Rangi Liyanage

[email protected]
MSc in Information Systems- SLIIT
BBA (Hons) Specialize in Business Analytics- SLIIT
 Introduction to the module

 Business, Data and Analytics

 Big Data

 What is Accounting Analytics

 Data Visualization
 3 credit module - 2 Hours Lecture & 2 Hours Tutorial

 Enrollment key – IM4740

 Assessment criteria:

 Assignments – 50%

Final exam – 50%

 Lecturer contact info: [email protected]

Sri Lanka Institute of Information Technology

 Analytic Techniques for Decision Making: Range of analytical methods and how to

employ these techniques to interpret financial data and make data-driven decisions
that enhance organizational performance.

 Exploration of Big Data in Accounting: The module equips participants with the

necessary knowledge and tools to effectively navigate and derive meaningful

insights from big data sets in an accounting context.

 Practical Application of Software Tools: By actively working with software tools and

present findings in a clear and visually compelling manner.

 Descriptive models for Accounting Decision making

 Predictive Accounting models including non discrete variables and outcomes

 Computation Intelligence for Credit scoring, Cash Flows and Fraud detection

 Interpretation and Evaluation of results for internal and External Reporting Audit
 What Data Analytics is and How it is important to Accountants?

 Sources of Accounting Data

 Data Storage

 Financial Reporting and Analysis

 Data Visualization

 Data warehouse

 Audit Analytics

 Data Mining and Fraud

 Data analytics described as the “sexiest job of the 21st century” by Harvard

Business Review

 “In 2018, data and analytics can’t be ignored – analytics will drive major innovation

and disrupt established business models in the coming years. Technical professionals
need to adapt their data and analytics architecture from end to end, to meet the
demand for analytics everywhere” – (Gartner)

 “There will be a shortage of talent necessary for organizations to take advantage of

big data. By 2018, the United States alone could face a shortage of 140,000 to
190,000 people with deep analytical skills as well as 1.5 million managers and
analysts with the know-how to use the analysis of big data to make effective
decisions” – (McKinsey)
 Using tools and techniques to convert data into meaningful business insights

Tools and Business

Data
techniques insights

 Business insights/recommendations vs. information

 Combination of computing, statistics, mathematics

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 Business Analytics focuses on the use of data and statistical methods to drive

strategic decision-making and improve business performance.

 It helps businesses understand customer behavior, optimize operations, identify

market trends, and identify areas for growth and improvement.

 Key components of business analytics include data collection, data cleansing and

preparation, exploratory data analysis, statistical modeling, data visualization, and

business intelligence reporting.

 Business Analytics can be applied to various business functions, including marketing,

finance, operations, supply chain management, and human resources.

 Formulate
Question

Implement Gather
Insights Data

Test Perform
Hypotheses Analytics
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 Analytics is the use of:

 data,

 information technology,

 statistical analysis,

 quantitative methods, and

 mathematical or computer-based models

 Help managers gain improved insight about their business operations and make

better, fact-based decisions.

12
 With the digital revolution, there is a huge

amount of data being generated – social media,

access to internet, internet of things

 Data fuels the world’s most valuable companies –

Google, Microsoft, Amazon, Facebook, Apple

Source: https://www.memsql.com/blog/the-analytics-race-
amongst-the-worlds-largest-companies/
 With the digital revolution, there is a huge

amount of data being generated – social media,

access to internet, internet of things

 Data fuels the world’s most valuable companies –

Google, Microsoft, Amazon, Facebook, Apple

Source: https://www.memsql.com/blog/the-analytics-race-
amongst-the-worlds-largest-companies/
 Business Analytics – Tools to explore past data to gain insight into future business
decisions.
Extensive and systematic use of data, statistical and quantitative analysis,
exploratory and predictive analysis, and fact-based management to drive business
decisions and actions. (Davenport, 2006, HBR)

 BI – Tools and techniques to turn data into meaningful information.

 Big Data –data sets that are so large or complex that traditional data processing
applications are inadequate.
 Data Mining - Tools for discovering patterns in large data sets.
 Pieces of data measures features of real world entities, may have different data types:

 Amount of an item in a sales transaction.

 The City where a customer lives

 Diet type of a chicken in a poultry farm

 A measurement may correspond to different nature of data types in computer systems:

 Logical (binary) → Boolean type

 Count (natural) → Integer type

 Whole number → Integer type

 Numeric → Real type

 Nominal → String type

 Categorical → String or integer type

 Ranking → String or integer type 17

Data for Analytics
A sales transaction database file

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Classifying Data Elements in a Purchasing Database

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 Big data is a combination of structured, in-house
operational databases with external databases, with
automatically captured, often unstructured data from
social networks, web server logs, banking
transactions, web pages, etc.
 All this data is combined into non-normalized data
warehouses
 It typically includes vast amounts of structured, semi-
structured, and unstructured data that is generated
from various sources such as sensors, social media
platforms, online transactions, and more.
 Volume: Involves a massive amount of data that exceeds the storage and processing
capacity of traditional database systems. This data can range from terabytes to petabytes
or even exabytes.
 Velocity: Generated at high speeds and requires real-time or near-real-time processing. This
includes data streams from sources like social media updates, stock market trades, or
sensor readings, where timely analysis is crucial.
 Variety: Big data encompasses diverse data types, formats, and structures. It includes
structured data (e.g., traditional databases), semi-structured data (e.g., XML or JSON), and
unstructured data (e.g., text documents, images, videos), making it challenging to analyze
and interpret.
 Veracity: Big data is often characterized by data uncertainty, inconsistencies, and noise.
Ensuring the quality and reliability of the data is crucial to make accurate decisions.
 http://www.ey.com/gl/en/services/advisory/ey-big-data-big-opportunities-big-challenges
 Data scientists examine Big Data using a combination of programming skills, statistical skills,
and domain knowledge to answer relevant organizational or societal questions.
• Uncertain economics
• Rapidly changing environments
• Global competition
• Demanding customers
Q: How important are business analytics skills, such as business intelligence, for your
accounting and finance employees?

Source: Robert Half survey.

 Data Gathering
 Here the data scientist will need to become familiar with application programming
interfaces (APIs).

 Data Wrangling/ Data preprocessing

 Data wrangling or ‘data munging’ is a critical data analytics skill. Once you have the
data you then need to get it into a usable format. This might involve generating ‘pivot
tables’ in Excel or PANDAS or R

 Data Management
 Data scientists should have familiarity with database management. There are lots of
options out there, ranging from traditional relational databases such as SQL to ‘noSQL’

 Data Analysis
 Two broad sets of techniques — descriptive statistics and inferential statistics
https://www.youtube.com/watch?v=7snFLFY5zZA
 Accounting Analytics
Accounting analytics, is the examination of Big Data using data
science or data analytics tools to help answer accounting-related
questions
 Use of data analytics techniques and tools to gain insights
 Identify patterns
 Data-driven decisions in the field of accounting.
 It involves the application of statistical analysis, machine learning, and other
data analysis methods.
• Data Interpretation
• Financial Modeling
• Performance Analysis
• Data Visualization
• Identifying suspicious transactions, patterns of fraudulent behavior, and potential
financial risks
• Cost Optimization
• Decision Support
 Audit – Internal and External  Tax
 Data driven audits  Analyze tax efficiency of business units
 Better experience for the client  Identify tax-opportunities
 Better experience for the auditor  Aid in evaluating global opportunities
 More valuable insights
 Improving corporate compliance
 Managerial
 Risk identification and management
 Advisory Services  Operational improvements
 Identify questions  Forecasting
 Use analytics to help business improve  Optimization models
performance
 Build analytical models
Any of the following might be considered sources of Big Data for an accounting
analytics project:

•social media data , web search data

•journal entries
•transactional data (e.g., customer transactions)
•call center transcripts
•store videos, web cams, etc.
•online customer reviews
•XBRL
•proprietary databases
•websites
•IoT devices
•image repositories
•sensor data
•public data (crime, health, education, weather forecast etc.)
•media/journalism
•company emails
•company disclosures
• Good technical skills: Understands the data and knows how to manipulate it.

• Understanding of the business context: Can distill a business problem or opportunity into
key questions to be answered and understands the business data flow and the relationship
between objects within the business context.

• Analytical mindset: Possesses an inquiring nature and intellectual curiosity

Lets focus on two main research questions:

1) measurement and
2) finding relationships
Accounting is inherently a ‘measurement discipline.
 Accounting analytics is not only interested in measuring sales but in relating sales to
other variables. In other words, the accounting analytics practitioner is keenly
interested in seeing what other variables can predict the increase (or decline) in
sales. This is the search for relationships.
 “Getting the right answers is only possible when you have asked the right questions.”

 Some examples:
 Financial questions:
 what is the optimal product/service pricing to maximize revenue/ profit margin?
 What is the predicted profit margins for a product X?
 What is our optimal investment strategy?
 Operations questions:
 How do we optimize supply chain?
 How do we minimize production waste?
 How do we optimize delivery routes?
Based on your objective/question:
Types of data
 Structured –
• POS data, financial data, customer data
 Unstructured –
• Text files, photos, images
 Semi-structured
• Includes tags but doesn’t have a column/row structure. XML, tagged
documents
Get the data
 Internal data
 Transaction data, sales data, customer data, etc.

 External data
 Social media, weather data, government data, maps
Data Integration
Apply Analytics
 Descriptive Analytics
 Predictive Analytics
 Prescriptive Analytics

Communicate your findings…

 Memo’s
 Presentations
 Data Visualizations
 Examples:
 Dashboards
 Data Visualization software
 Charts
 Line charts
 Pie charts
 Area charts
 Scatter chart

 Dashboards
 Visual representation of a set of key business measures
 Provides summaries of key business information to help managers
 Enhanced Data Comprehension
 Identifying Financial Trends
 Improved Decision-Making
 Effective Communication
 Budgeting and Forecasting
 Cost Analysis and Allocation
 Risk Management
 Geospatial Analysis
 Business, Data and Analytics

 Big Data

 What is Accounting Analytics