Tech-Enabled Transformation in Management Accounting

Instructor: James Blackburn

James has an MBA and a MA in Humanities. He writes on leadership, business strategy and finance.

In this lesson, you will learn about three technologies that are transforming management accounting. The three technology movements within management accounting are robotic process automation, machine learning and data visualization.

Shifting Workplace Technologies

It was a busy time at Management Accounting International's office. The recent demand for technology-savvy accountants and the need to hire more accountants forced the firm to move to a larger office across town. In fact, they were so busy, they had to move over the weekend, just to keep up with their clients' services.

Workers were carrying boxes from their cubicles to the moving truck when one of the interns stopped by Mike's office with a puzzled look on his face.

''What's wrong, John?'' Mike asked.

''I found these boxes in the storeroom. I don't know what to do with them,'' he replied.

''What's in them?'' Curious, Mike walked from behind his desk to examine the contents of the boxes. As Mike approached, a crowd started to form around the intern and the mysterious boxes. With a slight chuckle, Mike smiled at the group, reach down into the box and picked up one of the items. ''This, ladies and gentlemen, is an accounting journal.''

Lifting the dusty, hard-bound ledger above his head, Mike added, ''It's the way accountants used to store information in the old days.'' Dropping the ledger back into the box, he motioned for John to load the boxes onto the truck. ''One day, a museum may want to archive these double-entry ledgers. For now, let's take these items to our new office.''

Technology and Accounting

In its day, the ledgers were the latest in accounting technology. Today, the world of accounting is completely digital. Paper ledgers are artifacts from a far-gone era, replaced with spreadsheets and databases. Pretty soon, spreadsheets and databases are likely to find a home next to the ledgers in a dusty museum of accounting technology. As with all technologies, the accounting tools of yesterday will be replaced with even more powerful tools like machine learning and data-visualization tools. And, like the green visor-wearing bookkeepers, expert management accountants, familiar with only the basics of technology, will be replaced by technologists with the modest of accounting skills.

Computer technology greatly improves the speed at which management receives information about operations. In many cases, managers can review sales, cash flow and inventory with less than a one day delay. They can review customer orders and fulfillment of the orders, plan manufacturing and forecast staffing needs, all with simple spreadsheets and basic data analytics. However, today's hyper-competitive marketplace requires management to offer products and services with lightning speed, customized features and lower prices. Margins are tight. One wrong decision can cost millions. Management needs more information and with less uncertainty. They need insightful data beyond the capability of simple human analysis.

Machine Learning

Machine learning helps reduce uncertainty. Machine learning uses powerful computer algorithms to analyze large amounts of data for patterns and insights. Two common techniques used in machine learning are supervised and unsupervised learning. Supervised learning uses small sample sets of data to train the algorithm. Once the model has been created, the complete data set is added to the model. In unsupervised learning, the machine learning algorithm analyzes the entire data set using pre-determined methods to identify patterns in the data.

Python Versus SQL

Most management accountants are very familiar with SQL or Structured Query Language. SQL has been around for decades and has been the primary option for extracting data from a database or accounting information system. Today, extracting useful data is not as easy as it used to be. The complexity and amount of information available have made SQL a limited tool. Python is quickly becoming the software language of choice for data analytics professionals. Python is an open-source high-level software language that easily accesses a rich library of machine learning tools. TensorFlow is one of these libraries and offers very powerful machine learning options. Scikit-learn is another tool available to Python programmers.

Cloud-Based Solutions

Amazon Web Services and Google are two popular hosting platforms. These platforms offer scalable storage for large data sets. They also include a wide selection of public data sets that can be combined with internal data to provide incredible competitive insights. Both platforms offer machine learning algorithms that can analyze extremely large sets of data to assist organizations to better understand the needs of customers or to assess risks.

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