Big data has been around for decades now but is becoming more popular as businesses and organizations find out newer and better ways of using big data analytics to improve their business functions. The huge amount of unstructured, semi-structured, and structured information that flows into the network of big data every day needs to be analyzed to give businesses a more comprehensive understanding of their functions. New tools and technologies are continuously being developed with the hope to capture more relevant data to help corporate management teams make better plans, deal with situations faster, and take more informed decisions.
Data analytics in finance and accounting
Like other corporate functions, data analytics help finance and accounting teams understand there business processes better through the following four types of analytics:
Descriptive Analytics: Through these analytics finance and accounting teams can analyse historical and current data within the organization. Thousands of activities, decisions, problems, and interactions are handled during the daily functioning of any business. Bringing out the logic in the flow of all this data that is created through these activities is done through descriptive analytics.
Diagnostic Analytics: This kind of analysis comes in use mostly during financial audits to understand why something happened and to spot the cause of discrepancies in certain financial figures. Looking at data sets spread over a period of time, while looking for patterns and irregularities, accountants can spot errors and take corrective measures immediately.
Predictive Analytics: One of the most important functions of the financial and accounting teams is to come up with forecasts for the years to come. Also when investing into a new project or even a piece of machinery, project appraisal is done to give an estimate of the how profitable the project or the asset is going to be. Looking into a large pool of historical data or patterns in the big data available through the analytics, finance executives can chalk out more precise predictions and appraisals.
Prescriptive Analytics: Through prescriptive analytics finance and accounting teams can respond quickly to changes by proactively shaping outcomes beneficial to the organization. This kind of analytics use optimization to answer what-if scenarios, thus quantifying trade-offs. Predictive and prescriptive analysis used together can help small businesses get maximum benefits at the enterprise level.
Big data is not only about possessing a large amount of data, it is the power you can yield by analyzing these large data sets to boost your business further.
Iain Enticott, Director, Technology for Accountants.
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