Last updated on April 2nd, 2024 at 06:26 am
Data analytics and management accounting go hand in hand with one another. Accounting not only helps in storing the financial accounting details of a company, but it also serves as a great source of data that can be used for deriving meaningful insights.
With accounting software, it has become possible to go through and analyse accounting data and interpret valuable information. This information is used for making informed business decisions. With accounting data analytics businesses have become more competitive, efficient and profitable.
What do you mean by data analytics in accounting?
There is no specific definition of data analytics. Data analytics is inclusive of sourcing relevant data and performing the analysis of the data. The insights gained from the research are used for informed decision-making by a business.
Cost management professionals and management accountants use data analytics to discern various patterns in customer spending, predict regulatory reactions, identify market behaviour and anticipate market trends.
Many accountants have a specialisation in data analytics. They develop skills in managing, analysing and mining various streams of data. This helps them in gathering the minutest of details which are used for identifying patterns, answering questions and making fact-based predictions.
What are the different types of data analysis for management accounting professionals?
With the help of analytics, a proficient accountant can make a business use a continuous data-monitoring model instead of static representative samples for decision-making. This not only helps in providing a holistic view and also empowers the business management to take timely and more accurate decisions.
Let us take a look at the different types of data analysis used in accounting:
Descriptive Analytics
In this kind of analytics, the accountant has to answer the basic question ‘what is happening’. For this, the accountant has to consider all important and available data points and create perfect and accurate reports. The reports must reflect the business reality. Descriptive analytics is mainly used by accountants for creating financial reports and statements.
Diagnostic Analytics
The question that the accountant answers in this analytics is ‘Why’. Accountants depend on historical data and current information for providing insights and reasons for the known results. This analytics is mainly used for creating dashboards of completed business periods.
Predictive Analytics
In predictive analytics, accountants try to understand ‘what’s next’. Accountants are often endowed with the responsibility of creating business forecasts. With access to Big Data and analytics, accountants can now predict the various patterns which drive the forecasts.
Prescriptive Analytics
Accountants cannot just predict where businesses will go in the future but can take the businesses there in real time. With the use of data analytics, accountants can generate fact-driven reports, which can be transformed into actionable steps. This analytics is used while building data-supported business plans.
Accountants can choose to specialise in one kind of analytics, but in the long run, they will need to learn all the types for working across various categories.
How do accountants use data analytics for helping a company?
There are many ways in which an accountant uses data analytics for helping a business organisation. Some of them are as follows:
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Understanding consumer behaviours
Reviewing and tracking internal behaviours and consumer patterns and employee productivity waves help accountants in driving growth plans and business decisions.
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Evaluating performances
You can evaluate the performance of every business area by using predetermined metrics. An accountant looks at quarterly goal performance, revenue data and production numbers and evaluates performances accordingly.
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Structuring business improvements
Data analytics can find out areas in the business which are not performing up to the mark or as per expectations. For creating an effective strategy, the accountant will review historical sales performance numbers, sales forecasts and operating costs.
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Mitigating risks
With the help of data analytics, an accountant can manage and uncover various areas of potential or current risk in real-time. Some of the areas where the accountant focuses include investment opportunities, funding needs and process flows.
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Building business plans
For making suitable plans for the future, a company needs to understand past and present business patterns in detail. An accountant takes a look at various factors like employee retention patterns, historical sales numbers, equipment life cycles and organisational spending.
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Maximising profits
Data analytics provide clear insights from datasets and businesses can use these insights for making crucial decisions, which build up their bottom line. Accountants look at various data points including current market trends, past purchasing behaviours and patterns, customer orders and inventory management. All these help in maximising profit margins for the business.
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Finding new opportunities
For developing a competitive advantage and finding opportunities to grow, businesses have to take a look at current trends and analyse past performance at the same time. Some of the important factors that are to be taken into consideration include current customer breakdowns, operational capabilities and market patterns.
Various tools in use for data analytics in accounting
To become a successful accountant with data analytics, you must have critical thinking abilities and technical skills. You must be well-adept in various industry-specific data analytics tools to help businesses make informed decisions.
Some of the accounting tools, which you must know include Power BI, Microsoft Excel, IDEA, Tableau and AI and analytics. Having a sound knowledge of programming languages like ‘R’ and ‘Python’ proves to be effective for an accountant. Apart from these, presentation and communication skills are also needed for a perfect career.
Wrapping it up
With the continuous generation of new data points, data analytics in accounting has become an important field to explore. Accountants can expand their skills in this evolving field. If you are into cost management or management accounting, using data analytics can give your career a great boost.
Imarticus Learning offers a CMA Certified Management Accountant course to interested candidates. With the CMA USA certification, you can become a leader in the world of finance and accounting.
You can take up the CMA course after graduation or even while pursuing a job. With the USA CMA course, you can master the required skills as a CMA. With expert mentoring, you are sure to get guaranteed interviews in top companies in the world.
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