data analysis – Page 11 – Cooper Mann Consulting

August 22, 2013

Predicting Outcomes and Providing Guidance | Being Nostradamus| Proformative.com

I have a gripe with the accounting profession. My gripe is with the fact that accounting information delivered to most business owners is old news. Stuff happened, the professional properly recorded it and reported on it, you paid your taxes, and that’s that. Game over.

Once upon a time, accountants had to work with book ledgers, pen and pencil (mostly pen, putting that single line through incorrect entries), and stacks upon stacks of paper documents. Just keeping up with the process of recording transaction information, adding it all up (and making sure the footing totals jibe), and then summarizing the information into usable form took all the time available, and the focus was on the accuracy of the work – not necessarily the timeliness of it. With the advent of computers and computerized accounting systems, the process of creating and storing the data became easier, but the volume and nature of information increased and thus the complexity and time to process increased (the “everlasting gobstopper” problem.. it never really goes away).There isn’t any argument over the critical value and importance of that work. Every business owner understands that not properly accounting for business activities can mean increases in tax burdens, penalties and interest, and more. It’s good work… but what do you do with it? My intent is not to try to diminish the value of today’s approach to accounting. Rather, I’m trying to point out how the accounting profession could make a huge impact in today’s pathetic economy, help businesses get financially healthier, and help put the small/medium business market on a path to growth and success. It involves seeing into the future.

These days, technologies exist which facilitate acquiring the information (even in paper form), converting that information into digital data, and then actually interpreting the data to arrive at a transaction. Traditional software and cloud service providers alike are recognizing that mechanical data entry is passé, and do-it-yourself solutions for accounting and bookkeeping will rely upon “smart” engines which can read and properly understand what each scanned document means.

So – once the accurate data entry problem is solved… what’s the next logical step? Analytics! It’s only really possible now that online solutions have brought the business information to the accounting professional in real-time, and have allowed the accounting professional and the business owner to collaborate and share data faster than ever before. If information is power, we have a lot of power in our hands… but do we really know it? This is where BI (business intelligence) and analytics come in, and where the opportunity exists for the accounting profession to become a guiding force in rebuilding our economy.

What if an accountant could not only tell his client that the business lost money last year or last month, but that they’re going to lose money through this month and year if they don’t change their behavior? And, what if the accountant could run a variety of scenarios which would help forecast the most positive business outcome based on certain choices which could be made, or certain activities which could be handled in different ways? What if the accountant could help his client peer into the future, and get an inkling of what the business could look like if certain economic or business conditions continued… changed… ?

Maybe I’m a little overzealous when it comes to believing that the accounting profession could have recognized the economic trauma which was coming, or that they could have prepared their business clients for it. But I don’t believe I’m very far off the mark in believing that not nearly enough “analysis” occurs in the typical public accounting engagement, and even when it does… is the suggested path the right one? I would submit that BI is new enough to so many people that it may not be. Learning what the numbers are telling you is one thing… staving off disaster is quite another.

I would encourage all BI and Data Analytics fanatics to check out an article on CFO.com on this subject: That New Big Data Magic http://www3.cfo.com/article/2011/8/analytics_that-new-big-data-magic

A few memorable takeaways from the article:

“you may be spot-on about a problem, but the solution doesn’t magically appear out of the data.”

“what you do with [data] is a people-based activity, a skill base you have to mature. And it doesn’t come quickly.”

“CFOs have a gut sense that there’s money out there in all that data… The challenge is how to turn that data into new opportunities.” The good news.. is that new technologies are making it more economical to make sense of Big Data… The caveat is that those technologies will not provide those opportunities. That’s still up to the people who make business decisions.”

jmbunnyfeet Make Sense?

reblogged from Proformative.com Being Nostradamus – Predicting Outcomes and Providing Guidance

August 20, 2013March 26, 2019

Financial Literacy and Small Business Success

Businesses and individuals alike must make complicated financial decisions throughout their lives. Sadly, the volumes of research which explore aspects of financial and debt “literacy” among individuals and small business owners reflects that a growing portion of the population lacks the understanding to make these decisions. Questions surrounding this issue often focus on the educational aspects, and the positive impacts which might be created through greater levels of understanding of accounting fundamentals and the basics of financial management. Particularly in smaller businesses, where there is a much closer relationship between business and personal finances, understanding even basic financial concepts is likely to lead to “better financial decisions and household well-being”.

a strong relationship between debt literacy and both financial experiences and debt loads [1]

Because many educational offerings tie to specific training approaches and methodologies, it becomes very difficult to measure the usefulness of the skills developed separately from the effectiveness of the training methodology. Trainers may employ specific devices or tools which facilitate their delivery, and often times these tools become more of a focus than the actual educational content. On the other hand, a program might provide a great deal of information in a fairly raw form, yet this information is unlikely to deliver a useful result if the participants do not understand it or cannot grasp the concepts introduced. The challenge is not only with providing the education, but finding a balance with the information and the outcomes; understanding how basic the training might be and still provide a measurable, beneficial impact.

In the study Keeping it Simple: Financial Literacy and Rules of Thumb, the authors discuss the benefits of teaching small business owners a series of fundamental “rules of thumb” for management of the business, rather than delving into the complexities of comprehensive business accounting and finance. Teaching participants about the basics of double entry bookkeeping, cash management and investing, and then coupling that information with instruction on essential processes to follow resulted in significant improvements in financial management and improved the accuracy and consistency of reported data.

the rule-of-thumb training changes actual business management practices [2]

Outcomes show consistently positive when a simpler approach to developing “financial literacy” is provided to small business owners, and particularly when the training and content is oriented towards the characteristics of the participants. The highest level of result was achieved with business owners with a low level of financial “sophistication”, with a limited interest in financial or accounting training, and with limited baseline business practice structure. These were the participants who were found to be most likely to implement what they learned in the “rule of thumb” training.

The conclusion drawn from these discussions is that financial education and basic accounting training can become a key factor in helping business owners not only account and report better for their businesses, but provides an essential foundation for understanding how to grow the business and create profitability. Accounting professionals working with small business clients should recognize that an effort to provide a level of education to clients is likely to not only help those clients make better business (and personal) financial decisions, it will also increase the chances that the client will keep better books and provide the accounting professional with more consistently useful information to work from.

After all, the goal of the accounting professional working with small business clients is to help those small businesses become successful businesses, isn’t it?

Joanie Mann Bunny Feet Make Sense?

[1] http://www.nber.org/papers/w14808.pdf

Debt Literacy, Financial Experiences, and Overindebtedness | Annamaria Lusardi and Peter Tufano| NBER Working Paper No. 14808|March 2009

[2] https://www.poverty-action.org/sites/default/files/kis-dfs-march2013_0.pdf | Keeping it Simple: Financial Literacy and Rules of Thumb | By ALEJANDRO DREXLER, GREG FISCHER, AND ANTOINETTE SCHOAR

August 12, 2013August 14, 2013

The Language of Accounting: Disconnect between Accountants and Bookkeepers

There are a tremendous number of bookkeeper training programs developed over the years which propose to deliver the essential bookkeeping knowledge (e.g., double entry accounting) required in order to properly service business bookkeeping requirements. Particularly as the CPA profession stepped away from traditional bookkeeping in favor of performing “higher level” and more profitable work, there was and continues to be a great need for skilled and experienced bookkeepers. While it seems that accountants and bookkeepers would be a natural fit for partnering to serve small business client needs, there is often a disconnect between the two which causes the working relationship to not always prove as beneficial as it could. What is the cause of this disconnect? In many cases, it is due to the fact that the bookkeeper training educated the operator on the use of a software product, and not on the fundamentals of accounting and bookkeeping.

Over the past few years, I have had the opportunity to look through a lot of bookkeeper training programs, and the thing that stands out is that many of these programs aren’t really training bookkeepers on accounting principles. More frequently, the training is focused on teaching users how to use software (usually QuickBooks). With the number of users of the QuickBooks product, it is obvious that there is a need to educate users on the solution because people need to know how to use their software properly. But it happened at some point in time that a majority of the industry came to believe that learning QuickBooks (or Xero or Freshbooks or Kashoo or whatever) was somehow synonymous with learning bookkeeping.

When I first started working with my father in his accounting practice, I had to use a manual general ledger, check register, etc. It was all manual – computers didn’t come along for a while (yes, I am that old). It was time-consuming, but it taught me the fundamentals. I know what a subledger is. In consumer-friendly software like QuickBooks, you don’t work in the AR subledger; you push the button that says “customers” or maybe “invoices”. QuickBooks, in many ways, doesn’t speak accounting. It speaks record keeping. And this is where the disconnect begins.

An old school accountant will recall the green eye shade days and working with book ledgers and 13-column pads, but even “new” school accounting professionals know that the fundamentals of accounting aren’t available for re-invention. A debit is still a debit and a credit is a credit. Yes, there are intimacies involved which speak to specific treatment of items for reporting and tax purposes, etc., but the essentials of double entry and other basic accounting principles are consistent and unchanging.

The “language of accounting” includes certain precise terms with specific meaning, and this precision in the use of terms simply doesn’t exist in many bookkeeper training programs. Rather than focusing on the fundamental accounting training bookkeepers truly need in order to be of maximum value to the business, these programs focus on helping users become experts in using the software product, or even to become experts at teaching others how to use the solution. While this software expertise may be beneficial in terms of helping accountants work with their clients who use the software, it doesn’t add enough value to the relationship to warrant partnering. What accounting professionals need are bookkeepers who understand bookkeeping and who can apply basic accounting principles to the task. Which software they operate is secondary to that purpose.

Professional bookkeepers, accountants, and the business client are all in a position to benefit tremendously when the service providers team up to provide comprehensive service. The key to making these connections lies with the professional bookkeeper who must not only understand basic accounting principles, but must also be able to speak to the accounting professional in their native language.

Make Sense?

Bookkeeping Needs Better Reporting Tools

There are many articles and papers available which discuss the rapidly increasing “volume and velocity” of electronic information moving through businesses these days. The focus of the discussion in most cases is on how businesses need to adopt tools and solutions to help them with the management of this electronic data flow. What isn’t being discussed at length is the visceral business intelligence which is lost due to less direct interaction with the raw data.

By manually working through each item, the person regularly processing the information would often develop somewhat of a picture of the business simply through a level of intuition, a gut reaction to the information. This is a rapidly declining model, thanks to intelligent technologies and direct system integrations.

With the plethora of electronic information sources, data collection tools, and transaction download facilities, many bookkeepers and business owners are finding that their gut instinct and business intuition is being lost in the shuffle of managing and matching up all this electronic data.

Focusing on small business bookkeeping, the processes are now being oriented more towards matching up electronic transaction data points than on entering the information from the raw source. Where bookkeepers were once perceived as “mechanics” in terms of performing the bookkeeping data entry, the activities of these professionals is becoming even more mechanical in nature as the primary requirement shifts from entering the information to importing it and then matching it to source documentation.

Even decisions regarding categorization of the transaction are often made by software solutions, eliminating more involvement by the bookkeeping or accounting pro. At the same time that bookkeepers and accountants find themselves having difficulties communicating the value of the service they deliver, technology trends in the industry are weighing even more heavily on that value proposition by providing users with do-it-yourself tools and self-service solutions.

The answer to the challenge of demonstrating value in the bookkeeping and accounting processes is for accountants, bookkeepers and business owners is to focus on the result of the work rather than focusing on the work directly.

Small business owners will challenge their accountants and bookkeepers to explain why processing a limited number of transactions per period would cost much, and the professional ends up fighting a battle which cannot be won; there is far more value in the work they perform than simply entering the data. It’s this explanation of WHY bookkeeping and accounting takes skill and has value which become arguable to the business owner, and is a discussion which the accountant or bookkeeper is more likely to win if they were to in a position to provide their client with proof of this value.

Too often, accounting and bookkeeping service providers attempt to prove their worth to the client by espousing the quality, accuracy, and timeliness of their services and say too little about the value of the result they will deliver. Additionally, many professionals introduce their clients directly to the accounting software and try to engage the client to work cooperatively with the bookkeeping, as there is a perception that the client may see more value in the work if they can a) see it being done in real time and b) see how complicated it could really be.

Unfortunately the accounting and bookkeeping solutions often implemented by small businesses actually look pretty easy to use and are intuitive, which serves to even further diminish the value proposition as the client perceives that they could likely operate the software just as well as the bookkeeper.

In order to deliver the proof to the client that the bookkeeping work has value, the result becomes the focus of the effort. Rather than providing balance sheets, profit and loss statements and bank reconciliations, those involved in the bookkeeping and accounting process for the small business should also focus on reports which demonstrate the value of PROPER bookkeeping and accurately reflecting business activities.

Would the client know the real difference between cost of goods sold and a regular business expense? Reflection of that single transaction with two different treatments could be the trigger to get the light bulb to light up. How best to demonstrate the variation? Not in pure written report form, that’s for sure. Numbers alone don’t generally trigger real understanding, but painting a picture might.

Today’s dashboard and reporting tools – solutions which use information from the accounting system to reflect visual trends and representations of business performance – can deliver far more meaning and easier understanding than a columnar report with numbers and percentages. Further, these tools can address the task of revealing critical insight into business value, demonstrating (for example) the difference between cash flow and profitability, or identifying trends which indicate patterns in how the business is causing or reacting to change.

As small business owners feel continued pressure to improve performance and profitability, and as lending sources for business credit remain difficult and costly to engage, the necessity for quality bookkeeping and accounting services does not diminish, it increases. The challenge is in finding ways to read the data and discover the insight and meaning it reveals.

The value of bookkeeping and processing accounting data for businesses is ever-increasing in these days of global markets and global competition, and the forward-thinking professional will recognize that deeper insight into the business – insight enabled through the use of realtime reporting and analysis tools – delivers an ongoing opportunity to work closer with the client in addressing challenges identified and presented, and allows the accounting professional, bookkeeper and business owner to be guided by real information rather than emotion or intuition.

jmbunnyfeet Make Sense?

read the original posting at The Progressive Accountant.

August 1, 2013

IT Security and Engaging Users to Reduce Vulnerability

There is a lot of discussion going on about security in the cloud. With numerous advancements in technologies of various sorts intended to secure our information and identities on the Web, how is it that security continues to be a growing problem? The answer is in the Big Data the Web collects (read about the Internet of Things – IoT), the large silos of data now handily available in the cloud, and users who continue to provide access for all sorts of bad guys and malicious attackers simply due to not understanding that they – the users – remain as the biggest vulnerability of all. It is educating this user and finding a way to get them to recognize their potential as a critical element in enhancing system security and reducing vulnerability that has become the larger challenge.

People are nothing more than another operating system, says Lance Spitzner, training director for the Securing The Human Program at SANS Institute. “Computers store, process and transfer information, and people store, process and transfer information,” How Hackers Fool Your Employees

Social engineering and finding ways to earn user trust has become a widely recognized means for gaining access to systems and information. Any experienced computer security consultant recognizes that Microsoft Outlook is among the best applications to place in front of users to test system security, as emails with malicious attachments (spearphishing) represent a majority of targeted attacks. And hackers aren’t resting on their laurels while users figure out that opening email from unfamiliar sources isn’t a good idea. Nope, not for a minute. Today’s flavor is “conversational” phishing, where it is made to appear as though a real person is at the other end of the conversation. Hackers are patient, and they are willing to take the time to find a way in. Users, on the other hand, still tend to be somewhat complacent when it comes to security, and often operate under the belief that the IT security products and the IT department have it all under control. And no matter how many times they’re told to not click on strange email attachments, to change passwords frequently, not to reuse passwords, and to make passwords hard to guess… getting users to comply continues to challenge system administrators.

Communicating with users about the importance of adhering to password management and other security standards often falls on deaf ears for two reasons: users believe that system security is the job of the IT department, and users are made to feel stupid by being chastised and punished by the IT department that’s supposed to be helping them. Rather than helping to educate users and find innovative ways to get users to participate in helping to improve system security, IT administrators and security teams generally view users as part of the problem rather than part of the system of solving it.

It’s a heated debate that can upset people on opposing sides. For instance, one RSA conference presenter conducted a class on “how to patch stupidity,” Spitzner says. “He explained why people are stupid, how they’re stupid and how to fix stupid. It was a very emotional talk for me, because how can you sit there and insult the very people who can end up helping us?… How Hackers Fool Your Employees

In order to build strong security which is better-suited to protect businesses from today’s variety of threats, IT security professionals and system administrators should engage in positive internal marketing for better system security, deliver improved education to build awareness with users, and actually engage users in the process of threat identification and detection. These users don’t have to be geeks or IT people; they can be average users who simply keep their eyes open to things that just don’t seem right. “People can become a detection system to improve organizational resilience.”

jmbunnyfeet Make Sense?

July 31, 2013March 28, 2014

The Small Business Borrower | Biz2Credit

In order for regulation and legislation to work in favor of small businesses, it becomes essential that accurate and complete information be available for analysis. Too often there are details not recognized in the information used by various agencies to help guide policy and action, and particularly in the world of privately held small business, the quality of data is often in question. This is where structured accounting software and the public accountant come in to play, and where a difference can be made not only with the individual client, but at a higher level by facilitating more accurate data production to support various research initiatives, such as those sponsored through the SBA and the Fed.

Overall, these research studies highlight two things: the important role that financial institutions play in lending to small business owners, and the value of quality data sets in ascertaining financing issues faced by small businesses and their owners.

Charles Ou, Ph.D. | Senior Economist | Office of Advocacy | July 2009

With the availability of highly useful tools for monitoring various key performance indicators and metrics in the business (with analysis of cash flow being an essential part), business owners and their accounting professionals alike are able to use real business data to reveal not simply the trends in business performance, but to identify areas where direct action could improve results in one aspect or another. By paying closer attention to managing business finances and analyzing key aspects of business performance, the “discouraged” or “denied” business borrower may become a successful or (even more valuable) a non-borrower.

via The Small Business Borrower at Biz2Credit.com.