Data analytics: Empowering small and medium audit firms
"An investment in knowledge pays the best interest." – Benjamin Franklin
DATA analytics has emerged as one of the most critical technological tools in the Philippines, with businesses across industries leveraging its capabilities to gain a competitive edge in a pervasively digital environment. In the audit and assurance industry, data analytics has proved to be especially useful in providing management with the tools to analyze large volumes of data quickly and accurately. However, for small and medium auditing firms, establishing data analytics capabilities can be a challenge due to limited resources.
Despite this, these firms increasingly recognize the importance of information in delivering quality audit services, lowering costs and remaining competitive. By leveraging data analytics, these firms can gain insights that allow them to make informed decisions, improve their efficiency and better serve their clients.
Implementing information systems like data analytics can provide small and medium auditing firms with a variety of advantages. One of the most significant advantages is the ability to identify areas where operations can be streamlined and optimized. By analyzing data from various aspects of the firm's operations, data analytics can reveal patterns and trends that would otherwise be difficult to detect. This, in turn, can help firms identify significant pain points and bottlenecks in their processes, allowing them to make more informed decisions about how to allocate resources, improve efficiency and therefore save on costs. For example, data analytics can help firms identify which audit procedures are taking the most time and what procedures can be automated. Armed with this information, firms can better allocate their resources to focus on the most critical tasks, which shall ultimately improve their bottom line.
However, data analytics can be costly, particularly for small and medium auditing firms. A simple database or ERP software could cost the firm hundreds of thousands of pesos per year, not even accounting for the personnel costs for maintaining the database system. These costs associated with acquiring the necessary technology, tools and expertise can often be a major barrier for these firms, limiting their ability to establish data analytics capabilities.
While the previous statements are true, it's important to note that data analytics doesn't have to be an all-or-nothing endeavor. Firms can start small and gradually build their capabilities over time. One effective way to approach this is by applying the Pareto principle, also known as the 80/20 rule. The principle states that roughly 80 percent of useful information can be derived from just 20 percent of the data collected. By identifying the most critical data sets and focusing on them first, firms can gain valuable insights without incurring the full cost of a comprehensive data analytics program.
Another way for small and medium auditing firms to start with data analytics is to use spreadsheets as their foundational database. Unlike setting up elaborate databases and data structures, starting with spreadsheets can be significantly less expensive. Furthermore, spreadsheets like MS Excel and Google Sheets are widely used tools that most professionals are already utilizing, making it a convenient and accessible option.
Once a foundational database has been established, firms can then start building dashboards that summarize the data into meaningful information. Subsequently, using the Kaizen method, firms can then gradually build upon their existing data structure and analytics capabilities over time. The Kaizen method emphasizes continuous improvement by identifying and implementing small, incremental changes to improve processes and outcomes. By taking this approach, firms can avoid the high upfront costs typically associated with data analytics while still reaping the benefits of improved decision-making and optimizing operations performance.
Finally, firms should invest in their staff's skills to build data structures and analyze the data. Fortunately, the learning curve for rudimentary formulas and data structure creation is not steep, and there are numerous online resources available to help personnel develop these skills. By investing in training programs, firms can develop the skills necessary to make the most of data analytics tools.
In the dynamic landscape of today's markets, where change is the only constant and technological advancements shape the very fabric of business, the significance of investing in information cannot be overstated. It serves as an unwavering compass, guiding firms toward competitive prowess and resounding success. By gaining an intimate understanding of their current position, gauging the velocity of progress and anticipating the hurdles that loom on the horizon, firms can embark on a journey of strategic foresight. Armed with this knowledge, they can chart their course with unwavering confidence, meticulously planning their every move and fortifying their chances of triumph amid the swirling tides of uncertainty.
Manuel Guilius A. Pamorca is a quality assurance review supervisor of Paguio, Dumayas and Associates, CPAs (PDAC)-PrimeGlobal Philippines, an institutional member of Acpapp. The views and opinions in this article are hers and do not represent those of PDAC and Acpapp.