It is well-established that accounting is a data-intensive stream. It is filled with numerical, non-numerical, statistical and non-statistical data. There is data involved in invoices, purchase orders, employee salaries, daily expenses and a load of other things. Such enormous amounts of data can get overwhelming after a point.
Accounting professionals have to undergo a tedious process to collect and analyze such enormous amounts of data. Moreover, the data is scattered at various sources. Accounting professionals need to ensure that there are no mistakes in the data collection and analysis process. They need to ensure that every bit of data is collected for accurate analysis. Otherwise, any shortcomings can lead to significant losses to the organization, including compliance issues. This can land the organization into legal trouble.
This is where big data and data analytics come into the picture. Big data is already making a huge impact in the finance sector. The accounting department is no exception. The use of data analytics in accounting can help streamline and simplify various processes involved. It will also help automate compliance management that can save organizations from legal issues.
Here’s a look at the role of data analytics in accounting.
Auditing is the core of accounting processes. It helps analyze how the organization is performing financially. However, manual auditing is a time-consuming and tedious process. Moreover, there is a high chance of human error that can lead to severe consequences.
The use of big data in accounting for auditing purposes can transform the task completely by providing in-depth information about various financial data. This helps business leaders monitor their financial operations such as earnings and expenditures. It not only helps with accurate periodic auditing but also enables business leaders to make better-informed decisions.
Moreover, big data and data analytics can be combined with technologies such as robotic process automation, artificial intelligence and machine learning to automate the process of auditing with accurate input and output. This ensures that there are no financial irregularities and compliance issues.
Businesses always face financial risks that can cause a great deal of harm. Identifying the risk is a difficult process. Most of the risks go unnoticed and only come to light after some severe consequence to the organization.
Big data and data analytics in accounting can help identify financial risks right at the outset. It helps analyze and detect trends associated with emerging risks and risk management. For instance, big data can help identify expenditures going overboard in certain business processes right from the start. Business leaders can, thus, take the necessary steps to minimize and mitigate the risks.
Again, data analytics tools will require the help of machine learning and artificial intelligence technologies to automate the process of risk assessment and management.
Many businesses face fraud from external as well as internal threats. This leads to massive financial losses, sometimes running into millions of dollars. Fraud detection can become nearly impossible for human employees as the amount of financial data keeps on increasing.
The use of big data analytics in accounting can help identify potential frauds easily. Businesses can use expense management software to centralize all their financial data. The data can be captured right from day one. Thus, businesses have a better understanding of everything related to their finances. They can, thus, identify frauds quickly and easily before it escalates into something bigger and causes enormous tangible and intangible losses.
This will also ensure compliance management as every penny will be accounted for. Again, businesses will need AI-powered data analytical tools to identify fraud easily.
Undoubtedly, using big data and data analytics in accounting allows businesses to take complete control of their operations. This enables business leaders to make better-informed decisions in the short term as well as long term. The decision is backed by statistical expertise, qualitative accuracy and strategical experience made possible by data-driven analytical tools.
For example, business leaders can reduce their SKUs if the expenditure is going overboard than planned, thanks to the information provided by big data and data analytics. Similarly, they can make other decisions that can help improve the financial status of the company.
Using big data and data analytics in accounting with the assistance of machine learning and artificial intelligence can help businesses take a proactive approach. AI-powered software can streamline big data processing by handling expense reporting, tracking and management.
Businesses will no longer have to manually intervene in financial processes to ensure compliance. All will be taken care of by automated tools based on artificial intelligence, machine learning, blockchain, big data, data analytics and other technologies.
Big data brings numerous benefits to the accounting sector. Largely, it will help them to meet the compliance requirements by automating various processes. This will save the organizations from any legal or non-compliance issues.
However, big data and data analytics in accounting can’t be used independently. They always need the support of other technologies like artificial intelligence and machine learning, among others. The combination of these technologies will help maximize the benefits of big data and data analytics. As we move towards a digital world, the amount of big data is only going to keep on increasing. Thus, businesses need to implement big data tools to move ahead, thrive and grow by leaps and bounds.