Practitioners have been encouraged to use data analytics to more productively interact with clients and grow their businesses – but there are risks along with the rewards.
By Nina Hendy
Data analytics opens a world of new opportunity for accountants to provide more value-adding client services. Instead of relying on traditional financial data to gauge business performance, accountants can now assess inventory, marketing, customer behavioural trends and other data types.
According to managing director of accounting firm Wise Advice, Brad Golchin CPA, it enables accountants to explain how different aspects of a client’s business interact to affect financials and to also predict likely future trends.
“We can now show the real value we can add,” Golchin says.
“In the meantime, we need to ensure all staff have been trained and have a good understanding of the client’s business, the data being created, and how it can be analysed.”
Ideally, Golchin suggests focusing on a specific segment of the market and accumulating as much data as possible relevant to that niche which, he says, will make it easier for the practice to implement data analytics.
Also, endeavour to verify all data, use trusted sources, and always meet with the client to check they have not overlooked any potentially important information, he adds.
Key Takeaway: Ensure all staff in your practice have a good understanding of the client’s business, the data being created, and how it can be analysed.
Rising mistrust of data analytics
However, widespread lack of transparency and misuse of data by large tech firms worldwide has reduced trust in data analytics. This has been confirmed by various studies, including KPMG’s Building Trust in Data Analytics, for which Forrester Consulting surveyed 2165 data and analytics decision-makers from a range of industries in Australia, Brazil, Canada, China, France, Germany, India, the UK and US.
As data and analytics tools become increasingly sophisticated, opportunities for organisations to inappropriately use them also increase. Unfortunately, when data is misused it not only stirs ethical concerns among consumers, but often has wider consequences for business and society in general.
The Office of the Australian Information Commissioner (OAIC) publishes a quarterly report on the number of data breaches that occur in Australia, revealing that in the period 1 October to 31 December 2018 there had been 262 notifications. Human error accounted for 33 per cent, 64 per cent were malicious or criminal attacks and 3 per cent deemed system faults.
Worryingly, almost half the breaches (47 per cent) involved release of financial information.
The Data4Good Conference, held at the end of March in Sydney and organised by independent data and analytics consultancy Altis Consulting, heard that numerous companies are using data and analytics as a force for good.
However, Altis Consulting CEO John Hoffman does concede that anxiety has been heightened by the Cambridge Analytica scandal and Facebook’s much publicised gross misuse of data.
Indeed, the OAIC’s 2017 Australian Community Attitudes to Privacy Survey showed the majority of Australians were not only concerned about online privacy, but that 69 per cent were more concerned than five years ago.
“We need to build up the trust that has been lost with this incredible misuse of data,” Hoffman says.
“The same tactics used by unethical companies to exploit data can actually be used for good purposes. We need to develop better standards of ethics when it comes to how we mine and then use data.”
Key Stat: Almost half (47%) of the breaches reported in Q4 2018 involved the release of financial information.
What it means for accountants and data
Because accountants have access to very personal financial information, they have a leading role to play in ensuring it is used ethically, Hoffman says. This includes reporting data breaches to the industry watchdog.
Any use of data should be governed by clear principles understood by all staff, such as:
- Ownership: Individuals own their data and organisations are simply stewards of that data
- Transparency: It should be clear what the data is being used for and why
- Consent: Obtaining appropriate approval to utilise an individual’s private data is imperative
- Privacy: All reasonable steps must be taken to preserve privacy.
“Any use of data needs to be carefully checked against its source and originally intended purpose,” Hoffman emphasises.
“This is important for accuracy. For example, data captured for marketing purposes often has very different levels of veracity than that needed for accounting.
“It’s also important for privacy reasons, because data protection legislation specifies that data can only be used for its stated purpose.”
Practitioners need to put checks in place
Practitioners should put adequate checks in place to ensure:
- That data used for new areas of business is consistent with how it was sourced
- There are clear steps to update it if the data is found to be incorrect
- That any data no longer required or accurate is destroyed as soon as practically possible.
In the case of marketing materials, prospects also need a clear process through which they can voluntarily opt out, Hoffman says.
From an accounting perspective, positive actions to help improve the general public’s perception and concerns around data use need to be seriously considered, he maintains.
Providing clients with plain English guidance on what their data will be used for is a key first step, as well as offering advice on what to do and who to talk to if they have concerns.
A data map highlighting manual processes or silos of data that can be more effectively processed, stored and used can help, and assist practitioners to comply with data protection legislation, Hoffman notes.
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