The term ‘big data’ has been around for several years, but while many professions have already begun to see the benefits of it, the accounting profession is only just getting started. So how can the profession exploit big data, and what will it mean for accountants in the long run?
Big data isn’t just about huge volumes of information – it is about analysing that data and then acting on the insight found. Traditionally, accountants have used spreadsheets for much of their work, but Susan Parcells, senior director of finance transformation at BlackLine believes a considerable amount of this work will be moved to other types of technology.
“It is no secret that there are some challenges and concerns around the integrity of those spreadsheets … There will still be instances where spreadsheets will be the best option but it will be on a much smaller scale than currently seen,” she said.
This is because new tools are out there which can help accountants, as Bob Dohrer, RSM’s global leader for quality and risk, explains.
“Initially, some of the largest firms and networks created proprietary data integration systems but now there are off-the-shelf products… we use CaseWare’s IDEA analysis software and extraction tool, as well as ACL Analytics and a visualisation tool from Tableau, which helps to analyse large amounts of data,” says Dohrer.
Dohrer explains that many of the commercial products are expensive for smaller companies, but he insists that tools should not be a limiting factor for all sizes of firms and that all companies can benefit from big data.
So what are the benefits?
These new tools are useless without the large volumes of data that pass through them. For years, auditors have used financial data, but because of the ability to crunch through more data and analyse it using technology they can now also use non-financial data to get a clearer picture.
Dohrer explains that it isn’t just about the type of new data that can be taken into account, but that there needs to be a mindset change for the auditor.
“You have to ask if this is what the client is telling me then what type of information would lead me to cause the transactions to be processed this way,” he suggested.
For example in the retail industry where turnover, sales and revenue could be cyclical depending on the climate, Dohrer says he is starting to see people bringing in non-financial data produced on peer groups in more specific regions, even down to areas within cities, and that information can be cross-referenced with the financial data to determine if the climate, or indeed other external factors are contributing to the difference in sales.
“That information can be used in regression models to predict levels of sales and turnover down to a specific store level, or up to a company level,” says Dohrer.
In turn, big data allows accountants, typically seen as having a historical perspective on the business, to help other business leaders to make better decisions through the real-time insight they have.
“Accountants are therefore becoming more of a strategic business partner and advisor thanks to the accessibility to big data,” says Parcells.
Opportunity to regain lost ground
Dohrer suggests that this will help extinguish fears that have been around over the past five or 10 years that auditors and accountants aren’t as relevant in the financial reporting supply chain.
“It’s an opportunity for us to regain some lost ground perhaps… the use of big data is an opportunity to better serve our clients, provide some insight, and to perform more effective audits more efficiently,” he says.
From an auditing perspective, Dohrer says one of the key aspects of big data for RSM is being able to download every transaction in the financial accounting year and trace those through internal control.
“This gives us such an enhanced insight from a risk assessment perspective and allows us to focus our efforts on higher risks and therefore perform a more effective audit service,” he says.
Prior to the use of big data tools the company wasn’t able to focus on the high-risk areas because it couldn’t capture all of the financial transactions in one go.
RSM is also able to reply to stakeholders and regulators with specific answers to questions because of their analytical capabilities, and if a client’s management questions why certain things were completed the way they were, the firm can have the information at its fingertips and corroborate and respond to those queries.
Responding to queries swiftly is one of the reasons EY has invested heavily into its Helix big data analytics platform.
“We needed to have a platform that could interrogate the data, audit the data and deliver it because the days where people put a query in and they get a response back five days down the road is not good enough,” says Hermann Sidhu, EY’s global digital leader.
There are clearly many benefits to big data for the accounting profession – but Sidhu stresses that firms should beware of the hype surrounding it.
“When I talk to CEOs, CFOs and CIOs, every one of them is in different stages in terms of implementation of data analytics platforms and tools, but the business outcomes of the ROI piece is frankly not as much is an issue to them… it is important, but they really want to focus on how to declutter from the hype and noise and narrow down the use cases that are most effective and relevant to their businesses,” he said.
Is your business or firm using big data tools to drive growth or efficiency? What are you using, and how effective has it been?