Big Data has made headlines in recent months for its potential to transform hiring and talent management, but it also has applications in the accounting industry. By using widely available data, accounting firms have the potential to transform a variety of common practices, from audits to risk management.
One of the most important applications of Big Data in accounting lies in risk forecasting. With the massive amounts of data available, both from the company and external sources, accounting departments will be better able to identify potential risks. The additional data can help accountants create a bigger and more comprehensive picture. Accountants can also use predictive analytics to find the lowest-risk options for investments, new market ventures and new product lines.
Businesses often turn to their accountants for advice about potential business strategies and initiatives. With Big Data, corporate financial departments will be able to analyze the situation and predict outcomes. The wealth of available data, from both internal and external sources, will make it easier to create a business case that reflects reality. Instead of serving mainly as company watchdogs, accountants can use data to play a larger role in strategic planning and business development.
When it comes to audits, many accounting firms have moved to electronic work papers. Now that more data is digitized, firms can use it—with client permission—to create more accurate audits. Perhaps more importantly, accountants can use the audit data to help clients understand how they compare to their competitors, both in and out of the area.
As more businesses move toward data-driven systems, accountants will be called on to assign value to clients' data assets. Accounting firms that are quick to jump on the Big Data bandwagon have the opportunity to create their own metrics for data valuation. As a result, they will set themselves apart from the competition and capture an outsized market share. For ambitious firms, data presents an excellent opportunity for expansion and growth.
For professionals in the accounting industry, there is some level of concern about using internal data. In order for data to be an effective tool, it will be crucial to compile sensitive financial information from clients, which will require consent and careful privacy standards. Accountants will also need to learn a new set of skills to understand and implement data analytics effectively. Fear and hesitation may also play a role; historically, the accounting profession has been slow to take risks and adopt new practices. What's more, because most accountants are accustomed to dealing with structured data, the unstructured nature of Big Data may prove problematic.
In many cases, the opportunities that go along with data-driven systems outweigh the pitfalls. For companies that can overcome the potential challenges, Big Data holds a world of possibilities.
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