Present, futuristic technologies in the evolvement of accounting
A LOT of change quotes are available on the internet explaining the permanence of change and the need to adapt to change. Renowned companies like Kodak have closed due to a failure to adapt to change.
Kodak was the very first company to invent a digital camera, this was definitely cutting edge and ahead of the market in 1975, yet their failure to adapt to new technology heralded Kodak’s downfall.
The one quote I greatly resonate with on change is by Jeff Bezos, the executive chairperson of Amazon, says: “What's dangerous is not to evolve”.
The failure to evolve in a world where technology is dynamic and change is constant may herald the downfall of even the best performing companies.
Technology has changed what it means for companies to stay competitive, Hazem Fayyad in his article on Survival of the fittest in the age of Digital Disruption highlighted that “back in the 1950's an S&P 500 company would stay on the index for an average 60 years, today, companies get replaced on a monthly basis, and companies that want to succeed must understand how to merge technology with strategy”.
This article will look at technologies in accounting and finance and how businesses can leverage on these technologies to ensure their survival now and in the future. Furthermore, the article will also look at the role of the accountant in such an automated world.
Cloud computing
In the old days all the accountant’s work and documents were found on paper and then subsequently on a hard drive on someone’s computer, but now businesses are using cloud computing.
Cloud computing allows storage and access of data online rather than on a hard drive. Cloud computing is key in accounting as it allows access to information via the cloud hence accounting teams and clients can access up to date financial data in real time allowing easier collaboration and information sharing.
Some of the popular platforms in use are QuickBooks and Xero. The growth in cloud computing can be attributed to integration of the cloud with new technologies such as artificial intelligence and machine learning.
The integration of artificial intelligence and the cloud have been said to “automate complex and repetitive tasks to boost productivity, as well as perform data analysis without human intervention”. (Joydip Kanjilal:2021)
The main drawback for cloud computing versus storage on site or on one’s hard drive is that cloud computing only works where there is an active internet connection.
In a Zimbabwean context where power is an issue, entities wishing to adopt cloud computing should have alternative power sources to ensure they have access to their desired cloud computing platforms.
Cloud computing servers are considered quite secure, and some may even consider them, more secure than traditional accounting software. However, risk of hacking still remains, although considered low.
In choosing cloud accounting software, it is vital that adequate research is carried out on the information security practices of preferred software.
Blockchain technology
Can the audit process be entirely abandoned with blockchain? Accounting’s core principles rely on the double entry bookkeeping system. As part of the accounting function the accountant is expected to prepare financial statements for the users of general purpose financial statements, and the auditor to give reasonable assurance about the provided financial statements.
Investopedia defines blockchain as a digitally distributed, decentralised, public ledger that exists across a network. It is popularly used in cryptocurrency systems as it guarantees the accuracy and security of data without the need for a trusted third party.
Blockchain will reduce the input of an auditor as most of the work in regards to verifying transactions will be kept in a decentralised register.Blockchain also has the benefit of providing encryption, which still allows companies to use a common data retention infrastructure.
This, therefore, allows transactions to be recorded in a shared ledger, although the auditor and accountant will still maintain their separate database.
Such collaboration with a shared ledger with a date that has fidelity is a welcome benefit to both users of financial statements and auditors in relation to the integrity and completeness of accounting transactions.
Blockchain does have some drawbacks attached to it, the major one being efficiency. One of the cited inefficiencies is its poor data storage; a single ledger can easily cross hundreds of gigabytes.
Furthermore, blockchain needs a lot of power. As entities actively try to compete on a global scale, cost control is a key factor in achieving this objective. Unless the power consumption of this technology can be managed, this solution may not make economic sense for companies competing in countries like Zimbabwe where power is a problem and the associated costs of generating alternative power sources is costly.
Machine learning in accounting
Accounting today defines machine learning as “the application of computer algorithms to identify data patterns and use them to make more accurate decisions in similar scenarios. ML is generally used in conjunction with artificial intelligence to build automation systems and complete tasks in a way that mimics human actions.”
Accounting tasks that have defined business rules are repetitive and manual. They can be automated as the neural networks used in machine learning and will process and analyse data. Given enough data, they will recognise patterns, make connections and perform tasks as per business rules.
Accounting applications learn invoice coding and suggest where transactions should be allocated. For example; allocation or posting transaction to the correct accounts, once an accountant posts a particular transaction to a certain account, the next time that transaction is posted, the accounting application will automatically allocate the transaction to the correct account.
Implementation of machine learning is a lengthy process as machine learning requires massive inclusive good quality data sets to train on. This can put a dent on the time and resources of an organisation, as on implementation a lot of stuff will to analyze and verify data inputted.
A classic saying in computer science is “garbage in garbage out”, this means should incorrect inputs be used, incorrect output will be produced. It is, therefore, very important that correct inputs be used in machine learning, this is core to the success of implementing machine learning technology.
Accountant role in the future
With the integration of accounting and emerging technologies the role of the accountant has been changing. A future fit accountant is an one that will be technologically savvy, with skills to use technologies in accounting, as well as set up ledgers, contracts and records.
It is important for the accountant to develop requisite skills to carry out administrative, managerial and analytical skills that technology cannot do. The skills and job specifications of an accountant are expected to expand.
The future is expected to lean towards”
• Advisory — accounting professionals need to be skilled in identifying and analysing patterns and trends besides the traditional advisory services, i.e. transaction advisory in the terms of taxation, accounting and management accounting and finance.
• Business intelligence — this includes leveraging on software and services to transform data into insights that may be used to assist in making a business decision. Professionals need to be able to interpret data visualisations and strategies.
• Procurement professionals — procurement professionals’ role is centered on ensuring an entity’s operations continue as smoothly as possible all year round. This will include establishing business requirements, researching the business’s market and evaluating vendors and suppliers, as well as negotiating contracts and managing risk.
Mhindu is a finance manager at Metholdings. She is a chartered accountant with a passion for teaching. She has had vast experience in that regard at the Chartered accountants academy, as a trainee accountant and as the head of financial accounting and reporting. — hopemhindu@gmail.com