Small and medium-sized accounting firms are dipping their toes into data engineering, the plumbing behind data-driven advisory.
A Toowoomba-based manufacturer came to his accountant with a tough hiring problem. His budget was sufficient to take on another employee, but the role required an odd mix of skills: part receptionist and part salesperson. The talent pool, already shallow in regional Queensland, made the prospect of finding suitable candidates even slimmer.
After asking a couple of questions, Power Tynan Accountants CEO Amanda Kenafake CPA realised that this was not a human resources problem, but one of data engineering. The manufacturer wanted a receptionist to copy data between two applications, a process that could be automated with software integration.
Kenafake’s data engineer successfully automated it and the client happily hired a full-time salesperson instead.
Surprised a regional firm with 50 staff employs a full-time data engineer? It is not an anomaly, Kenafake argues, but the vanguard of enormous change coming to public practice.
“Who do my future employees look like? It’s not [just] accountants you’re looking for – it’s engineering students,” she says.
From compliance to operations
Seemingly out of nowhere, data engineering has shifted from a Big Four specialty into a hot topic among progressive small-to-medium firms. Power Tynan is one of a handful of public practices to have added the skill set as a precondition for delivering data-driven advisory services to small-to-medium enterprises (SMEs).
Practitioners have long pursued the idea of business advisory, promoted by accounting software companies as a counterweight to the commoditisation of compliance services. In reality, many have faced difficulties in turning the idea into a success.
Financial reporting applications such as Fathom, Futrli and Spotlight Reporting are often the first ports of call on the journey to business advisory and have helped many firms streamline services such as budgeting, forecasting, benchmarking and financial analysis. However, they aren’t designed to handle large amounts of operational data as well as accounting data – and it’s the operational dataset that is proving to be the key. It contains the leading indicators for opportunities or issues in a company before they show up in accounting data.
Dan Beck runs Power Tynan’s technology consultancy, PT 2.0. An accountant by trade, he moved into IT and managed information systems at WHK South East Queensland, before it was renamed Crowe Horwath. Beck brought his tech skills to Power Tynan and was one of the first to spot the opportunity for data-driven advisory.
“Clients are asking for information and insights,” Beck says. “The only way you can get that is to pull all the data that every business has into some kind of format, in real time, to run the business.”
Firms can manually collect data from multiple systems and sort it out in Excel, but the process usually takes months. Data engineers instead connect applications to a database that collects the data, cleans it up and puts it in a real-time dashboard.
Beck says that in time, data engineering will become a commodity. “In a couple of years, if you can’t give me data engineering, you can’t give me the data and on-time insights. Then, you’re not going to get the clients you want.”
The next step in reporting is enterprise business intelligence tools designed for interrogating databases. Microsoft Power BI is an early favourite because it integrates well with Excel and, more importantly, has a generous freemium model that lets accountants experiment free of charge.
At the 2018 Accountech.Live expo in Melbourne, two sessions detailed how to use Power BI as a reporting tool for practice software such as Reckon APS and Xero Practice Manager. While these programs already produce custom reports, practitioners can click on statistics in business intelligence tools to see the data supporting each report.
Ryan Davey, marketing and technology specialist at advisory firm Unicorn Business Solutions, uses Power BI to measure client group profitability and to show quote versus actual job performance to see where margin is being lost.
Similarly, Beck has used data engineering at a wholesale seedling company to determine which seed was the most profitable to produce. The project required the installation of biometric scanners to track how many times employees touched each seedling, and integration with the company’s enterprise resource planning (ERP).
The skills delivered by PT 2.0 include a methodology for turning a business question into an IT project, researching ways to create and collect data, and knowing how to pull different types of data from multiple systems.
Gavin Whyte, chief data scientist at Deloitte Australia, works in retraining accountants as data engineers on the Google Cloud Platform. Data engineers use complex scripts or algorithms on the platform to clean or transform operational data into a format that can be compared easily to financial data, revealing new opportunities. Most of Whyte’s data engineering projects are for enterprise customers in mining, banking, gaming and so on. However, he firmly believes that small-to-medium firms should also consider hiring data engineers.
“I think having a data scientist or engineer in the firm will increase the revenue quite drastically,” Whyte says. “You’ll probably spend an awful lot of time just cleansing the data and putting it in the right formats, even before you get into actual work.”
Learning new tools of trade
If smaller firms such as Power Tynan and Unicorn Business Solutions are the precursors to a major new trend in accounting, accountants will naturally start looking further up the chain at more complex tools.
Google, Microsoft and Amazon offer competing cloud-based databases that are quick to set up and relatively cheap to run compared to the capital cost of building a server room, as required in the past. Enterprise-grade business intelligence tools are also falling in price as they move to the cloud.
Oracle Analytics Cloud, which includes data lakes (storage for large datasets) and visualisation tools, starts at A$2 per hour. SAP Analytics Cloud sells its business intelligence tool for US$23 per user per month (all prices correct at time of writing).
These tools would once have required someone with programming knowledge to create search strings to find relevant data. They are now designed with self-service interfaces so that business users can ask questions in plain English.
SME software accounting brands such as MYOB, Intuit and Xero are also starting to use phrases such as business intelligence, analytics and data insights. All three companies have connected their software to Microsoft Power BI for more detailed reporting.
"I think having a data scientist or engineer in the firm will increase the revenue quite drastically." Gavin Whyte, Deloitte Australia
Intuit and Xero have discussed plans to show highlights of operational data from clients’ business apps that connect to their accounting software. These highlights will appear in the adviser’s view of Intuit QuickBooks Online and Xero, so the accountant can explain them to business owners.
However, small-to-medium practices don’t need to wait for the accounting software companies, as they can already export data from cloud-based business applications directly and mix it with accounting data themselves. The most commonly used case is with inventory applications such as DEAR Inventory, Unleashed Software, Cin7 and TradeGecko. Although they connect to small business accounting software, these inventory programs add features that compete with smaller ERPs at a fraction of the price.
Smaller firms can potentially keep larger clients longer by moving their stock tracking from accounting to cloud inventory software. Of course, larger clients come with larger datasets and more complex reporting, which again increases the need for data engineering.
It goes beyond inventory. The deep software ecosystems fostered by Xero, Intuit and to a lesser extent MYOB allow SMEs to create complex clusters of apps to raise productivity in sales, marketing, project management and other areas. The apps send data between each other using open application programming interfaces (APIs), but consolidating the reporting is not always as successful.
Beck says this explosion in cloud-based business software is creating issues in reporting, in turn fuelling demand for data engineering. “Clients are becoming more mature about when they expect data – they expect it immediately – and they expect it to be exception data, not all data.”
Where to start?
The challenge for every firm is where to start. Can you just hire a data engineer, put them to work with clients and check off your new data-driven business advisory service? It’s not that easy, says Kenafake. A firm needs to commit to data-driven services from the leadership down.
“A lot of firms will say to a partner, [that] ‘you’re in charge of data analytics’, and all the other partners continue on their merry way,” Kenafake says. “That doesn’t work. It’s a change in business model.”
Firms that fail to prioritise data-driven advisory will inevitably be distracted by compliance or other traditional mainstays and fail to allocate adequate resources, she adds.
“You have to build capacity to add capability. If people are [always] busy doing their day job and don’t have time to build the skill, then it [becomes] just one more thing you want me to do. If you don’t have all the partners and senior management on board, you’re pushing the proverbial uphill.”
It is not only opportunity that led Power Tynan to data engineering, but also a proactive and progressive approach to minimising the risk of compliance services becoming commoditised.
Kenafake has been monitoring the introduction of digitised taxation in the UK and the impact it will have on compliance revenues for public practices. She fears Australian accountants could be blindsided by the same disruption, just as taxi drivers were by Uber.
“I hope Australian accountants learn from the UK and don’t sit back and say, ‘it’s never going to happen here’. You don’t want to be another taxi industry. You want to be Lego and reinvent yourself four times in 10 years.”
Sholto Macpherson is head of content for Accountech.Live and Accounting Business Expo.
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