CPA_Practice_Advisor_March_2020 - 20

THE MILLENNIAL ADVISOR

What Are You Missing?
Big Data Helps Accountants Look More Closely
NO MATTER WHAT role you play in the accounting profession, you probably have thought
to yourself more than once, what am I missing? Is it a transaction for the month, a
reconciling item, a payable? Or is it something bigger that has slipped past-like a key
performance indicator? Or something worse, like fraud? Since the start of our profession,
we have struggled with these nagging fears. What might we be missing? Often, we lack
the time and resources to dig deeper to investigate the dark corners or look twice into
those gray areas. For some of us, we face these fears front and center when a client
gets rocked by allegations or findings of financial fraud.
Look at the recent documentary,
"McMillions," an HBO series about
the McDonald's Monopoly game
scam that occurred between 1989
and 2001, perpetrated by ex-cop
Jerry Jacobson and several accomplices. It highlights a fraud that went
on for years-totally undetected by
a trusted, stalwart global brand.
The beauty of accounting has
been and will always be its simplicity. Numbers don't lie. Isn't that the
truth? The challenge is being able to
look at the numbers in the right way
to understand what they are telling
us. When you are driving in the fog,
you can't tell if you are in the middle
or right at the edge of a cliff.

THE BEAUTY OF BIG DATA
Luckily for all of us, the solution
to these issues has finally arrived,
we just need to veer a little to the
left and out of the fog to embrace it.
We need to take a modern view of
accounting and harness the power
of big data. Then, we can instantly
analyze what is sitting right there
in front of us. We can find a path
through the numbers to alleviate
our nagging worries by diving deeper
into the financial and non-financial
numbers and expand our focus past
the income statement and balance
sheet into what lies deeper.

20

MARCH 2020 ■

No matter the problem
or trend, the data is
there- right in front
of you to analyze and
review.
While accounting is built around
assets equal liabilities plus stockholder's equity, this financial data is
just one part of what resides inside
all modern accounting software.
The financial data, sales figures,
expenses, and more are what we
have always embraced. Instead of
analyzing revenue on a monthly
basis, what if we go deeper and
begin to analyze revenue at the
daily or hourly increment? We begin
to draw even deeper analysis into
what has happened in the past and
then project what will happen in the
future. But we no longer need to stop
at just the financial data.
Moments past that data where
we have always spent our time, just
a little deeper beneath the surface
lies an abundance of non-financial
data. These would be things like
hours worked, billable hours,
conversion rates on new business,
numbers of transactions per cus-

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tomer, on-time rate for shipments,
customer satisfaction, and more. A
typical modern accounting system
has hundreds of non-financial KPIs.
They are logged as part of every
transaction, normally as a second
or third data point, meaning we
don't often think about them when
we enter them.
Once we become aware of how
much data is at our fingertips, we
can begin to use that data to readily confirm or deny some of those
lingering worries that keep us up
at night.

DIVING IN
Don't let the mass amounts of data
overwhelm you. Start by defining
what it is you want to understand.
Are you concerned that the sales
team logged fictitious sales activity
over the weekend in advance of
Monday's meeting? Do you suspect
that the new product line has not
taken off and its conversion rate is
below assumptions?
Avoid the lure to just start
digging into all the data that sits
in front of you. Pause and identify
the transactions you want to
understand. With this goal in
mind, your next step should be to
understand what numbers drive
that transaction. If you are wor-

GARRETT WAGNER, CPA

CEO/Founder, C3 Evolution Group
garrett.wagner@cpapracticeadvisor.com

ried about fraud, think about what
financial and non-financial data will
show signs of opportunities for the
fraud to occur-the lead indicators.
Combined with what data would
lead indicators show signs that fraud
already may have occurred, the lag
indicators?
Once you know what you want
to analyze and what drives it,
begin to review the data and see
what lies beneath the surface. You
may be amazed how quickly trends
pop up in front of you. If you were
concerned with misleading data
from a certain individual on the
sales team, perhaps you can quickly
see when specific data changed that
weekend, showing sales activity met
or exceeded expectations or historic
trends.
Or perhaps you notice an
increase in write-offs 30 days after
the sales team's weekend shift. Does
it indicate that someone is creating
fake sales, then refunding them 30
days later after getting paid their
commissions?

THE TRUSTED ADVISOR
No matter the problem or trend,
the data is there- right in front of
you to analyze and review. Don't lie
awake each night wondering what
is going on inside your company or
at your client's company. Harness
the power of big data and look for
yourself. Become that proactive,
most trusted advisor you were
born to be. Solve the problem that
is sitting right in front of you using
the data right in front of you. ■
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