The Future of Accounting – The Rise of the Machines
Posted by Lucy Beck on February 24, 2014
Guest blog by Roger Gregg at Invitbox. We thought this was an interesting perspective on what the future holds for accountancy firms…
Accounting, by long-standing definition, is “the process or work of keeping financial accounts”. Straight forward enough.
When I recently tweeted the prediction that there is a 94% chance of an accountant’s job being automated within the next twenty years, I hadn’t had time to make a cup of tea before the first interjection came in. I had found this data in a recent report by the Oxford Martin School, who examined the expected impacts of future computerisation on US labour market outcomes – basically which jobs and how many jobs are at risk due to the rise of the machines. So I say to the interjectors, let’s just think about it, do you really think accountants will be simply keeping financial accounts in 20 years? Won’t the machines be doing that for them?
How much has changed in the last twenty years?
Picture the accountant’s office of 1994. You arrived in a paisley shirt and loafers. This morning you tried one of those new latte coffee drinks in the paper-cups as you ask a colleague if they know anything about this new Internet thing you’ve heard about. On your desk are Tipp-Ex, a hole-punch, ring reinforcements, a Parker pen and a calculator with printer functionality incorporated. There are more filing cabinets than staff.
Dot-matrix printers are clacking-away in the background, you just spent an hour installing Excel 4.0 from two floppy disks over a mug of Nescafe, and you are now trying to find the page of the manual explaining the new ‘auto-fill’ feature you heard about at the water-fountain. The receptionist is about to gather up the cheques and credit card slips to visit the bank and collect the bank statement from last week.
Twenty years ago, accounting was as much about gathering information, transposing it and filing the data, as it was about preparing it. And with that gathering, storing and filing came billable hours. Good times!
The pace of change in cloud accounting
Gathering data now happens with a drag and a drop, an upload, or the click of a few buttons. In fact some data, like bank-feeds, just appears overnight. Other data, like bills, appear in real-time, direct from the supplier. Receipts can be recorded and expensed by the person who incurred them direct from their phone. Sales systems are beginning to connect to accountancy software suites. Timesheet systems connect to payroll that in turn connect to the general ledger and bank payment systems.
Since Invitbox was launched two years ago, I have been amazed by the rapid pace of change that I have seen in accounting firms. I have seen firms emerge that operate 100% in the cloud. So much so, that the practice operates out of a shared office space with hot-desks. They don’t need to print, nor do they have filing cabinets. Everything is shared online with the client.
I have watched practices change from being traditional accounting firms into dynamic organisations providing business services to their clients, connecting with them weekly, and becoming an integral and valued part of the business’ DNA. I have also seen some of their competitors who refused to change, reduce their staff numbers in response to falling client numbers.
Very often, between early adoption (by the technology enthusiasts and the visionaries) and acceptance by the early majority (otherwise known as the pragmatists) there is a period known as the chasm. I have heard it said by some that cloud accounting is at this point – at the chasm. I don’t know about you, but I see accountants and bookkeepers as pretty pragmatic folk. And as far as I can see it, these pragmatists are already adopting cloud computing.
Cloud computing has crossed the chasm and is now approaching the tipping point – the point at which there is an inevitable mass adoption of cloud accounting, and it is just over the horizon. With cloud accounting, the question is not if, but how soon.
Understanding the opportunities that exist
But ‘cloud’ is not just about the storage of data, or where we work and process information – it is about the connectivity of things. The cloud facilitates systems connecting with each other, and the sharing and accessing of information. And as cloud-based accountancy software systems develop to allow users, bookkeepers and accountants to add to, access, and use that information more easily and more intuitively, so too do they develop beyond simple data-entry and reporting engines. They begin to learn from the rules accountants give them. Accountants are teaching them, and in doing so, accountants are teaching the accountancy software companies how to build a better product.
Accounting software systems are now openly referring to themselves as operating systems linking business units, people and other software applications together. At events I have attended in the last 6 months Xero and MYOB have both described themselves as an operating system for small business. Intuit now refers to itself as a ‘provider of business and financial management solutions’ – but couldn’t that description apply to most of what an accountancy firm does? Providing business and financial management solutions.
As accounting software has developed to assist accountants in the preparation of financial records for their clients, we have seen a natural creep into the space of doing it for the accountant, as opposed to helping the accountant do it. So if accountants simply adopt these cloud systems without changing and adding to the services they offer, what are they going to do with all the spare time they have? Where else can they add value? Accountants can’t keep billing the clients the same fee – the clients will realise that that a lot of the work is being done for them as part of the monthly subscription.
Accountants need to expand the services they offer, and to start to understand the opportunities that exist in providing expertise and services through the add-on ecosystem that is expanding around the core accountancy software products.
For the moment at least, a monthly subscription to an accountancy software package still requires an accountant or bookkeeper to create system rules, validate, to manage exceptions, to evaluate the results and make recommendations. But for how long? How long will it be before accountancy software ‘helps’ the accountant to the point of actually doing it for them? Where to then? All of a sudden that add-on ecosystem looks pretty attractive as a source of expertise, and billable services.