How cloud accounting and automation is changing traditional operating models for private businesses

Michael Clarke, Deloitte Private CSO, and Sholto Macpherson, business technology journalist and editor of DigitalFirst.com, discuss how cloud and internet-driven disruption is impacting the pace of change in the accounting sector.

The internet reshaped our personal lives with Facebook, YouTube and Netflix. Now it’s doing the same to our business software. And its impact on the way you run your company will be on a similarly revolutionary scale.

How is the traditional model for delivering compliance and accounting to clients being disrupted?

MC: The greatest change in business software is the transformation of the desktop accounting program, which is occurring in three parts – the move to the browser, the shift to mobile, and the use of AI.

The first is the move to the browser. Now (almost) every software vendor sells an online version of their accounting program which you can access from any device, anywhere you have an internet connection. The greater achievement is that online (or “cloud”) accounting software can send and receive information automatically between many sources, online and offline.

Can you provide any examples?

SM: Let’s take the retail industry for instance. Retailers making sales at the cash register can see transactions appear the next day on the general ledger. When a customer accepts a quote the accounting software instantly turns it into a draft invoice. Banks send statements as a list of transactions each day without the need to download and upload arcane accounting files.

Once data starts flowing into accounting programs automatically, user-created rules can automate much of the transaction processing. As a consequence it is becoming much easier to keep an accounting program up to date and its data verified and reconciled.

MC: Another example is our Connect by Deloitte platform. The speed and efficiency which the technology delivers allows us to be better connected to our clients, whether they be a private enterprise, a family group or family office, a not for profit organisation or a large franchise Group, we are able to provide real time financial data and day to day operational services to help our clients be in the best shape possible to make business decisions, mitigate risks and take advantage of opportunities that are identified.

We’re seeing this move making a significant impact with our existing clients who are already on cloud ledgers and experiencing the benefits of a single shared ledger that both our client and Deloitte practitioners can see in real time. This new way of working has enabled us to streamline the way we deliver our services and ultimately provide more value with better insights from an advisory perspective.

What about the shift to mobile?

SM: Smartphone apps have taken on several important functions; recording paper expenses, creating and sending invoices, and monitoring receivables. Mobile apps are expanding into on-the-go reconciliation and viewing business metrics, or dashboards. The latter is increasingly useful as it becomes easier to maintain your books electronically with weekly or even daily reconciliation.

MC: This shift works well for our clients as not only are we experiencing a change in the traditional user experience – for example  the ability for a client to send an invoice and accept a payment of that invoice almost immediately – this seamless experience enables our clients to be better connected to their accountant, staff and suppliers.

How will artificial intelligence (AI) play a part?

SM: AI is a really interesting area and its use will automate even more of the categorisation of financial data. Tools such as machine learning use an algorithm to understand how transactions are usually reconciled.

The algorithm creates its own rules that mimic the bookkeeper’s behaviour. So if a transaction is recorded differently than expected, the algorithm automatically updates its rulebook. It’s this last stage that will have the biggest impact. In fact, the move to cloud computing platforms has really been a prelude to the introduction of AI.

MC: Artificial Intelligence and Robotics were once the domain of sci-fi movies. Cloud has changed all of that as more and more data becomes accessible.  AI is essentially about removing some of the mundane things from accounting processes, like verifying information, classifying transactions, gathering data from multiple sources, and undertaking calculations.  The beautiful thing is, this creates capacity for accountants to focus their attention onto things that are more valued by clients, insights, scenario planning and relationship building.

Another facet of AI is natural language recognition. How will this positively impact businesses?

SM: Natural language recognition brings the art of conversation to the accounting app on your smartphone. So imagine a Siri or Cortana with bookkeeping knowledge. Within 12 months, some apps will be able to tell you who your best customer was last month and whether you have enough to make payroll next week.

How will automation and AI impact the work of accountants?

MC: Accountants are shifting into more value adding services at the request of their clients. These range from closer roles in forecasting or measuring company performance with KPI dashboards and taking over the complete finance function for private enterprises and family offices.

Machine learning can help us get better connected between multiple sources e.g. banks, accountants and Government. What’s more exciting is our ability to provide automated insights based on what is occurring in their cloud ledger.

The thing that is not changing in my view is the significance and importance to clients of the trusted advisor.  The Accounting profession has for decades held this mantle for many of Australia’s largest private businesses and for the families that own them.  The emergence of cloud, while it will continue to disrupt the profession, also strengthens the trusted advisor relationship as information is more accessible in real time.

SM: Just like the shift from typewriters to PCs, this revolution will accelerate the speed of business even further. The time elapsed between a good idea and a successful product or service will shrink. And good advice will become more important than ever.

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