Accounting has come a long way since it first kickstarted the invention of writing in ancient Mesopotamia, but the biggest changes to how accounting works have only just occurred in the last few years, and they’re still evolving today.
Quick takeaways if you’re in a hurry
- In recent years, new technologies, namely cloud based accounting solutions, have changed the way businesses do accounting.
- Modern accounting firms have split into two separate groups, smaller and traditionally compliance-oriented bookkeeper organizations, and strategic advisory firms that integrate accounting with enterprise risk management, insurance management, and more.
- The cloud has opened the door to big data in accounting, and is promising to integrate accounting into a larger developing business intelligence industry.
Read on: Bringing accounting into the 21st century
[Estimated reading time: 5 minutes]
Accounting and the cloud
Technology has brought about a lot of change in the accounting world over the past few years. It has increasingly given businesses better control of their finances, and given them more tools to manipulate and apply their accounting data.
The introduction of cloud-based accounting has revolutionised bookkeeping. Computers made it easy to modify and recalculate existing data compared to our grandparents’ pen-and-calculator powered accounting tools, but the cloud has made it possible to automate the entire system.
Cloud-based accounting systems like Xero, MYOB, Qucikbooks, and others can automatically track bank account transactions in real time, manage and track payroll and other costs, calculate taxes, and generate regular reports without the risk of human error. Today it’s possible to know everything there is to know about your business’ financial situation at a glance, on any day of the week, month, or year.
The new world of accounting
These changes have created two distinct accountant groups who seek to apply these new tools for slightly different purposes. The type of accountant you and your business choose to engage is a matter of personal preference, just as the goals that you have for your business are.
The first group is what we’ll refer to as advanced bookkeepers. These tend to be smaller accounting firms that keep everything in order and up to date for you. They can track what you’ve done through Xero (or whatever other software you’re using) and help to produce your end of year reports and GST (Goods & Services Tax).
They’re focused on helping you reach compliance and are the ideal choice for business owners who are looking for a way to spend less time thinking about their business’ accounting, and more on running everyday operations. That’s not to say larger corporations don’t or shouldn’t work with these firms. In fact, many sizeable businesses prefer to handle higher order accounting concerns in-house due to privacy concerns, or out of a general discomfort with outsourcing these kinds of tasks.
The second group of accountants has moved away from a compliance focus and grown into a more forward-looking advisory and strategic role. They work with their clients to address higher order concerns like enterprise risk management, actuarial consulting, and insurance management. These are usually structured practices, and range in size from small 5-person teams up to the big four accounting firms.
Accountants analyze client data in real time and apply their experience and expertise to make recommendations to their clients. Larger firms, especially Deloitte, PWC, KPMG, and Ernst & Young, are increasingly experimenting with and developing ways to leverage the enormous amount of data they have access to in order to bring big data computing to bear for their clients.
On the horizon: big data in accounting
The introduction of big data into accounting is still ongoing, and its effects are promising to be extremely significant. Big data has transformed everything it touched, from marketing to mass government surveillance. Accountants have only recently begun looking at it as a possible resource, largely because ignoring it any longer could threaten their entire industry and relegate them back to the realm of simple bean-counting.
The secret to its success is that it allows us to analyse a vast amount of unstructured information. “Unstructured” isn’t just expedient, it’s also significant because it means that we can find unexpected patterns that could otherwise be obscured by the very act of sorting and partitioning the data. By analysing not only accounting data, but also marketing, sales, and consumer data, these firms will be able to integrate and apply their accounting expertise to every aspect of your business from marketing to purchasing, to overall production and performance.
This new service isn’t just accounting anymore, it’s a symbiotic business intelligence partnership. It will allow businesses to optimise their operations as never before. Not only will financial oversight be effortless, businesses will have much more advanced abilities to detect fraud, to budget for the future, and to develop low-risk/high-reward growth strategies.
Accounting is changing rapidly, and it’ll be fascinating to see how the field continues to develop and integrate with other aspects of client operations over the coming years.