Business Analytics: Transforming The Role Of Management Accountants

If you have been a management accountant for any length of time, you know that you traditionally have worn four distinct hats in your organization: participation in strategic cost management to achieve long-term goals and objectives; planning and decision making for internal cost activity; management and operational control for performance measurement; and, to support the first three roles, preparation of financial statements. (1) All four roles have supported decision making by using management accounting and finance data/information for analysis. This is an exciting time to be a management accountant because recent developments in technology and the field of business analytics are going to equip you with new tools and processes that will enable you to build value in your organization. Rather than being restricted to routine spreadsheet analysis tools, management accounting analysis will be transformed through business analytics. Figure 1 shows how business analytics will anchor and tie together your traditional roles. Bradford Hamilton, information technology (IT) controller at Cummins Inc., a global power-technology company, believes that you "need to know and be engaged in business analytics because management accountants bring value to the business as business partners. In order to be a business partner, they have to understand the financial dynamics of the company often beyond simply what shows up in the income statement and balance sheet. Business analytics provides insight into many cost drivers and other financial dynamics of the business and often in real-time, when the data is most critical. Our business leaders look to us to partner with them in interpreting and utilizing this data. " The enhanced role for business analytics is driven by an explosion in the amount of new data available for analysis. [FIGURE 1 OMITTED] The New Data Ecosystem Ten years ago, management accountants probably would not have recognized many of the terms shown in Figure 2, much less in the context of business analytics. As more and more information becomes digitized, the data ecosystem continues to explode, providing companies with expanded data that can be combined with traditional company data. The changing data picture is revolutionizing business analytics and is a key technology trend for management accountants. Let us examine this shift in more detail. Figure 3 shows the changing picture of a company's data sources, which have expanded to include data created outside the company's borders. Historically, companies have relied on internal data for analysis: files and databases generated by enterprise resource planning (ERP) systems, other internal software applications, and spreadsheet programs. For example, management accountants can analyze travel expenses, sales revenue, and product costs by creating spreadsheets or querying a company's ERP system. Because these examples use data with identifiable structures that computer software can recognize and read, management accountants can search and choose specific information to analyze. In contrast, unstructured information is incompatible with a company's data formats and therefore cannot be searched. This includes external Internet websites and new data sources such as tweets, videos, e-mails, maps, and sensors (such as the location-tracking feature used by advertisers), shown in Figure 3. When this data floodgate is opened and becomes accessible, companies will be able to combine external data with their internal data for richer analysis and insight. Research company Gartner predicts that the amount of data will grow 800% by 2017 and that 80% will be unstructured data. (2) Despite this promising news, however, there are many challenges facing companies' use of data in business analytics. [FIGURE 2 OMITTED] [FIGURE 3 OMITTED] A Bigger Set of Challenges While business analytics has much to offer, several issues are affecting its growth and adoption. …