With robots and other machinery replacing many labor-intensive jobs, technological disruptions like Big data and Advanced analytics have started to challenge the management accountant’s job too. New management accountants in their early career, will have more sophisticated challenges that need to be addressed when they are trying to establish themselves in the current dynamic finance world. Improvements in information technology have given rise to an explosion of data. With the management accountant’s advanced role in the modern business world, it is better to consider a large amount of data when decision making. Big data analysis has provided more clear pictures and enable predictions made o vast amount of data. This will enable management accountants to make better strategic decisions. Through advanced analytics combined with big data will enable management accountant to help the decision making by more improved forecasting, profitability modelling, activity-based costing and supply chain management. The advancements in the technology and with the new tools that are available for the management accountant, he or she should be able to prepare themselves for the new challenges that they might face in the real world.
Technological innovation has always made the news. All aspects of the business are evolving to the next level with these innovations. First, the world experienced many blue-collar jobs being replaced with the inventions of robots and other machinery that were built to reduce labour usage. But recently with many new technological advances like big data, cloud, artificial intelligence, machine learning, advanced analytics, visualization, blockchain and etc. it is proven that the white-collar employments also not safe from the technological disruptions.
The finance function of business has been a major victim of technological disruptions. Already with Accounting software and sophisticated enterprise resource planning systems accounting tasks are being automated. With the software, accounting tasks are being completed efficiently and at a lower cost. With this rate of innovation, a report by Mckinsey and company in 2017 revealed that at least 50% of the work that accounting professionals are paid for is automatable through currently available technologies, with an additional 15% automatable through future technologies. (Sanghvi, Manyika, Lund, & Chui, 2017). The management accountant in an organization is supposed not just only to focus on transaction-processing but also to be a fully- fledged ‘business partner’ with a high decision support capability ( Herbert, 2011).
The purpose of this report is to evaluate the influence that emerging technologies like big data and advanced analytics pose on management accounting. Finally, the report intends to suggest how a management accountant can prepare themselves to face the wave of technology disruptions.
Changing role of Management accountants Managementaccountant
Management accountant’s role in a company is to provide information for managers for decision making. Managerial accountant’s task differs from a financial accountant as managerial accounting serves the needs of managers inside the organization while financial accountant serves the needs of stakeholders outside the organization. Also, it is not mandatory for management accountants to comply with the rules like, generally accepted accounting principles (GAAP) or International Financial reporting standards (IFRS) which are imposed by external parties. Management accountant is meant to provide information to the manager to accomplish three tasks, planning, Controlling and decision making (Garrison, Noreen, & Brewer, 2012).
Changing with the technology
With significant changes happening in the market including globalization new challenges are in front of management accountants. With most of the record-keeping task are being automated by the software, the management accountants now have to play even bigger roles in their workplaces through involving in decision making, without just being an information provider. With the advanced technologies management accountancy has been playing a vital role in organizations in providing updated information to the management for better decision-making. (Ahid & Augustine, 2012).
There is no established definition for big data. It might be due to the subjective nature of the meaning of the word “Big”. What is big today might not be big tomorrow.
As the name implies, Big data generally refers to the significantly large data that are gathered by organisations (Governments or private agencies). Due to the size of these data sets, it becomes difficult or impossible to analyse through traditional analyzing techniques. Big data word was coined because the world understood the value of this information that can be gathered through analyzing the large pools of data. The word “Big data” was first introduced by Doug Laney. The definition Doug Laney introduced consisted of three main components. First one is the volume which refers to the type and the depth of the data that is being gathered. Before digital age data gathering and storing was a major challenge. But with the invention of the computer, at present storing data is not an issue. With this, the number of datasets that are available has been significantly increased. At present, the organizations that use big data has no issue with data storing, but data processing has become their main challenge. The second component that Laney mention was Velocity. This refers to the rate that the information is gathered. At present, data gathering has become significantly fast. Real-time data collection has become a norm in consumer and marketing research. The last component of Big data that Laney mentioned was variety. Variety is the different types of data that is being collected. This can be a geographical difference, time difference etc. (Grable & Lyons, 2018).
One main reason for the recent increased attention towards big data Is due to the explosion of social media. Most of the population, especially age under 30 has proven that the usage of new social media has increased during the past few years. Social media that majority use includes Facebook, YouTube, Twitter and different blogs. It is studies that many uses one to more these networks to connect from home or office multiple times a day. Since this network is global, the amount of information gathered every day is immense. The big data analytics has a huge opportunity in social media to analyses and predict the trends before even they begin (Karolina, 2018).
From the early days’ researchers, analysts or any person who needed to analyze a data set used a number of analytical methods. The evolution of data analytical methods has reached a significant benchmark with advanced analytics. At present advanced analytics is being used in almost every field including agriculture, business, law, drug discovery, etc. (Benuzillo, Savitz, & Evans, 2019).
With big data, a revolution came to the need to interpret the gained a vast amount of data into meaningful information. Advanced analytics became the solution for this. It combined several data analytical techniques to provide a more comprehensive analysis. At present firms consider having advance analytics as a tool to make them competitive in the market. Advance data analysis exceeds the capabilities of traditional business intelligence which is based on indicators, quarries and dashboards to interpret the data. (Rose, Berndtsson, Mathiason, & Larsson, 2017).
Advanced data analytics has been defined as “‘Any solution that supports the identification of meaningful patterns and correlations among variables in complex, structured and unstructured, historical, and potential future data sets for the purposes of predicting future events and assessing the attractiveness of various courses of action.” Some of the techniques that are used in the advanced analysis are simulations, data mining, econometrics, forecasting, statistics and text analytics operations research optimization, descriptive modelling, predictive modelling (Kobielus, 2010).
In investing decisions, advanced data analytics is focused on removing the biasness of decision making, finding alternative data sources to develop alpha and making the research process richer and faster. In debiasing the decision making, the data analysis is mainly focused on removing the systematic biasness. This is possible due to the ability to combine several data sources to make an informed decision. Advanced analytics was also able to enrich and speed up the research process by making the analysis of the vast amount of data to in a very short period of time (Doshi, Sudeep, Kwek, & Lai, Joseph, 2019).
Implications on management accounting
The possibility to consider more data into decision making can improve the quality of analytics but it must remove the inaccuracies and the data with bias possibility. When a large amount of data is obtained it is necessary to find matching correlations. With the management accountant’s advanced role in the modern business world, it is better to consider a large amount of data when entering into decision making. This will enable management accountants to make better strategic decisions. Big data analysis will enable the management Accountant to understand the business in a broadened way and interpret the data accordingly and identify the areas which need more attention of management which can develop more growth opportunities and enhance the controlling power. Social media data can be used for sentiment analysis and combine with current business information and develop more suitable business strategies which will enable the management accountant to help to make the improved and informed decision making.
Big data analysis will also enable the management accountant to identify the most suitable information for strategic decision making. Big data will consider a large amount of data in the analysis process which will result in improvements in traditional management accountants’ role. With the proper analysis, opportunities can be applied with new technologies for management accounting. For instance, introducing and implementing new data channels, automatic data generation, unstructured data, cost & time optimization, real-time data, improved data for strategic planning, and decision-making, and support for the top management including the management accountants.
However the challenges regarding big data can be identified as involvement of a large amount of data could lead to many problems like, lead to overload of information, changes could cause in cost structure and faster decisions could turn out to be false and mainly the unavailability of resources: technology and human resources (Karolina, 2018).
There are many new areas that management accountants can find new opportunities through data analytics. The accountants will be able to find enhanced roles in the audit and fraud detection where the accountability of the accountants will be tested. Management accountant will be able to help the decision making by more improved forecasting, profitability modelling, activity- based costing and supply chain management. Another area that advance analytics will improve the management accountant’s role is enhanced data governance. Here the accountant will be able to provide more reliable and consistent reports. Finally, though these enhancements, advanced analytics will be able to make the decision making more relevant, understanding and economical to the organization (Gould, 2019).
In a study with asset managers, the importance of advanced analytics was revealed. Although some researchers see these developments will replace the humans who are doing it now. But in the case of asset managers, advanced analytics was able to add value by enabling the managers to make important decisions faster and consistently (Doshi, Sudeep, Kwek, & Lai, Joseph, 2019). This would be same for the management accountants. Unlike financial accountants, management accountant’s role is more firm-specific and involve more analysis that provides information for the managers to make the decisions. Therefore, advanced analytics will be able to add more value to the role of management accountants.
Preparing for the future
For new management accountants starting their career or in their early career, there will be more sophisticated challenges that need to be addressed when they are establishing in the current dynamic finance world. International Federation of Accountants (IFAC) introduced the main three competencies that should be there in a future-ready accountant. First one is the competency in statistics. This skill is essential for accountants to identify trends and insights that can be observed when analyzing the data. The second skill is the ability in advanced analytical techniques like data architecture, data manipulation and also other skills like machine learning and algorithms. The third and the most important skill that IFAC has identified is the accountant’s ability to critically analyzing and interpreting the business problems and providing insights and intelligent solutions (Gould, 2019).
When preparing for the digital revolution of the finance world, there is the argument that finance should own the business intelligence. At present, business analysis is mainly conducted by big data and advanced analytics. Therefore, it is essential for a management accountant to be proficient in using the different models and other analytical techniques that make him or her proficient in business intelligence. The main reason for the argument that finance should own business analytics is the accountant’s ability to provide more sense to his current job by adding more clarity and meaning to the numbers. An accountant is considered as reliable and confident information sources. Therefore, when accountants provide the interpretation of the advanced analytics the confidence kept on that information will be high. Finally, it is argued that the rising importance placed on business intelligence through data analysis provides a rare opportunity for a management accountant to shift his or her role as a business partner. Here the accountant will be able to use the trust and the confidence that he had earned to provide more informative analytical insight (Hagel, 2013).
Professional management accountancy institutes and other management accounting training centers also have a responsibility to prepare the new management accountants entering into the field to face the real-world challenges. Chartered Institute of management accountants added Big data into their curriculum in 2015 understanding this timely requirement (Dewu & Barghathi, 2019). It is important that the new management accountants see the new trend and the changes in the field as opportunities and not as threats. The advancements in the technology and with the new tools that are available for the accountant, he or she should be able to prepare themselves for the new challenges that they might face in the real world. Therefore it can be concluded that emerging technologies like big data and advanced analytics do not pose a treat to management accounting profession but these technological disruptions will shift the role of management accountant to a new advanced level.
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