Digital Transformation of Accounting- Big Data Analytics in Accounting

Emerging Trends in Accounting

Digital Transformation of Accounting- Big Data Analytics in Accounting 

What is Big Data?

Big Data can be defined as extremely large sets of unstructured data coming in various forms gathered from different sources at a rate so fast that it is way beyond the processing power of a traditional server. It is so voluminous that it is measured in terabytes and zettabytes. Big data is all about complexity and speed, and is therefore often characterized by the ‘3 Vs’ where –

•      Volume – Represents large volumes of data

•      Velocity – Represents the high-velocity data flow

•      Variety – Represents a wide variety of data, especially in an unstructured or semistructured form such as images and texts.

Impact of Big Data on Accounting

a.       Real-Time Access

Modern accountancy methods require you to deliver tasks strategically within a given time frame every month. But, the traditional record-to-report methods limit the visibility of data, thereby making it difficult to complete the tasks every month before the books are closed.

Having real-time access to the accounting data is the only way forward as it keeps you in sync with the broader business calendar, instantly corrects errors in reports, and escalates efficiency, saving both time and money. Utilizing big data for analyzing reports can help make better business decisions and set meaningful performance benchmarks.

b.      Data Analytics

Big data contains a large volume of unstructured data that is to be organized. Applying data analytics to big data creates several opportunities for accounting firms to gain significant insights, predict future outcomes, and automate non-routine financial tasks.

An accountant must learn technical and analytical skills to handle statistics and run large data sets with data mining and statistical analysis tools such as Statistical Analysis System (SAS) to their knowledge base. In the era of big data, it’ll help businesses deliver greater value and transform their decision-making skills.

c.       Risk Identification

Providing risk-free financial services to customers is essential for firms these days, as voluminous data comes with a large number of security threats.

Big data enables accountants to proactively identify issues with real-time access to the data so that accounting businesses can base their decision-making more on hard evidence and facts, rather than emphasizing on guesswork and assumptions about customers, employees, and vendors.

d.      Data Visualization

With the help of visualization software such as Tableau, accountants gain the ability to see large amounts of data, which, in turn, helps users to see patterns, flows, irregularities, and exceptions more easily.

These tools have helped accountants to see data in ways that were not possible previously using traditional methods. And have made it easier to link together data from various sources to provide new insights to the reports. Also, they have made it possible for accountants and CPAs to perform advanced statistical analysis of data, using more variables, real-time data, and advanced modeling.

e.       Audit Analytics

Internal and external auditors have been at the forefront of the use of big data in the accounting industry. Nowadays, the traditional approaches to auditing, which include analyzing billions of transactions in a ledger based on sampling, are not used anymore.

Though auditors still work on large data sets, audit analytics enables them to visualize the wide range of financial and non-financial data. It helps identify exceptions and pressure points so that auditors can focus on greater areas of risk to predict outcomes that will improve forecasting.

Need for Data Analytics in Accounting 

1)  Monitoring and Improving Business Performance

Every industry must regularly evaluate their Business Performance if they want to stay profitable. Accounting Data Analytics can help to ensure that the company is running smoothly, goals are being met, and performance is being maintained or improved. This knowledge is critical for a company’s long-term viability and survival.

2)  Improving the Client Experience

Data Analytics in Accounting can be used to improve Client Experience by examining parameters such as the turnover of tax returns, the time it takes to perform an audit, or general client satisfaction surveys. This can help the company to bring new clients and improve the client Retention Rate. Retention Rate is one of the important business metrics that refers to the percentage of clients retained by the company over a given period of time.   

3)  Identifying and Managing Risks

A Risk can originate from a multitude of sources both inside and outside the company. Anyone in the Accounting department of a company must know how to deal with risk. Data Analytics in Accounting can help in analyzing the areas of risk that are faced by the company and use Predictive Analytics to make business decisions around specific risks.

4)  Generating Higher Profit Margins

Data Analytics in Accounting can be used to uncover the behavioral patterns of your customers. These patterns can aid businesses in developing Analytical Models, which can then be used to discover investment opportunities and improve Profit Margins. Thus, Accounting Data Analytics also helps in generating higher Profit Margins.

5)  Cash Flow Analysis

Data Analytics in Accounting can also assist in tracking your Cash Flow and identifying places where a company can reduce losses or invest profits more wisely. Thus, Accounting Data Analytics has a profound impact in analyzing the Cast Flow and transforming the business.