Update: This article was last updated on 23rd October 2020 to reflect the accuracy and up-to-date information on the page.
With technology expanding in almost every industry today, the accounting sector also is going through some significant transformation by evolving through traditional methods.
Hence, industry professionals need to keep up with cutting-edge technologies to stay ahead of their competitors in the financial sector. In order to do so, big accounting firms have already started adopting technologies such as Big Data, Robotics, and Artificial Intelligence (AI) into their business models.
Out of all the trending topics out there, big data is impacting nearly every aspect of the accounting industry. It helps produce better data-driven audits, hence, creating a better experience for clients as well as auditors.
In the tax process, it helps evaluate tax codes, reduce fraud, and monitor budget and tax expenses, thereby saving time, money, and stress for filers. Whereas, in the advisory sector, it helps identify and monitor questions and create better reports to improve business performance.
Moreover, in finance, it helps design analytical models and build better financial reports. Therefore, it is one of the most useful technologies that accountants need to adopt in their process.
But, what is big data, and what does it really apply in practice?
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 semi-structured form such as images and texts.
Here’s all that you need to know how big data is paving its way into the accounting industry:
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.
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.
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.
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.
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.
With the ever-increasing voluminous data, CPAs must have the ability to utilize the latest technology and tools to analyze financial data. It will help them improve client experience, provide greater assurance over financial statements, and increase the decision support that they give to make their business thrive.
Therefore, top accounting firms must integrate big data techniques seamlessly into their business models to achieve this transformation. But, in the end, using big data and analytics in any industry can be challenging as it comes with many contingencies around the quality of data, the data sources, and the choice of data sets that need to be understood adequately while using big data.
What impact did Big Data have on your accounting firm? Do let us know in the comment section below.
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