It is well known that bookkeeping is a data-intensive flow. 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 lot of other things. Such huge amounts of data can become overwhelming after a point.
Accounting professionals have to go through an arduous process to collect and analyze such massive amounts of data. In addition, the data is spread over various sources. Accounting professionals must ensure that no mistakes are made in the data collection and analysis process. They must ensure that every bit of data is collected for accurate analysis. Otherwise, any shortcomings could lead to significant losses to the organization, including compliance issues. This can lead to legal problems for the organization.
This is where big data and data analytics come into the picture. Big data is already having a huge impact in the financial sector. The accounting department is no exception. Using data analytics in accounting can help streamline and simplify several processes involved. It will also help automate compliance management that can save organizations from legal troubles.
Here’s a look at the role of data analytics in accounting.
Auditing is the core of accounting processes. It helps to analyze how the organization is performing financially. However, manual checking is a time consuming and tedious process. In addition, there is a high risk of human errors that can lead to serious consequences.
Using big data in accounting for auditing purposes can completely transform the task by providing in-depth information about various financial data. This helps business leaders monitor their financial activities, such as income and expenses. Not only does it help with accurate periodic audits, but it also empowers business leaders to make more informed decisions.
In addition, big data and data analytics can be combined with technologies such as robotic process automation, artificial intelligence and machine learning to automate the audit process with accurate input and output. This ensures that there are no financial irregularities and compliance issues.
Companies always run financial risks that can cause a lot of damage. Identifying the risk is a difficult process. Most risks go undetected and only come to light after serious consequences for the organization.
Big data and data analytics in accounting can help identify financial risks from the outset. It helps analyze and detect trends related to emerging risks and risk management. For example, big data can help identify expenses that go overboard in certain business processes from the start. Business leaders can thus take the necessary steps to minimize and mitigate the risks.
Again, data analytics tools need the help of machine learning and artificial intelligence technologies to automate the process of risk assessment and management.
Many companies face fraud from both external and internal threats. This leads to huge financial losses, sometimes running into the millions. Fraud detection can become nearly impossible for human employees as the amount of financial data continues to grow.
Using big data analytics in accounting can help identify potential fraud easily. Businesses can use expense management software to centralize all their financial data. The data can be recorded from day one. This gives companies a better insight into everything that has to do with their finances. This allows them to quickly and easily identify fraud before it escalates into something bigger and causes huge material and intangible losses.
This also ensures compliance management as every cent is accounted for. Again, businesses need AI-powered data analytics tools to easily identify fraud.
Undoubtedly, the use of big data and data analytics in accounting allows companies to take full control of their operations. This enables business leaders to make more informed decisions, both in the short and long term. The decision is supported by statistical expertise, qualitative accuracy and strategic experience, enabled by data-driven analytical tools.
For example, business leaders can lower their SKUs if spending goes too far than planned, thanks to the information provided by big data and data analytics. Likewise, they can make other decisions that can help improve the financial status of the company.
Using big data and data analytics in accounting using machine learning and artificial intelligence can help companies be proactive. AI-powered software can streamline big data processing by handling expense reporting, tracking, and management.
Businesses no longer have to manually intervene in financial processes to ensure compliance. Everything will be controlled by automated tools based on artificial intelligence, machine learning, blockchain, big data, data analytics and other technologies.
Big data brings many benefits to the accounting industry. It will largely help them meet compliance requirements by automating various processes. This will save the organizations from legal or non-compliance issues.
However, big data and data analytics in accounting cannot be used in isolation. They always need the support of other technologies such as artificial intelligence and machine learning. 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 will only increase. So companies need to implement big data tools to move forward, thrive and grow by leaps and bounds.