The Fourth Industrial Revolution will profoundly change the world of accounting. But agile companies stand to benefit from these changes.
Jodi Joseph, Divisional Executive, CaseWare Africa – Adapt IT – unpacks the different elements of the 4th Industrial Revolution and specifically what they mean for accounting professionals in terms of how they run their businesses and avail of the opportunities for growth that this latest technology era brings.
Accounting, or accountancy, is thousands of years old and can be traced to ancient civilisations. Italian Luca de Pacioli - recognised as the father of accounting and bookkeeping - published his work on double-entry bookkeeping, as long ago as 1495. The profession has weathered the challenges and opportunities of each of the first three industrial revolutions, but the changes looming in the Fourth Industrial Revolution (4IR) look set to take place faster than any that came before it.
Throughout the ages, the fundamental purpose of the profession has stayed consistent – to:
• provide reliable financial information,
• help businesses stay compliant with ever increasing regulations
• and take up the role of trusted advisor for people who want to run businesses and make money.
This purpose will remain true throughout the 4th industrial revolution. But how we will provide reliable financial information and what a trusted advisor will need to do and know, will change.
Driving these changes will be certain key 4IR technologies:
• Blockchain. In a world of fake news and a drive for total transparency, the Blockchain equals the Truth.
• As an incorruptible chain of blocks where each block contains data of value which is validated by all nodes in the network, information stored on the blockchain can never be deleted or altered. This technology is viewed as the future of land registries due to the myriad of benefits it offers and its potential to greatly reduce property fraud. Blockchain technology underpins ‘smart contracts’, which are programmable contracts that self-execute when certain conditions are met, and offer the possibility that transactions could complete much more quickly when combined with a blockchain registry.
• Big data and cloud computing capabilities. As public expectations change and accountants and auditors must review all information of a company at scale, big data and cloud computing capabilities supports data acquisition. At the same time, data analytic tools are now smarter than ever before. Patterns that could never be detected before are now available at a click of a button.
• Internet of Things. IoT solutions support stock control and risk management for accounting clients across all sectors, enabling accounting efficiency and improving profitability.
• Artificial Intelligence. AI programmes are set to intelligently enhance process automation, reducing the risk of human error and improving efficiency and compliance.
In the short to medium term we see all 4th IR technologies significantly improving the efficiency of the profession - it should be far quicker and cheaper than ever before to process more information, and the quality of outputs to inform decisions should also vastly improve.
Four steps to adapting to the change
For the accounting profession, these new technologies bring with them sudden change, but also significant opportunities. To weather the change and enter the 4IR on a competitive footing, accounting should take the following four steps.
Step one - Focus on purpose
Throughout the ages the accounting profession has existed to help people, governments and economies make good decisions about the allocation of resources and to hold others to account for those decisions.
Better technologies will only enable the profession to deliver on its purpose better than ever before. Improvements will be on speed and quality of information for all participants in the ecosystem.
Step Two - Exploit powerful technologies
To fully exploit new technologies, we need to be clear about what they can do and how they can help. Be informed and get involved so that technologists help solve fundamental business problems in new ways. Clients will look to you to bring some of these answers.
In preparing to exploit 4IR technologies, accounting must focus on leveraging 3IR technologies, automating the practice and ensuring quality data exists today.
Step Three - Think radically
As a profession, we need to be open to more profound change. Research is showing that humans and computers working together produce better results than computers in isolation. We need to think about how we will use technology to leverage the truly human qualities that make the profession effective - such as professional scepticism, leadership, empathy and creativity.
Step Four - Be adaptable
Technology is changing more rapidly than ever before, so it is impossible to predict how far it will get in replacing human decision making. Therefore, accounting professionals will need to take a flexible approach when thinking about the future. Skills will also have to adapt, with a concerted effort made to understand new technologies and data.
Accounting must also understand clients’ appetite to leverage technologies. Growing numbers of clients are using online cloud accounting packages – not to perform the accounting role, but to take up parts of the process that serve them, such as instant invoicing or chasing up their own collections. The impact of this is better cash flow for clients and better data for accounting to work with.
Most of all, the 4IR means accounting will have to move quickly, get with this change, and stay agile, as this revolution cannot be ignored.