With the advent of big data and technological advancements, the importance of data analytics (DA) has surged in the accounting field. Accountants leverage data analytics to research financial information, unravel valuable insights hidden within financial statements, devise financial strategies, reduce expenses, discover process enhancements and manage risks. The capability to analyze massive quantities of economic data has given rise to fresh prospects for accountants and their teams to aid strategic decision-making and generate company value.
Accounting and finance firms are investing heavily in data analytics technologies, including self-service reporting, big data, data visualization, predictive modeling and automation. The emergence of these technologies has presented accountants with an exceptional opportunity to distinguish themselves from their peers and safeguard their professional futures by honing expertise that can help their employers and clients save time and money.
Graduates with an advanced business degree in accounting will need a foundation in data analytics to best support a business’ financial needs. Below are DA applications that support executive decision-making, as well as financial and management accounting.
Analytics Drives More Sound Financial Decision-Making
Utilizing data analytics skills and technologies in accounting supports strategic executive decision-making by providing key insights into a business and its markets. For example, DA software can analyze customer data to identify trends, helping organizations make more informed product development investments with optimal profit margins. It can help them to develop more effective sales and marketing strategies by providing insights into customer behavior, preferences and purchasing patterns.
By analyzing large data sets, companies can identify which marketing channels are most effective in reaching their target audience, what types of messaging resonate with their customers and which products or services are most likely to generate interest and drive sales. DA software can also help sales and marketing leaders to monitor the performance of their efforts in real time, allowing them to adjust their strategies as needed to improve outcomes and drive revenue growth.
Data analytics has become indispensable in evaluating the performance of business units and departments. With access to data-driven insights, business leaders can make informed decisions about resource allocation, identifying areas where investment will yield the greatest returns. By analyzing large data sets, organizations can evaluate the effectiveness of different business strategies and forecast outcomes. Once decisions are implemented, DA technologies provide real-time monitoring of business performance, allowing for timely adjustments to streamline operations and processes.
Data Analytics in Management Accounting
Management accountants rely on data analytics to gain a better understanding of the performance of business units by identifying key patterns and trends. By monitoring key performance indicators (KPIs) such as operating cash flow, budget variance and line of business revenue versus target, management accountants can recommend business adjustments to improve performance. Their data-driven work is becoming increasingly vital in budgeting and forecasting, helping organizations plan for the future and make better decisions about resource allocation.
There is no greater need for smart resource allocation than talent acquisition and retention. Clear and measurable KPIs are used to evaluate the performance of individual employees in relation to their financial impact on the organization. For example, they can track employee productivity, revenue generated per employee and other metrics directly impacting the company’s bottom line. This enables managers to provide feedback and coaching, develop targeted training programs and make informed decisions about promotions and bonuses. For employees, aligning individual goals with the company’s broader objectives enables them to focus on high-impact activities that drive business growth.
Data Analytics in Financial Accounting
DA software tools help financial accountants to enhance the accuracy of financial reporting, identify patterns, detect fraud and improve the accuracy of financial reporting. With education, accountants can leverage exploratory multivariate and inferential statistics and work with both relational and nonrelational databases to extract insights that would otherwise be inaccessible. For example, DA software can help them monitor transactions and identify any unusual patterns or outliers that could indicate fraudulent activities to prevent financial losses.
DA technologies can help accountants ensure that their companies generate consistently positive cash flow and make significant strides toward achieving their objectives. In the process, DA tools automate routine tasks, such as reconciling accounts, generating reports and preparing financial statements. Automating these processes frees up accountants to conduct more value-added work that takes full advantage of their expertise and training.
Analytics tools also enable accountants to enhance the client experience by continuously evaluating a complex set of parameters and inputs, such as turnover of tax returns and time to audit, as well as client feedback. By synthesizing all of this data, accountants can identify areas for improvement and optimize their services to meet the needs of their clients.
The International Federation of Accountants Recognizes the Importance of Data Analytics
The industry’s global organization for the accounting profession recognizes the impact that data analytics is having. IFAC predicts technology will empower future accountants to work with more advanced data, unlocking fresh opportunities to enhance business value and drive growth. They see technology as a facilitator rather than a threat and emphasize the need for accountants to continually cultivate new skills with artificial intelligence and machine learning tools to remain effective.
The IFAC also emphasizes the significance of ethical considerations and the need for accountants to maintain professional standards while utilizing technology to furnish data-driven insights supporting financial decision-making. The University of Wisconsin-Parkside’s online Master of Business Administration (MBA) with a Concentration in Accounting program instills this ethos throughout the curriculum and in its Accounting Data Analytics course as it provides the data analytics skills accountants need to build databases, monitor business trends and performance and support smarter executive decision-making.