Business Analytics and Performance Management: A Small Data Example Combining TD-ABC and BSC for Simulation and Optimization

Abstract

The purpose of this paper is twofold: first, it discuss the potentials of combining performance management with the concept and methodology of business analytics. The inspiration for this stems from the intensified discussions and use of business analytics and performance in organizations by both academics and professionals. Second, the paper demonstrates and evaluates the idea of business analytics on a numerical example combining the balanced scorecard and TD-ABC. Four different scenarios are analysed by means of spreadsheet Monte Carlo simulation and optimization to show how such a combination can be made and assess the consequences. The paper shows that in order to be able to fulfill future jobs descriptions; accountants must not only have specific quantitative skills but also creativity and imagination. In addition, the results of the simulation scenarios show the complicated nature of decision making and the careful considerations needed before actually making a decision. For practical implications, the paper establishes some basic ideas for integrating the business analytics methodology for selecting and evaluating accounting problems and it therefore paves the way for analytics performance management approaches.