Three ways data analytics will change the future of accounting
Data analytics is having a profound impact on the accounting profession, and now is the time for accountants to embrace technological change
New developments are accelerating the digital transformation of many organisations and the industries in which they operate. This is having a profound impact on virtually every industry including accounting, which provides both challenges and opportunities for practicing professionals.
A recent International Federation of Accountants discussion paper, for example, suggested accountants will need to enhance their capabilities in various areas, including statistics and modeling, and blend this with their in-depth understanding of an organisation to identify the relevant opportunities and risks. The paper, The Professional Accountant’s Role in Data, explained how the expertise of accountants can be applied in four different areas – as data engineers, data controllers, data scientists and as strategic advisors, to effectively capture and deliver optimal value through the data management chain.
Professor Paul Andon, Head of the School of Accounting, Auditing and Taxation at UNSW Business School, recently discussed these issues and the future of the accounting profession with Jessen Hobson, Professor of Accountancy and Director of the Deloitte Foundation Center for Business Analytics and Co-Coordinator of the Gies Business Research Lab, Fahim Khondaker, Partner, Data Analytics & Insights at BDO Australia and Professor of Practice in the School of Accounting, Auditing and Taxation at UNSW Business School.
Data analytics maturity
Professor Andon observed there are different levels of data analytics maturity within the accounting profession and he quizzed Professors Khondaker and Hobson about their perspectives on this as well as the skills and capability gaps that need to be bridged.
While the accounting profession has always had access to data to make informed decisions, Professor Hobson said that what is new are the available tools and the amount and complexity of data. “These tools can not only analyse the data with machine learning, and AI can start giving suggestions on what we should do with the data. It can start affecting behaviour, it can start almost making decisions for us. And I think that's really new,” he said.
There is a broad range of knowledge and ability within the profession to do this, according to Professor Hobson. While this process is getting easier thanks to the variety of platforms available, he said there is still a “wide gap” between the larger technology companies of the world down to small businesses operating with limited support and resources. However, he said the good news is that there are many user-friendly data analysis and visualisation tools that can assist in bridging this gap.
Professor Khondaker also said that when it comes to data analytics, capability “varies significantly” in industry. “We are seeing a huge amount of change in the last three years,” he said. While interest is growing rapidly for organisations wanting to do something, they often do not understand or appreciate the effort involved in realising their goals, he explained: “it's a journey. We have a saying in our team that no matter what you do, it's infinitely better than guessing.”
For the most part, he observed managers and executives know what they're doing when it comes to data analytics – however, there is room for improvement. “Eighty per cent of the time, business executives already know what they're doing. It's that additional 20 per cent, where information may be lacking, or they need some support to make a decision. And for some organisations, having that 20 per cent of information is worth a lot of money so it's worth the investment in time and effort to do the analysis” he said.
The automation of accounting
Technologies such as machine learning and artificial intelligence are playing an increasing transformation role in many professions, particularly when it comes to the four Ds (dull, dangerous, dirty and dear work). Professor Andon observed that there is a certain level of fear of analytics and automation in the accounting profession, in that AI is and will increasingly take on specific kinds of work previously undertaken by humans.
“There's a lot of talk about how automation may potentially have a significant impact on the scale and size of the profession, and how many accountants we actually need into the future,” observed Professor Andon, who asked whether these kinds of projections are accurate and how they will likely play out for the profession.
Rather than being afraid of automation, Professor Hobson said this is something that should be embraced. “It provides a lot of potential for us to grow our profession, and to help those who would potentially not come into the profession realise that when they come, what we want from them is their knowledge about the domain that they're working in. We want their ability to recognise what's going on and how this can affect the business and be able to communicate that to others,” said Professor Hobson, who explained that the ability to relate to others and deal with them on an emotional level is something that computers can't reproduce.
Another important factor is the ability understand what causes data to affect the business, which comes back to causality and the relationships in variables of data, he added. “Again, that is something that's somewhat uniquely human. We've done this in the accounting profession, so this is not new,” he said. This is where technology can add value to the profession in automating work that is reproducible and otherwise boring for many accountants, who instead get to focus on more work that is related to causal relationships in data and how this can add value to their business.
Professor Khondaker expounded upon this point and said it is important to address and understand where potential fear and anxiety around automation are coming from. “It's probably because of the unknown,” said Professor Khondaker, who gave the example of a client who used to take 18 days to produce a complex monthly report for external stakeholders. Through the process of analytics and automation, this timeframe has been reduced to four hours – which has now freed up 17.5 days of work time for three people, who now spend three days analysing the resulting data and adding more insightful and valuable commentary to the report.
As automation increases, he predicted process-orientated work (such as the creation of financial statements and balancing of numbers) will reduce, and this will provide accountants with the opportunity to focus on developing and contributing to the business through skills associated with analysis and influencing. “Analytics paired with accounting skills is going to empower an accountant to have a more influential say at the table. And there will be other people at the table. There will be your chief of operations, your chief of HR, your CEO, and you will have an opportunity to influence a discussion with those people around the table in a more meaningful way,” he said.
Skilling up the accounting profession
In light of this skills paradigm shift for accountants, Professor Andon asked Professors Khondaker and Hobson about any advice they could offer those already working in the profession as well as current and future students and potential career options.
“First and foremost, it's critical to understand the tools that we're using to analyse data and how the data relates to the particular domain they're interested in,” said Professor Hobson. “I think that they need to experiment themselves, personally. If I need a skill, it's about practicing or using a particular tool for something I'm inherently interested in.”
Being willing to experiment is important and Professor Hobson explained that he often tells his accounting students to “start pushing some buttons and see what happens” – but there is a gap between those who are willing to do this and others who want to first know what the buttons do. “That actually says a lot about people who are going to be successful in this area. We're great consumers of technology, but sometimes we're a little afraid to see what drives that technology. I think we shouldn't be; we should go in and push more buttons,” he said.
Professor Khondaker agreed and asserted that accounting professionals “need to realise that we'll be learning forever,” he said. “I think that's the reality. There's no stopping point – everything you learned today, we will have to learn again in a month or refresh in a month. So that mindset will have to change anyway. That's a given.”
Data analytics is a great tool in the right context, he added: “accounting gives you the skills to identify that context in the world of business. Now, if you want to go into the world of health sciences or medical research, there's a role for analytics in that world as well,” he said.
“But in the world of business, I can't think of any other profession that's better than accounting from an application of analytics perspective. It's probably your most competitive advantage as a professional going into the sector if you can combine those two at the moment.”
Jessen Hobson (1974–2023): His leadership and dedication to the academy, particularly in analytics education, will forever inspire us. Through this article and these videos, we recognise his academic legacy with great fondness and respect.