In this summary, we will cover:
- What data analytics is all about?
- The uses of data analytics
- The effect of data analytics in reshaping the work of accountants
- Data analytics is the process of using specialized software to examine data sets in order to make conclusions about the information they contain.
- Data analytics can also be defined as the method of collecting qualitative and quantitative information or data, thereby allowing marketers, product managers, and accountants to draw a valid conclusion about their customers.
- Data analytics can be used in predicting a likely value of continuous variable e.g. amount of sales to be made in the next quarter or the market share of a product.
- It can also be used to summarize or provide an overview of an existing information or data e.g. distribution of amount spent when a product is been purchased or number of sales a company made quarterly.
- Data analysis is reshaping the work of an accountant by making it easier and summarizing a large data accurately and quickly.
Data analytics is a very good tool in our world today as it is gradually changing the work of an accountant. Data analytics initiatives has achieved this in the following ways;
- It helps accountants to respond quickly to incoming market trends and gain a competitive edge over a rival.
- It has also helped accountants to predict or foresee gain or loss of a continuous marketing trend thereby alerting the company to react swiftly to
- It can also be used in sieving through a large volume of data effectively and quickly thereby giving an opportunity to detect and distinguish a fraudulent transaction from a genuine transaction.
- It is used in the analysis of big data to identify new opportunities which might lead to a better business strategy, more accurate operations, greater profits and happier customers. When analyzing large data using data analytics, hidden patterns and correlations can be uncovered.
- An accountant uses data analytics to help businesses or companies to discover useful insights within their finances and make improvements that can increase efficiency and manage risk, thereby resulting in valuable decisions which eventually grow the business.
- Tax accountants also use data analytics to analyze complex taxation questions relating to investment scenarios which gives room for organizations to respond quickly to opportunities in order to beat their competitors.
- Accountants who act as investment advisors use data analytics to find behavioural patterns in consumers and the market. This pattern helps businesses to build analytic models that assist in uncovering investment opportunities and to also generate a higher profit margin.
Having discussed its effects, let’s take a brief insight into the types of data analytics we have. There are four major types of data analytics. They are;
- Descriptive analytics: This includes the classification of information e.g. report on the distribution of money in an organization which includes; revenue generated, and expenses incurred, sales tax collected, inventory counts etc.
- Diagnostic analytics: This is used to monitor changes in data or information due to the fact that previous information or data is often an excellent indicator of future performance. So, this information is critical to building a reasonable forecast.
- Predictive analytics; this is used by an accountant to assess the likelihood of future outcome, building forecasts and identify patterns that shape those forecast. This enables business leaders to grow increasing confident in following an accountant.
- Prescriptive analytics: critical business decision and vital actions arise from prescriptive analytics. Accountants use the forecast they create to recommend an opportunity for future growth or raise an alert on poor choices.
Accountants also face Challenges while using data analytics. Some of these challenges include;
- Data security and confidentiality: client’s confidentiality and data protection or security issues are normally encountered when dealing with some data analysis, the accountant is exposed or given access to sensitive or confidential pieces of information and the security measures that have been implemented to protect the integrity of the information as values are being placed on data privacy
- Data compatibility issues: If an accountant or an auditor performs a data analytics on data extracted from the client’s system using the auditor or accountant software, compatibility issues may arise between these two systems and the challenges will be to ensure that the data is extracted accurately and does not become corrupted during the extraction process.
- Equipping accountants with the right skills: technological advancement has led to the creation of sophisticated software and systems which have greater capabilities and an accountant needs some insights to understand how the system works to be able to work This has presented a challenge in the regular training of accountants to update their knowledge on the latest software and systems.
- Shortage of qualified personnel: There is a high shortage of qualified personnel in this area, however, this is not a regional issue as both European and North American companies reported these grievances.
In conclusion, as much as Data analytics is being used by accountants, there is still a greater need for them to embrace it. The skill of data analytics is very much needed in every aspect of their work as they would need analytical skills to enable them find areas where their efficiencies can be gained.
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