Jul 12 Big Data and Its Role in Accounting
Small and medium-sized organizations often find it difficult to find the “sweet spot” between employing enough internal controls to protect their business and having so many that it overburdens their accounting department.
Big data offers one of the greatest opportunities in accounting — especially if you can adapt and learn how to use the insights it offers. But how exactly can big data assist an accounting department with internal controls?
It is all about potential.
Why Does Big Data Matter?
Big data cannot be fully comprehended by the human mind alone. Its intrinsic value is not just in how many points of data it comprises. Rather, big data’s power lies in the patterns it uncovers that are not always readily apparent when working with small sets of data. Accounting itself is a husbandry of data collection and data analysis, so marrying big data and accounting is not only inevitable but welcomed.
As a business collects and identifies its big data, the organization must consider:
- Is the data valid?
- How fast are new points of data created?
- How many different data types are obtained, and from what sources?
- How much data actually exists?
Big data that a business can actually use in making decisions will be large in quantity, have excellent diversity, offer new data points rapidly, and ultimately be unequivocally authentic. Across industries, this kind of big data is growing more common. As accountants’ understanding of it grows, it offers even greater access to wider and clearer data sets.
How Do Accountants Use Big Data?
Essentially, the use-cases for big data are unlimited. Many industries use big data. One of the best use-cases for accounting is in audits.
Audit sampling helps accountants find mistakes or patterns within transactions and invoices. Analyzing big data can help identify even smaller issues within larger patterns. Then, the accounting department can further analyze those issues. This is especially useful for detecting where internal controls might be lacking.
Accounting firms can compare similar clients, using big data to illustrate how other businesses handle the types of trends and patterns uncovered with big data analysis. For instance, a similar organization’s internal controls might be better than the client’s, which may rely on outdated methodology.
Analyzing big data allows accountants to see an industry’s bigger picture, illuminating such things as behavioral shifts. A savvy analysis can even uncover potential fraud or upcoming economic shifts. Clients find this information instrumental in future decisions.
Data analytics helps to improve internal controls by allowing management to look at financial information in a different way than traditional financial reporting (ex. key ratios, business trends, better customer activity, as well as unusual adjustments), which will help to identify issues and concerns which may not have been seen before.
Big data improves clients’ experiences, which allows accounting firms to offer advanced, accurate services. Big data offers reporting agility and vital accuracy in comparison to yesterday’s data analysis.
To learn more about how big data can improve your internal controls, contact us.