Why is Big Data Information So Important for Accountants?

Big data refers to the collection of a large amount of data that pertains to the company. A large amount of data can represent critical information regarding the performance of the company. This data needs to be recorded, verified, and most importantly secured before it can be used to inform business decisions.

Accounting data for businesses with different branches have to be collected from the respective sources, merged, and recorded as per the generally accepted accounting principles. In this blog post, we will take a close look at the process involved in the analysis of big data from an accounting perspective.

Accounting and Big Data Analytics

Big data has a pervasive effect on different types of businesses and functions. Accounting data is collected and recorded by outsourced bookkeeping. The information needs to be verified by auditors to ensure that everything is recorded as per the standards and regulations.

Data-driven audits and financial analysis resulting in more informed decision-making by businesses. It can result in greater insights into the financial performance of the company.

Big data accounting analytics is invaluable in identifying, tracking, and improving business financial performance. Certified public accountants (CPAs) can build accounting models that can help support operational improvements resulting in the improved financial position of a company.

Accountants can analyze accounting data to find cost-cutting opportunities more easily. Big data can help in identifying opportunities to reduce tax liabilities. This process can also help in risk mitigation and creating policies for improving the profitability of a company.

Types of Accounting Data Analytics

Data analytics can be separated into three main categories, which includes descriptive analytics, predictive analytics, and prescriptive analytics.

Descriptive Analytics

Big data often includes descriptive analytics of business accounting records. This process involves grouping and categorizing data to make it useful for decision-makers. escriptive analytics of accounting data will help in answering questions related to the financial performance of the company such as the most sold products, markets with high demand, and more.

Predictive Analytics

Predictive analytics takes big data analysis deeper for greater insights into business financial performance. It involves forecasting future opportunities that can be exploited by the company to improve its bottom line. As an example, a company can analyze historical accounting data to predict the likely impact of marketing and promotional spending.

Prescriptive Analytics

Prescriptive analysis is a more complex type of data analytics. The process involves optimizing decision-making to maximize the benefit for a firm based on different variables. This type of big data analysis involves determining the ideal marketing budget that will result in maximizing impact on product or service demand and the resultant company profitability.

Decision Models

Accounting big data analytics often involves creating mathematical models to optimize decision-making. The technique involves making decisions based on specific controlled data such as the price of products and uncontrolled data such as the demand for products.

A decision model based on accounting big data analysis will help decision-makers to estimate the outcome of different processes. The decision model can also involve making sure that the operational performance helps in achieving long-term financial goals for the company.

Risk Management and Data Governance

Big data accounting analytics can also be used in managing risks that are pertinent to a specific firm. The accounting data needs to be secured to avoid access by unauthorized individuals. Accountants must work closely with data analysts and cybersecurity professionals to make sure that the data is secured and protected.

The data that is collected from different sources needs to be categorized and protected using standard practices. This requires monitoring of network connections and local systems to ensure that only authorized individuals have access to the accounting and financial data regarding the company.

Merging accounting with ‘big data’ science – Journal of Accountancy

All the different types of data from which accounting information is gathered such as bookkeepers, accounting software, bank statements, receipts, and other sources must be secured properly. The structured data from spreadsheets and accounting software must also be secured by taking appropriate measures.

Big data analysis can be made risk-free by analyzing and protecting data. Accountants need to secure hard evidence and soft copies through concrete actions. Firms need to ensure that voluminous accounting data is protected from online and local threats.

Data Visualization

Data visualization is a big data-driven technique that allows accountants to identify issues proactively. Accountants and business owners can visualize accounting data to make decisions based on facts rather than making assumptions.

Data visualization tools like Tableau allow accountants to analyze financial data to identify patterns, irregularities, and cash flow problems regarding the business. The data analytics tools help accounting professionals to view and analyze data from multiple sources to get insights into the financial performance of the company.

Audit Analytics

The data analytics tools allow auditors to sift through data in ways that were not possible with the traditional methods. Data analytics tools allow auditors to find connections between data obtained from different sources.

Big data analytics lead to greater insights into the financial condition of the company. It helps auditors to shed more light on the recorded data. Auditors can use big data analytic tools to perform complex data analytics with real-time accounting data.

Internal and external auditors will be able to do their job with greater accuracy with the right data analytics tools. They can work on a large amount of data and visualize different types of accounting-related data to identify issues regarding the company’s financial data.

Conclusion

Big data analytics has changed how businesses record and analyze transactions. Accountants and auditors can carry out their work with greater accuracy and detail with data analytic tools. They can provide detailed reports to decision-makers that can help them to make the right decisions regarding the company.

Maxim Liberty is a reliable outsourced bookkeeping service company. We have a highly experienced team of accountants that provide services to CPAs, legal attorneys, and small business owners in recording transactions. Our professional accountants record expenses using generally accepted accounting principles. For more information about our services, you can contact us by dialing (703) 957-6938.