If I say that we have officially entered into the age of data, it would not be farfetched. According to the World Economic Forum, the total data produced in a day would reach to 44 zettabytes in 2020.
With the influx of such humongous amounts of data, businesses need to be on their toes all the time to find valuable pieces of information and insights from the vast ocean of data. However, they also need to weed out the unhelpful data.
Big Data comes into play in this regard. Aptly named, big data involves large volumes of data of different varieties being generated at high velocity
that is practically impossible to process by conventional data processing
systems.
To explain this with an analogy – You might have experienced your old computer hang when you open a heavy video file. This is because the processor is not able to process the huge amount of data of the video file.
Although when we are talking about big data, the data amounts to unperceivable proportions. For instance, Facebook alone generates four petabytes of data every day.
In the accounting industry as well, the professionals have started realizing the implications of big data. If you are a part of the accounting domain, big data can help in opening new and untouched avenues of data insights and analysis. The integration of big data with advanced technologies like Blockchain, Artificial Intelligence (AI) and Automation, and Machine learning helps you create a robust and automated accounting process.
Here are some of the ways in which big data will have a significant impact in the coming years.
1. Audit
Auditing is an essential part of the accounting industry as it helps in analyzing a company’s finances and assets. However, in the modern age, the conventional methods of audit do not output the same results as businesses expect valuable insights.
Big data combined with data analytics is transforming the auditing process. The audit process is slowly moving from sample-based testing to the data-driven population-level audit that includes all the key areas of a business.
Big data offers auditors with structured data in real-time. Hence, they can explore more areas and identify outliers more effectively.
2. Business Decisions
With the introduction of automation in the accounting industry, the accountants have made a move from the repetitive accounting tasks to the business advisory roles. They are responsible for creating financial plans for their clients and offering valuable insights.
Big data comes in handy when taking on the role of a trusted advisor for businesses. The accountants can utilize big data to help businesses take informed decisions about their finances based on relevant data sets. Moreover, they can also create/formulate long-term financial strategies.
3. Performance
The performance of a business depends on various parameters like employees, core processes, and budget management. With the help of big data with advanced analytics, you can track the performance of the business by defining new KPIs. Also, the large sets of data help you recognize market trends and stay ahead of your competitors.
Big data, when used with advanced analytics, enables you to identify and analyze customer patterns, which can be used to improve the customer experience.
4. Risk Management
The success of an accounting firm depends on identifying financial risks and rectifying them. With the help of big data and predictive analysis, the CPAs can predict future risks and advise the clients to take the necessary steps.
By processing big data, CPAs can also identify potential frauds. This can be done without any human intervention and effort by using algorithms on large data sets.
5. Insights
Data visualization is the process in which the data is converted into a more perceivable form. Big data, when used with data visualization, offers improved visibility to accounting professionals into the accounting data.
It leads to better business insights as the big data sets can be segmented and transformed into meaningful information.
6.Wrapping Up
The latest technologies like big data, artificial intelligence, machine learning, automation, and blockchain will all be key contributors in the new-age accounting. Big data can be used with these technologies to predict future risk, identify market patterns, and enhance the risk management process.