Running a successful non-profit involves creating and executing a well-defined accounting plan. Being able to show that you are accountable will help donors trust your organization. After all, it’s easier to secure support if you have a clear statement of financial position and activities.
Taking a closer look at how data analytics in your accounting software can also help you make better decisions. The more data your accountants can analyze, the more valuable insights they can provide and the more process improvements they can identify.
This article discusses (1) data analytics in accounting, (2) what accounting software you can use, (3) why you should use data analytics, and (4) the different types of data analytics.
Understanding Data Analytics in Accounting
Collecting and presenting financial data is one thing. Analyzing the data to create realistic projections and effective strategies is another. Your organization’s success depends on your ability to develop and fund projects aligned with your mission. You can only achieve these with reliable data analysis.
When you use data analytics for accounting, you go beyond categorizing and classifying information. Your software can also help you calculate historical performances, assess outcome possibilities, and evaluate variances. From these, your accountants and auditors can easily make recommendations for future growth opportunities.
Data Analytics Software That Accountants Use for Non-Profits
Your accountants can provide you with all kinds of great insights using a combination of cloud-based accounting software, Microsoft Excel, and BI Tools. These allow them to organize and clean up data as well as extrapolate actionable conclusions. Your accountant can also use these tools to present data visually, so you can easily digest data. That way, you can make decisions quickly.
If you are already using Quickbooks, you’ll find that the software has built-in data analytics and that you can integrate it with other business analytics tools. While basic cloud-based data analytics tools are available for free, subscriptions to more sophisticated options can cost anywhere from $5,000 to $10,000 yearly. These can be pretty expensive, and in most cases, don’t include support.
4 Key Benefits of Data Analytics
Data analytics in accounting is helpful for non-profits to identify patterns and metrics, which can help in strategic decision making. Here are some of the other benefits of data analytics.
Less margin of error
Making full use of data analytics allows for continuous data monitoring. This helps your accountants identify inconsistencies so they can give you more precise recommendations.
Correct fund use
With data analytics, you will know how much money you have, which programs generate revenue, and which benefactors donate more. As a result, you will be more mindful of your expenses and stay on top of your donor base to maximize your funding.
Speed up investment decisions
Investment opportunities are often fleeting. Data analytics will help you find the best time to invest. It will also help you understand donor and benefactor behavior. If you’ve been making decisions by your gut, analytics will give you the data to back it up.
Accessible anytime, anywhere
Cloud-based data analytics offer great flexibility and improved security. Even better, some tools that offer lower upfront costs for startups that don’t need all fancy bells and whistles.
4 Types of Data Analytics
In general, there are four types of data analytics, but depending on your needs, you may only need a couple of them.
Descriptive analytics
Descriptive analytics helps to give you an idea of your company’s financial state. This type of analytics collects, classifies, and organizes information like your outlays, earnings, and collectibles. This way, you have the complete picture at a given period.
Diagnostic analytics
Diagnostic analytics does more than describe and organize data. It gives you insight into what went right or wrong in your financial activities. It also provides close-to-accurate assumptions to help you understand what to do next.
Predictive analytics
Predictive analytics can help answer questions to find out what will happen in the future by using fact-based predictions based on historical data.
Prescriptive analytics
Prescriptive analytics uses data analytics to suggest a course of action or strategy for a company’s future. It looks at the past, current performance, and possible future scenarios to develop a course of action and make it happen.
Outsource your accounting to LTD Global
A successful non-profit organization is accountable, which means it knows how to maximize funds and attract long-term benefactors. One way to do this is to show that you are financially responsible and using your funds for the right reasons. That said, data analytics in cloud-based accounting software is one of the most important investments you can make to gain valuable insights and make process improvements.
LTD Global is here to help you with your accounting requirements. We provide custom solutions based on the needs of your non-profit and make life easier for you. Let our talented team of consultants handle your accounting, so that you can focus on your core responsibilities. We also offer data analytics to help you keep track of your business finances. Don’t hesitate to contact us today!
Sources:
Data Analysis Tools, Tips and Resources for Finance Students and Professionals, OnlineDegrees.und.edu
https://onlinedegrees.und.edu/blog/data-analysis-tools/
Top 6 Data Analytics Tools in 2021,
https://towardsdatascience.com/top-6-data-analytics-tools-in-2019-4df815ebf82c
The Importance of a Strategic Nonprofit Accounting Plan, Norwich.edu
https://online.norwich.edu/academic-programs/resources/nonprofit-accounting
Why data analytics matter to accountants, Kenan-Flagler.unc.edu
https://www.kenan-flagler.unc.edu/perspectives/why-data-analytics-matter-to-ac