In the 90’s, the Internet exploded with the introduction of the web browsers, Apple was a struggling company, Google didn’t have a website while Yahoo was the king of search, and AOL inundated mail slots with CDs to keep its stranglehold on email. In the 2000’s, BlackBerry was king of the smartphone, only to be replaced shortly after Apple’s release of the iPhone and its accompanying App Store. With each decade, we’re encountering unimaginable change; we’ve gone from the desktop web era to the mobile dependency era, and now, the wearables era. While massive changes have been occurring within the Big Four accounting firms, the impact of these changes have, to date, been mitigated for the balance of the accounting profession. The next decade, however, will transform the professional accounting landscape in what many will consider to be unimaginable ways. In twenty years, the accounting profession will be nothing like it does today and along the way, there will be an unprecedented amount of turnover in firms that adapted too little or too late. In short, the profession will be under immense pressure to deliver value for its clients in a manner that adapts to sweeping technological changes.
The sweeping disruption from massive technological change and shifting consumer trends demands a new approach to how the industry creates value for clients and how accounting firms that are small to medium sized businesses (“SMBs”) can compete with the deep resources of the Big Four and emerging large firms. Some accounting offerings are more vulnerable to disruption than others. For example, transactional accounting services have been largely automated by technology; compliance is already undergoing automation and limited advisory services are following the automation trend as well. These automated core offerings require minimal to no oversight, effectively enabling larger accounting firms to leverage their resources to scale with lower operational costs, focus on different customer markets and ultimately, win customers from accounting firms that are SMBs. The impending automation of the accounting professional’s core responsibilities will force accounting firms, large and small, to focus on offering more advice and insight-based service, essentially becoming creative strategy consultants.
There are a number of emerging disruptive technologies that are likely coming up on a more frequent basis during client meetings, accounting conferences or workplace happy hours. Let’s review some of the more common ones and how they will drastically alter the professional accounting landscape:
Big Data thanks to IoT
Big data and IoT are terms that have been loosely thrown around so much that the mention of them is likely to induce a mild sense of nausea at this point. For definition’s sake, however, “big data” is the collection of data sets so large and complex that they cannot be analyzed by traditional databases or tools, such as spreadsheets. IoT is the ever-growing network of physical objects that feature an IP address for internet connectivity, and the communication that occurs between these objects and other Internet-enabled devices and systems.
Big data impacts nearly every aspect of accounting. In audit, big data produces more data driven audits and valuable insights, providing a better experience for the client and the auditor. In advisory services, big data can identify questions, help monitor and improve business performance, and build analytical models that support a variety of product or operational improvements. In tax, big data offers the opportunity to analyze efficiencies more easily, identify tax related opportunities for improvement, and aid in evaluating global opportunities. Lastly, in managerial accounting, big data helps with risk identification and management.
IoT is already impacting consumer’s purchasing frequency with more pay-for-what-you-use models with sensors tracking actual usage. This change in purchasing will require new pricing and accounting models and lead to much larger data profiles of each customer. IoT also impacts business processes like invoicing and reporting. Lastly, IoT will impact the way audits are carried out because the availability of real-time data coming from multiple sources and automated analysis will only increase the need for continuous auditing.
New technologies, based on big data and IoT, are reaching into every area of the business world. The amount of data we are able to collect is rising exponentially, driven by the Internet of Things. Due to IoT, in two years, the number of connected devices will be three times the number of people in the world. Increased connectivity leads to larger data sets and big data gives businesses unprecedented amounts of information and the analytical tools for improved decision-making. In turn, accounting professionals can use these same tools to move from data entry, recordkeeping and simple analysis to strategic business consulting. Today, financial controllers and CFOs use structured data, unstructured data, and predictive analytics to understand massive amounts of customer information, financial trends and industry information to make insightful forecasts for clients.
Artificial Intelligence (AI)
AI is technology that enables computers to perform decision-based tasks previously left to humans. It shows up in multiple forms, including machine-based learning that can progressively become better at analysis and decisions the more it is used, and speech-based technology that can understand different voices and languages. It is largely used to digest and analyze large volumes of data at speeds faster than people can ever accomplish. These technological advances were formerly reserved for science fiction, but artificial intelligence has arrived and is rapidly evolving. Early investments by large firms, including several of the Big Four, have paid off with technology that can substantially slash the amount of time an accountant spends on complex audits and asset estimates. All firms, even small ones, should start thinking about how to adopt advanced technology like artificial intelligence (AI), whether it will be by partnering with specialized AI tech companies or building their own technology department.
In preparation for the oncoming wave of AI within the accounting profession, accounting firms that are SMBs must add, develop and retain staff with database & technology skillsets. A solid foundational understanding of data management and a high comfort level with new technologies will give accounting firms an edge as the use of AI increases in the field. Naturally, the professional skepticism auditors have is necessary to spot when automated analysis goes awry and dealing with exceptions.
If you’re thinking that your accounting firm won’t be able to keep up with the overhead costs of bringing on additional technology staff and developing our own AI products, then don’t fret just yet. AI technology is becoming more accessible and will eventually become standard fare similar to the advent of the Internet. When the World Wide Web was first publicly available, only large companies could afford to establish an online presence and develop their own networks. That has obviously since changed, and today there is scarcely a firm, or person, left unconnected to the web. The same will happen with AI technology and it will become a more necessary and common component of doing business….of course, those who are slightly behind the bleeding edge but ahead of the pack will probably be the best positioned. If you master threading that needle, please let me know … in the meantime, Helical will continue to build out it