How Management Accounting Can Benefit from Using Business Analytics

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How Management Accounting Can Benefit from Using Business Analytics

By: Greg Parrish

Management accounting has been around almost since the dawn of business itself.  Many successful endeavors have become so with the help of advice from companies specializing in this field.  It is not until recently, however, that the popularity of analytics has come to the forefront.  By popularity, I don’t mean that it is the latest rage on the big screen or the topic of Twitter conversation.  But in its own realm, identifying trends and helping to plan for the future, analytics is a very big deal.

To fully understand how analytics can help within the management accounting architecture, we first must appreciate what management accounting is and what it entails.  By definition, it is the process and procedures that create documents and reports to aid management in the decision-making processes of running the company.  While that seems like a lot of words to explain something that seems rather simple, management accounting is often far from a set of simple processes.  To further complicate the situation, many companies today are seeking to gain a better understanding of the people with whom they are dealing; their customers, clients, audience or whatever term might fit for their specific venue. That, in and of itself, is a challenge among challenges since most believe people are individually unique; or are they?

Analytics would propose that people are much more similar than we were once made to believe.  Of course, everyone has their own unique qualities but when it comes to identifying purchasing habits or types of food we like, computational analysis works great in telling us what we need to know to make well informed decisions.  One very big reasons analytics is important is because Big Data has the potential to cause a paradigm shift allowing economic activities to be traced and measured earlier and deeper.  This theory has proven effective in many other areas where analytics have been employed to identify potential new customers or to improve the capabilities provided to an existing audience.  Based on those results, why would we not think that management accounting could also profit from the same type of data examination?

The truth is, organizations would be wise to take advantage of the data available at their fingertips.  By transforming from their current manually acquired and updated spreadsheet data to a more automated process providing almost every metric imaginable from which they can obtain more valuable information, companies can not only make the data more interesting but have more information about their operation that will lead them in the right direction.  The process, overall, is not terribly difficult.  It begins with an organization defining their goals; upon whom do they want to focus their attention, what do they wish to accomplish, when do they expect to meet their goals and how do they know what their success will look like as well as how they plan to achieve it.

Once their goal or goals is/are defined, they can then identify the information within their operation that will best identify with each of their expectations and use the data available to turn data analytics into actionable business intelligence.  After all, the objective of any endeavor should be to improve the bottom line in conjunction with providing better service to the customer, both of which go hand in hand.  If one cannot identify the needs of those for whom they are providing a product, they will never be successful.

Business Analytics have become an important aspect of a company’s ability to better manage their operation.  Management Accounting needs to embrace the advantages provided as well.  By doing so, they can and will be able to better plan and project future needs which will, in turn, provide them with a better, more efficient business model for growth and opportunity.


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