Do you have a pile of invoices and receipts that seems to grow faster than you can process them?
Generating expense reports and invoices, creating billing reports, filing tax documents, and monitoring constant changes in banking and finance compliance standards such as Sarbanes Oxley and GAAP (generally accepted accounting principles) are just some of the unique business challenges that accountants and finance managers must deal with.
However, there is some cutting edge technology on the horizon that will help small businesses meet these accounting challenges over the next couple of years.
In this article, we’ll break down the latest accounting industry trends, look at how the latest technology could impact your business, and tell you how to prepare.
1. Blockchain will streamline key accounting functions
You may have heard of blockchain, but what exactly is it? IT advisory firm Gartner defines it as follows:
“A type of distributed ledger in which value exchange transactions (in bitcoin or other token) are sequentially grouped into blocks. Each block is chained to the previous block and immutably recorded across a peer-to-peer network, using cryptographic trust and assurance mechanisms. Depending on the implementation, transactions can include programmable behavior.”
In other words, blockchain is a public ledger that executes value-based transactions through cryptography, thus eliminating the need for any third-party authentication.
Transactions do not only refer to monetary transactions, but also include taxes, votes, property, confidential documents, and more.
The image above highlights the key characteristics of blockchain on the left, along with functionalities of blockchain on the right. At the center of the image are some examples of blockchain frameworks developed by Microsoft and IBM, along with their industrial applications.
How blockchain will help accountants and finance managers
Blockchain will enable accountants to track financial transactions within a supply chain from manufacturing and transportation to the end consumer. This development will redefine how accounting software is designed to include more parameters related to bitcoin transactions, rather than cash-flow or debit/credit card transactions alone.
Accountants and finance managers can use blockchain technology to tackle the following business challenges:
- Automated audit workflows. Financial transactions are stored in blocks of information, which means traceable audits can automate the entire audit process, reducing paperwork and manual data entry.
- Reduction of fraud. Each block is authenticated by users, which can help in tracking asset ownership.
- Streamlined invoicing. Blockchain will allow accountants for small businesses to generate smart receipts to facilitate e-invoicing, simplifying and enhancing accounting document management, and allowing accountants to trace invoices in a supply chain.
Many people think bitcoin is synonymous with blockchain, though this is not entirely accurate. Bitcoin is just one example of a cryptocurrency that uses blockchain technology for distributed ledger transactions that are authenticated by multiple users without risking financial security.
Bitcoin represents a paradigm shift for accountants at small and midsize businesses (SMBs), since it redefines transactions based on bookkeeping to digitally linked blocks that contain financial information. In the past decade, digital cryptographic currencies have quadrupled to include a huge market capitalization of more than $43 billion as seen the table below:
The top 10 cryptocurrencies based on market capitalization value in ascending order
(Source: World Economic Forum Report, “Realizing the Potential of Blockchain“)
2. Edge computing will be a cost effective alternative to the cloud
In the last two to three years, cloud computing has been one of the top trends in the accounting industry.
However, over the next five years, cloud computing will be complemented by edge computing. This is due to the increased communication between IoT devices, along with the interconnected users, places, and processes, which make up the “intelligent digital mesh,” according to Gartner’s report, “Top 10 Strategic Technology Trends for 2018” (full report available to Gartner clients).
Edge computing is a scalable form of computing that generates, collects, and analyzes data at the site of the data generation—not at a centralized location, e.g., a data center.
How edge computing will help accountants and finance managers
Edge computing allows accountants and finance managers to host accounting software on a “local server,” meaning the server architecture is located closer to the data transactions than in cloud computing to reduce the volume of data sent in a wide area network (WAN).
Edge computing can help users redistribute accounting functions based on high volume of demand for payroll management or tax compliance.
For example, if your business is spread across locations, and in one location there is more demand for payroll management rather than tax compliance, you should host your set of payroll software application next to those business centers.
Benefits of edge computing include:
- Cost savings and increased efficiency. High traffic volume between an accounting application and a data center can lead to increased time for executing audits and other accounting tasks. With edge computing, the data execution is located locally, or nearby the user’s business, which reduces WAN bandwidth, thus reducing costs and increasing efficiency.
- Client workflow management. With edge computing, client relationships can be maintained by storing clients’ financial details in the cloud. This enables a collaborative framework to improve workflows with clients, since they can view their account details more easily.
When the accounting industry mostly relied on hard drive and paper-based workflow management, onboarding new clients—along with their data—was a key challenge. Edge computing hosts accounting software closer to a business’s analytics frameworks to reduce paperwork, making it easier for businesses to increase scope, as cloud-based accounting firms are five times likely to add more clients than traditional firms.
It’s important to note that most accounting software vendors have not yet deployed their accounting software with edge computing capabilities. However, edge computing will help streamline the cost of accounting software, as it will model pricing based on usage as compared to the site license model seen in legacy accounting software deployments.
3. Machine learning will increase automation of accounting tasks
A key business challenge that many accountants and finance managers face is data entry of records to maintain account ledgers and manage billing and tax filing activities.
Most accounting software can automate data entry and other redundant tasks to some degree, but this automation is often not complex and will be improved further. This is where artificial intelligence (AI), with the help of machine learning, comes in.
How machine learning will help accountants and finance managers
According to ICAEW’s 2017 “Artificial intelligence and the future of accountancy” report, accountants can use machine learning to improve accuracy and speed when entering data, through automation, better detection of fraud, and enhanced predictive analytics.
The following are some more benefits that machine learning will offer to accountants and finance managers:
- Faster expense auditing. With the help of machine learning, accounting software can learn a company’s expense policies, read billing and invoice information, and audit and approve expense claims based on established standards. This technology also allows for automated bulk expense reporting.
- Simplified payment processing. AI can help accountants analyze bulk invoices by automatically matching payment amounts with outstanding invoices. Accountants spend a lot of time managing accounts receivable and processing payments. Sorting through invoices is tedious, especially because customers will often combine multiple invoices into one payment, and historically, those payment amounts had to be matched with an invoice number manually.
- Lowered financial risks. Machine learning can help accountants identify potential financial risks by mapping expense reports and audits from your accounts project library and matching it to a current accounts project. Such a financial risk assessment by smart machines provides a comprehensive assessment that can be done in hours instead of the days it would take to do manually.
How to prepare for the latest accounting industry trends
An important note about these trends is that they are still in their development stages, and will bring more business opportunities for accountants and finance managers within the next five years.
Here are some other key takeaways to keep in mind as you look ahead toward leveraging these latest accounting trends:
- Educate yourself and invest in training for your accounting staff on the basic concepts of blockchain, machine learning, and edge computing. This does not mean you must be tech savvy or shift to a developer role to create your own machine learning-based accounting application. However, technology trends constantly change the industry landscape, and the rate of change has only increased in the past five years. If you don’t want to be caught off guard by the sudden impact technology can have on your business, you must educate yourself and your team on these trends in advance. Learn more about upcoming accounting trends by checking out our infographic on the future of accounting software.
- Look into custom designed solutions that use machine learning technology. To keep your business on the cutting edge of these accounting industry trends, consider hiring developers with machine learning experience to design customized solutions for your payroll or finance department. A freelance machine learning coder can design an algorithm that reads text from invoices and automatically enters the information in predefined data fields.
- Assess your requirements for placing accounting applications or data on the cloud or edge computing. While planning your accounting data architecture, make sure you use your network effectively. In other words, leverage edge computing by hosting accounting software where you require the highest volume of data transfers, instead of hosting software in a data center that may be located a great distance away.
These are just some of the latest accounting industry trends that are disrupting the profession of accountants and finance managers.
Check out these additional GetApp resources for the latest information on accounting software:
- GetApp’s finance and accounting software directory to read more about accounting platforms, what features are offered, and to read user reviews.
- GetApp’s accounting software scorecard to narrow down the options based on your unique business needs.