How is Technology Leading the Transformation in the Accounting Industry?
From the ancient accounting records of Mesopotamia to modern forensic accounting, financial bookkeeping has come a long way. The nature of accounting has changed a lot due to the addition of new elements such as double-entry bookkeeping, management accounting, and computer-assisted automated audits. Today, organizations are utilizing technologies such as Big data, AI, Machine learning, blockchain, and accounting software applications to streamline their accounting practices. AI and ML-enabled online accounting software with a big data analytics module is playing a key role in detecting fraudulent entries, flagging cooked account records, and minimizing irregularities in financial patterns for organizations.
Accounting is more strategic and creative with technologies. Today, accounting has progressed to be more comprehensive and multidimensional, with a result-driven approach. This article discusses the top technologies that are transforming accounting practices and are bringing a revolutionary change in the accounting industry.
Technologies that are Transforming the Accounting World
The accounting industry is a multi-billion dollar industry. It is projected to generate 119.48 billion dollar revenue in the US alone in 2021. Tech-led disruptive changes in the accounting sector have standardized the traditional accounting practices, expedited the modern accounting processes, and simplified the regulatory adherence requirements. From independent professional accountants, accounting departments, and accounting firms to small business owners, everyone is capitalizing on the power of technology.
Let us discuss the major technologies revolutionizing the accounting field:
The advent of blockchain technology in the accounting industry is a revolutionary event. Decentralized, open, and distributed ledger entries between parties using blockchain are impossible to falsify, destroy, or manipulate later. Blockchain-enabled entries are like fingerprints left on crime scenes. It is practically impossible for any thief to go back and erase the fingerprints left on crime scenes. Blockchain entries are time-stamped transactions that secure the integrity of records by traceable audit trails. In short, blockchain enables secure transactions, protects financial information from concealing attempts, and keeps credentials attached to accounting data intact.
Audits are costly affairs for companies. Each audit exercise involves a lot of time, money, and extensive documentation before and during the audit process. Any discrepancies found during audits can cause irreparable damage to an organization’s reputation and may weaken the trust of investors. Organizations can meet high-regulatory requirements and successful verification of financial information during audits easily with an inbuilt validation mechanism of the AI-enabled accounting software. Such validation also eliminates any attempt by auditors to work at the behest of the management to manipulate data. In short, accounting software helps to maintain the integrity of the auditing exercise.
- Machine Learning
Machine learning or machine reasoning is the ability of super-smart computers to find patterns in databases and create algorithms based on the patterns to predict outcomes, infer rules, measure correlations, etc. Machine learning can identify additional information to supplement the auditor’s conclusions. It augments the audit process by interpreting transactions and pointing out the ones that appear ‘deviation from the normal.’ This way, the auditor’s work is eased, and the audit process becomes more effective. Organizations that implement computer-assisted auditing tools with machine learning capabilities gain more control over their accounting processes, and all compliance risks are eliminated.
- Cloud Computing
Cloud computing enables accountants to collect, integrate and compute real-time data from clients/company accounts and automate the entries of thousands of transactions happening every day. For instance, an accounting software integrated with the POS of a company can collect information about all transactions in real-time and process it in the form of a valid bookkeeping entry. This way, cloud connectivity, and cloud computing enable organizations to centralize all data needed for accounting compliance. Organizations that don’t have the facility of a local data center can save their data through third-party cloud service providers. One more significant advantage of cloud accounting is its potential to increase the quality of financial reporting. It eliminates the risks involved with unsynchronized data or loss of financial information and helps improve the overall accounting process.
Fintech is a successful disruptor in the accounting industry that is helping accountants to streamline their workflows, apply analytics to entries, and automate multiple levels of accounting work. Modern accountants can solve complex accounting issues, verify client accounting entries, and customize services using financial technologies. Modern accounting services are not limited to providing traditional accounting solutions such as financial accounting, taxation, management accounting, audit, etc. Powerful analytical and forecasting features of financial technologies help accountants extend their services as business consultants or financial advisors. With accounting tools, professional accountants are able to provide low-cost multi-service accounting solutions to global clients.
- Big Data
In industry 4.0, financial data is not limited to textual data or unsolicited or solicited entries. Videos, images, audios, etc., can contain valuable financial information that supplements accounting records. Big data technology makes it possible to collect, assimilate, and analyze voluminous data to improve accounting assessments. Companies are not only hiring accountants but also data analysts and tech-savvy brains who can bring new insights and disruptive perspectives by analyzing big data using tech tools.
- Internet of Things
The Internet of Things is transforming the way accountants, especially those in advisory roles, work. IoT devices connected with client servers, tax reform sites and other data points can send real-time data to the accounting department via the internet. This way, any new tax update, latest transactions, changes in client accounts, new invoices, etc., gets instantly registered with the accounting department. Armed with real-time data, accountants can track financial assets, forecast financial needs, catch fraud attempts in real-time, and improve the quality of their accounting services.
- Accounting Software
Accounting software solutions have replaced traditional accounting methods with high-speed automated accounting modules. Micro, small and medium enterprises are restructuring their accounting workflows using accounting system software. With features such as core accounting, audit, taxation, payroll, reporting, financial, cost and management accounting, etc., accounting software technology eases the work of accounting professionals and even allows small businesses with little knowledge of accounting to record their financial transactions. Also, the new-age accounting systems are protected with multiple layers of cybersecurity, authorized access, two-factor authentication, and high-end encryption.
- Data Analytics
Data analytics in accounting has strengthened accounting practices. Through data analytics branches such as descriptive analytics, predictive analytics, etc., organizations are able to categorize, monitor, and calculate accounting data. Whether it is about solving complex taxation issues, or finding investment opportunities, or improving existing financial processes, accounting professionals are relying on the power of data analytics to solve various accounting challenges. Data analytics is crucial for supporting forecasts and unleashing authentic advisories.
- Robotic Process Automation
The manual methods of bookkeeping require painstaking efforts and are prone to errors. RPA accounting tools can process large datasets instantly, accurately, and transparently. By greater automation, fintech allows account departments to focus on valuable tasks such as strategy development, advising, and problem-solving. Automated bookkeeping solutions surpass human speeds, can self-correct themselves, and manage multiple accounting tasks simultaneously. RPA can automate accounting tasks such as:
- Financial reporting
- Variance Analysis
- Compliance Filing
- Accounting Review
- Management accounting
- Annual Reports
- Investment Analysis
The digitization, digitalization, and digital business transformation are no doubt impacting accounting value and practice. The modern multidimensional accounting systems are the backbone of the digital revolution that the accounting industry is witnessing. These solutions are not only cost-effective but also highly customizable to meet the requirements of all businesses and different industry verticals. Today, organizations can bank upon the competencies of the accounting branch to explore project trends, assess various business functions and strengthen investor relations. In a nutshell, organizations that seek productivity, simplicity, and cost-efficiency in their accounting processes should not refrain from adopting the technologies discussed in this article.
James Mordy is a content writer with the IT research firm GoodFirms. An avid reader, a solo traveler, and a tech geek, he loves to read and write about innovations that transform the business world. His areas of interest include the latest technologies, software products, artificial intelligence, and machine learning.