How Accounting Teams Can Leverage Big Data
For accounting firms, big data represents an opportunity for expansion and new service delivery.
- By Ludovic Rembert
- March 3, 2020
Big data is one of the biggest buzzwords of the last few years, but it has tangible effects and benefits that reach across industries. More data is created every year than the year before, collected from applications and devices that many people use all day. This absurdly large data set is rapidly becoming more accessible and thus usable by those willing to examine it.
For accounting firms, big data represents an opportunity for expansion and great service provision. Those who have the adaptability and insight to work with big data's possibilities and predictive capabilities may soon find they become more valuable than their peers.
Why Big Data Matters
Big data's true value doesn't just lie within the number of data points it contains. After all, big data is typically measured in tera- or zettabytes, which is far beyond the scope of any human organization to really parse.
Instead, the power of big data lies in its ability to reveal trends and patterns in human behavior that are difficult to see with smaller data sets. Accounting already deals with the collection and analysis of data sets, so the marriage of the two -- industry and resource -- seems inevitable.
Big data is usually collected and identified as such by considering these four Vs:
- Veracity, or trustworthiness, of the data
- Velocity, the rate at which new data points are created
- Variety, the multiple sources from which multiple types of data are acquired
- Volume, the actual quantity of data
Actionable big data will have incredibly high volume, excellent variety, high velocity, and high veracity. The good news is that big data of this kind is becoming more common across industries, allowing accountants access to broader data sets.
How the Accounting Industry is Using Big Data
The potential applications for big data are essentially unlimited, and it's already being used across multiple industries. One great example within daily accounting operations is in auditing.
At the moment, accounting firms typically use "audit sampling" to detect issues or trends in transactions or invoices. However, big data analytics can excel at identifying exceptions and outliers within a larger trend. Accounting firms can then focus their efforts on those exceptions for further analysis.
Big data can also be helpful for comparing a client against direct competitors. For instance, big data sets can allow accounting firms to aggregate performance metrics across an entire industry and present them to a client, pointing out specific reasons the competition may be outperforming the client rather than relying on outdated methods such as ratios or guesswork.
This is incredibly valuable for accounting firms that need to sell their services; providing accurate and actionable information to clients is a great way to boost firm value. The accuracy will only increase as data quality increases.
Even better, big data can allow accounting professionals to look at the big picture of a particular industry and see shifts in consumer behavior or trends. When combined with savvy analysis, accountants will be able to easily spot possible signs of fraud or even anticipate the way the greater economic wind is blowing. Such strategic insights are invaluable for any client working with an accounting firm.
Overall, big data improves the client experience and allows firms to provide ever greater and more accurate services. The data they use for their reports will be more agile and accurate compared to data sets forecasted in the past.
Expanding the Accounting Firm's Role
Perhaps the broadest effect big data can have on accounting teams is the expanding their services and role for their clients. Previously, many accounting firms relied primarily on collecting, analyzing, and reporting financial data sets. Accounting firms have always performed analysis based on their expertise, of course.
However, with big data, firms will be able to use their statistical expertise to provide something decision makers may not have relied on them for: advice. Because big data analytics can provide greater insight into a general industry, accounting firms will be able to advertise that they can give a client's company or organization options moving forward.
This blurs the line between accounting and strategy in a new way. Due largely to a trend of more accounting teams utilizing online storage options, smaller firms will also be able to take advantage of big data as it becomes more accessible. Although it's true that big data requires extensive architecture and the resources to acquire the data, the proliferation of big data across industries means that access to the necessary technology has expanded over time.
To use this technology, accounting firms will need to train personnel in the skills needed to analyze and vet big data. The good news for many firms is that the skills needed to provide excellent accounting services somewhat overlap with those needed for leveraging big data.
Many firms may find they already have several talented individuals who can perform these duties capably. Alternatively, firms can train their employees to use big data by having them attend seminars or take classes.
All firms that attempt to utilize big data must recognize that access alone is not enough. Big data is useless if it isn't properly understood and leveraged. To take advantage of new data volumes, firms will need to be flexible and have an agile culture. Sticking to past strategies and services will not do the job.
Overall, the accounting industry is rapidly shifting with the economy as a whole toward a data-driven market predicated on analytical skills and accuracy. Time will tell who manages to adapt the best.
It may be that in the future all accounting firms take advantage of the benefits and insights that big data provides. This may render firms that don't jump on the opportunity obsolete and struggling for clients.