snh 2018
Technology is bringing opportunities as well as challenges, and the profession can thrive by adapting and evolving
I have had the fantastic opportunity to work with colleagues in the private sector, interact with external consultants from public practice, and to do so in both for-profit and nonprofit organizations. Additionally, as I’ve transitioned from industry to academia I have made significant efforts to keep one foot in both areas by remaining involved, engaged, and passionate about the future of our profession. One thing, across different associations, industries, and subsets of accounting continues to hold true; disruption is coming for our profession in a big way. Whether it is the continued integration of big data, the tidal wave of blockchain technology poised to revolutionize the profession, and the looming impact that AI will have, the profession in the midst of a paradigm shift. Previous changes have certainly had a dramatic impact on the accounting profession, but the convergence of accounting and technology appears to represent a fundamental shift in how accountants work, are perceived, and are positioned in the marketplace.
The real question is, at the end of the day, how can accountants cut through the hype, understand these technology forces, and leverage them to their advantage? Let’s take a look at some of the changes, the impacts they will have, and what accountants need to know.
Changing requirements for financial reporting
Financial reporting forms the foundation of what many accountants do on a daily basis, and provides perhaps the visible way by which accountants can add value to their organizations. Traditional financial reporting, which is what virtually all accountants have been educated and trained in, both in college and via continuing education courses, focuses on producing information that is consistent, comparable, relevant, and timely. That said, many traditional financial reports are designed for a narrow subset of users, namely financial shareholders and creditors, and not the broader stakeholder base. In addition to this limited applicability, the time lag that tends to accompany the reporting of financial information also limits the usefulness of reports to end users. Changing expectations and requirements of the market, however, are forcing organizations (and their accountants) to evolve in order to address some of these limitations.
Integrated reporting, and other types of non-financial reporting, focuses on communicating and quantifying the numerous types of operational information that, at the end of the day, actually drive financial performance. Simply thinking of additional reporting requirements as yet another compliance requirement, however, will leave accountants unprepared to succeed moving forward. The fact is that, in a business environment that is increasingly digitized, globalized, and interconnected, end users of organizational information are interested in not only how the organization is performing, but how sustainable this performance is over the long term. Taking a step back, and realizing that sustainable growth and success is, ultimately, the desire of financial and non-financial stakeholders makes the transition to more comprehensive reporting seem increasingly like an opportunity. As internal and external end users expect and require information reported on a wide array of performance metrics, CPAs and accountants have a definitive opportunity. Leveraging existing skills, namely our ability to track, quantify, and report information, and a professional ability to explain what quantitative metrics mean for the business sets accountants up to play a primary role moving forward as organizations have access to ever increasing amounts of information.
Being aware of these forces, and realizing the implications is a very important step, but what tools are available for accountants to use to facilitate this transition from record keeper to business advisor?
Blockchain, AI, and the future of the profession
Technology is nothing new to the accounting profession, and many of us are extremely proficient with a whole suite of technology products and platforms. That said, and despite the continued integration of technology into the profession, these tools and platform represent incremental changes to work flows and processes. Going paperless, automating some basic approval steps, and even moving to cloud are business friendly steps that reduce costs, increase efficiency, and allow accountants to deliver more value to clients and organizations. Even with all of that, however, two emerging technologies appear to represent an exponential change to how accountants will work, and interact with, data moving forward. There has been a lot of discussion, media coverage, and articles written about both of technologies, and I am not going to reinvent the wheel. I’ve written quite a bit about these topics, but really want to focus on 1) what these technologies mean for accountants, and 2) the opportunities these technologies will generate.
Blockchain
Blockchain is, at a high level, a decentralized ledger system that allows all members of the blockchain (network) to access and view information that has been uploaded (blocks), and approved to be added to the network (chain). In addition to this open access functionality, once information is added it cannot be changed without a complete reversal, is encrypted, and can be accessed in real time manner by members of the network. These technical functions can be summed up as follows:
- Information is encrypted and secured from data hacking or breaches
- Data is available to all approved network members in real time
- Any type of data, even contracts, can be uploaded and secured onto the blockchain
Think about what this means for audit and assurance work. If organizational data is secured, accessible in real time, and has been approved by counter-parties involved in the transactions, this will greatly reduce the time and effort required to complete verifications and confirmations. Taking a step back, this reduction in time will eliminate some lower and even mid-level roles, but will allow accountants to, at some point in the not too distant future, conduct more comprehensive, and potentially all-inclusive audits.
Artificial Intelligence
Artificial intelligence has been a part of mainstream media for decades, been featured and the topic of movies, books, and vigorous debate. Drilling down to the essence of the issue, however, is critically important to cut though the buzz and to understand the implications AI has for the profession moving forward. At the core of the idea, AI represents computer software, or a suite of programs, that enable computers to manage and handle processes and situations that previously required human intervention and oversight. Also, critically important for accountants to recognize is that the implementation of artificial intelligence into business processes may sounds like an event or transition is far off into the future, but the fact is that it is already here. KPMG, in 2016, announced a partnership with IBM to augment existing audit processes with the Watson AI system. In the flurry of activity and coverage that followed this event, and other announcements like it, it can be easy to get caught up in the buzz.
Drilling down, some of the most important and impactful characteristics of AI for accounting professionals include:
- The automation of many tasks that, while time consuming, do not add value to practitioners or organizations
- Reduction of errors due to increased review and processing of data by AI programs
- Cutting down on the amount of time and personnel required to compile reports, perform audits, and prepare tax returns, allowing practitioners to focus on higher level activities
With all of these changes, and potential opportunities, there will inevitably be some disruption and displacement of some current practitioners, but these disruptions pale in comparison to the opportunities AI will create. Arguably more important for practitioners to understand is that AI and blockchain are not optional technology trends, nor are the niche products only applicable to certain industries. As these tools become increasingly mainstream, practitioners will not only have to educate themselves, but highlight the benefits of integrating these tools into their organizations.
The way forward
Accounting professionals hold a unique role in the market as advisors, quantitative experts, and professionals that not only create quantitative information, but who can explain the business case of these metrics to clients and end users. These competencies, and the value they create, are not under threat of change, but will inevitably be augmented by the rapid pace of technological innovation. Even in the midst of these changes, however, accounting professionals that are forward looking, proactive, and willing to adapt will be well positioned to create value for themselves, the profession, and end users moving forward.
Come see Dr. Sean Stein Smith speak about how you, a CPA, accountant or financial advisor can thrive in a digitally disrupted environment at Scaling New Heights 2018.