provide predictive insights that will enable them to develop strategies and deliver results.
What are you doing to encourage your team to think beyond the numbers?
