Everything is changing. As a CPA, our profession almost lives in a bubble where change is so gradual until it is not.
I’ve often heard that as technology innovates the roles of our people and what we do needs to change and evolve. This sounds great, but the accounting profession is generally slow to evolve and change. It always make me chuckle when our profession uses buzzwords like proactive and innovative. When you look closer, what you will find is the same set of services (usually overpriced) with some dated technologies, outdated manual processes and limited controls.
There are several significant technology movements coming to our profession that will disrupt the way we all conduct business.
The first is blockchain. I’m not a developer, so I’ll spare you all the technical jargon that makes our heads spin. Blockchain is simply a way of recording information and transactions into a digital ledger. The ledgers are tamper resistant and can be private, public or permissioned. There are no third parties involved in the transaction. Think banks. We can purchase good without using the bank to clear transactions or verify funds. Cryptocurrency, like Bitcoin, utilizes Blockchain to execute transactions and purchase goods and services. The most intriguing part is that business logic can be layered into the ledger to execute transactions. For instance, a ledger of apartment rental contracts could execute business logic to establish utilities. The possibilities are infinite. This technology is rapidly expanding and by all estimations it will become more common place over the next 5 to 7 years. This means that transactions will not be generated by the accounting departments and main task of reconciliation with third party providers, think banks again, will be eliminated. This will require accountants and accounting departments to change the way they work. The impact will be a reduction of traditional accounting services.
Next you have the rapidly emerging area of artificial intelligence (AI). AI works by combining large amounts of data with fast, iterative processing and intelligent algorithms, allowing the software to learn automatically from patterns or features in the data. Think Siri. The ability to have the computer search large amounts of data, understand your personal preferences through prior interactions and make suggestions or provide you with results. So what does that have to do with accounting?
AI is a broad field of study that includes many theories, methods and technologies, but the most impactful to the accounting profession is that of machine learning. Machine learning automates analytical model building. Machines can learn by using algorithms to interpret data from the world around us to predict outcomes and learn from successes and failures. It uses methods to find hidden insights in data without explicitly being programmed for where to look or what to conclude.
As machines infiltrate accounting tasks it will take over the more mundane and repetitive tasks, like expense coding and bank reconciliation. A lot of this technology is in place today and rapidly evolving every day. Your accountant needs to be leveraging these tools and significantly reducing the cost of providing these mundane tasks. The end of traditional bookkeeping services has already begun. We anticipate this technology to be common place in 3 to 5 years.
Lastly, is data analytics. It is probably the most exciting and currently available. Data analytics is the science of examining raw data in order to draw conclusions about the information. Data is everywhere and as a society we are creating data at an incredible rate. An article by Forbes states that by the year 2020, about 1.7 megabytes of new information will be created every second for every human being on the planet. This data is created in a variety of unrelated systems across organizations. The application of data analytics is to create correlations between this data to drive decisions and innovation. The role of accounting and the modern CFO will need to become well versed in data analytic skills to be able to pilot and grow an organization. The larger public accounting firms have already shifted their offerings to provide this insight for their clients. Smaller CPA firms like ours now have the tools and skills available to begin offering true CFO analytic services to our smaller clients. The ability to utilize data visualization tools allows accountants to have meaningful business discussions in real time that provide easy to understand pictorial representation of the business and its opportunities. These offerings will expand rapidly as the AI and machine learning develop further over the next few years.
All of these trends are and will change the face of accounting and CPA firms. If your accounting firm is simply providing bookkeeping or recordkeeping services, it is imperative to drive costs down through the use of modern tools and begin to add real data analytic services. These initial services will be bundled as either business consulting or real CFO services. The skills required for firms to provide these services are generally outside the current CPA skill set. However, most universities are providing the necessary skills for our new graduates to possess these necessary skills. The end result for CPA firms and our clients will be greater value and stronger business relationships than the traditional transaction based services.
Cordasco & Company CPAs provides boutique tax and accounting services. The firm focuses on understanding the rapidly changing tax and accounting environments and how to position its clients to optimize the benefits of these changing environments. Cordasco believes that current data analytics will significantly benefit its clients and position them for advancements in AI, machine learning and beyond.