What is accounting data normalization and why does it matter?

March 18, 2021
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Accounting data normalization is the process in which unstructured accounting data from various accounting platforms is pulled to reconstruct financial statements without the loss of data. Increasingly, businesses have been leveraging cloud-based accounting data to manage their finances. These cloud-based platforms store these data sets in different formats.

Third parties can benefit from these data sets by leveraging open accounting APIs to get access to raw data. However, these data sets are not contextual and require the input of data scientists to find meaning in the information.

Accounting data normalization automates the process of converting raw data into contextual data so that third parties can look at accounting data in a standardized format, regardless of the source — the accounting platform.

Accounting data normalization helps third parties in saving time and resources to process the data. By automating the process, data normalization reduces the risk of data loss due to manual processing. Most of all, data can be compared across various accounting platforms under one standardized template.

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