Question

Discuss how big data and data analytics are changing the role of Management Accountants.

Answer 1

Impact on the role of the management accountant

Traditionally, business managers relied on management accounts to enable them to monitor the performance of their business and plan for the future. Much of the information provided by management accountants was financial in nature, and focused on improving efficiency so that costs could be reduced. For an online business, the focus of management attention is on customer acquisition and costs. Information provided by the likes of Google Analytics is likely to be considered far more relevant than tools such as variance analysis. Data analytics are usually updated in real time – all a manager needs to do is log in and see up to the minute information.

Large organisations will utilise the services of data experts; data scientists who have advanced data mining skills and the ability to create predictive algorithms. This is a highly specialised field and the determination of the inputs and the translation of the outputs from this area are vital. Management accountants are in the ideal position to determine the data needs to support an organisation as they have a holistic view of the organisation and its existing information systems. It is essential to establish what areas an organisation should be monitoring to direct the focus of the data experts.

The first implication for management accountants is that they must be aware of metrics such as those included in Google Analytics and be able to explain and interpret them. Knowledge of big data analytics and website analytics should be considered a key skill for any accountant.

One traditional role of management accountants has been to interpret and explain data, having the ability to see the big picture, and communicate this to senior managers. This role is just as relevant today as it was in the past, so management accountants have to be able to understand the data analytics, and be able to communicate that. Management accountants should have the business knowledge and commercial acumen to interpret the results of data analytics in order to provide meaningful commercial analysis and supply recommendations.

While managers may wish to focus on acquisition and retention of customers, ultimately those customers must lead to profits, so management accountants will still have a role in evaluating the overall financial performance of the business. Controlling costs is also as important today as it has always been. Management accountants will have a role in calculating profits per product, or profits per customer, controlling the marketing spend and looking for evidence of return on marketing expenditure.

Management accountants will use data analytics to support value creation, which can be through increasing efficiency, improving profitability and cash flow but also through customer management, innovation and intellectual property. All of this data is not just about focusing on new opportunities which can be targeted but also about internal drivers of value. Examples of activities where management accountants can utilise data analytics (depending on the size and scope of the organisation, could be inventory management, production planning, error rates, quality assurance, logistics, market segmentation, price optimisation, resource management and so on.

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