Finance Software

How Data Analytics Is Changing the Way Accountants Work

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Accounting data analytics allows businesses to uncover valuable insights from their financial data.

Accounting is more than just balancing books or filing tax returns. Over the years, software has helped automate many manual accounting processes, allowing professionals to take up a more analytical role.

However, the shortage of skilled professionals remains a huge challenge for accounting to become a more analytical role. Companies need accountants skilled in business administration as well as data science. Gartner[1] says that a lack of data skills in finance can cost a business as much as 1% of its total revenue.

If you’re an accountant or auditor stuck with back-end spreadsheets and calculations, it’s time to look deeper into your numbers. To become a next-gen accounting professional, you must learn how to use data analytics to discover business insights and make recommendations—i.e., complement your financial skills with the knowledge of analytics.

Are you ready to upgrade your skills? In this article, we discuss how data analytics is changing the accounting profession and how you can adapt to this demanding industry skill.

What is data analytics in accounting?


Simply put, data analytics is the practice of taking a 360-degree view of a problem or situation. One does so by collecting, examining, and organizing all related data to extract meaningful information.

Accounting professionals deal with volumes of data every day—cash receipts, checks, bank statements, invoices, and more—to produce financial statements. Analytics tools help them dig into the financial statements and other nonfinancial data to make predictions and recommend corrective actions.

How accountants can use data analytics

Entry-level accounting jobs, such as collecting and logging records of business transactions, have already been partially or fully automated. Analytics is now helping accountants perform more complex tasks such as inspecting financial records for fraud and analyzing yearly financial statements. Here are some accounting functions that data analytics is transforming:

data analytics for accounting: How accountants can use data analytics
1

Improve the audit quality

Accounting analytics tools are enhancing auditors’ capability to inspect large volumes of data. Auditors are now able to analyze complete financial records instead of picking up small data samples. This is resulting in easier identification of outliers, lesser margins of errors, and more corrective recommendations.

2

Provide better investment advice

With strong predictive models analyzing the regulatory environment, market mood, and financial risks in a region, tax accountants can more accurately forecast market movements and make useful prescriptions, resulting in tax-saving and profitable investment recommendations.

3

Prepare more accurate budgets

By improving cost estimation, accounting data analytics is making budgets more accurate and relevant. Through real-time data analysis, it’s also making it possible for accounting professionals to revise budgets more frequently.

4

Deliver financial reports on time and on demand

By increasing the pace of processing data, analytics allows accountants to crunch data on demand to prepare financial statements, which summarize business transactions into profit and loss and other such reports. Generally, these statements are prepared once every three, six, or 12 months, but by then they lose their relevance for many stakeholders (business units, investors, etc.).

5

Anticipate and manage business risks

Data analytics is helping accountants better predict future risks such as bankruptcy, fraud, and misstatements in financial reports. Accounting firms can use predictive analytics to analyze risk areas, better gauge the possibility of specific risks, and take preemptive remediation steps.

Basic analytics vs. advanced analytics in accounting

Before the growth of data analytics, financial accounting was limited to the descriptive interpretation of financial statements, including summaries of everyday business transactions. Some practitioners, if at all, would go deeper to explore the “whys” of the data—say why the revenue was low this year. But it was a highly manual process, and the success depended on internal relationships and one’s ability to extract information from other departments.

Data analytics has made in-depth analysis the norm in accounting.

Self-service analytics tools make it easier to dig into data and trace patterns without complex programming knowledge.

In the analytics domain, there’s a clear shift in accountants’ responsibilities from administrative tasks to reasoning. They move from stacking and storing data to using it to filter relevant insights (descriptive and diagnostic analytics) and interpreting the results to attain larger business goals (predictive and prescriptive analytics).

Can accountants become data analysts?


Working with data analytics comes more easily to people with strong quantitative skills and business acumen. And accountants are prepped for both.

Accounting is the language of business, and accountants are its native speakers.

Their way with numbers and inherent knowledge of the basics of business and needs of internal (such as C-suite) as well as external (such as investors) stakeholders make them the perfect candidates to think holistically about data.

Also read: 9 Basic (and New) Accounting Skills You Need for Success

Use analytics tools to process your accounting data

By itself, data is of little use. To sift through and make sense of large data volumes, use data analysis software. Data analytics tools help organize large data sets, identify relationships between complex data points, and generate reports to enable trend analysis. They allow you to spot patterns and outliers, require low-to-no coding skills, and even offer user-friendly drag-and-drop interfaces.


Sources

  1. Fill finance’s skill gaps, Gartner

Looking for Accounting software? Check out Capterra's list of the best Accounting software solutions.

About the Author

Amita Jain

Amita Jain

Amita Jain is a writer at Capterra, covering the branding and accounting markets with a focus on emerging digital enablement tools and techniques. A public policy graduate from King’s College London, she has worked as a journalist for an education magazine. Her work has been featured by Gartner and Careers360, among other publications. Swimming, doodling, and reading fiction are her happy distractions outside of work.

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