The Disruptive Impact of the Digital Revolution on Accounting
Organizations are slow at adopting progressive methods. This is true
for CFOs, CPAs, and accountants. The accounting profession needs to
prepare for change due to the disruptive digital technologies
transformation in progress called the “digital revolution”. Terms that
reference this are artificial intelligence (AI), intelligent automation
(IA), robotic process automation (RPA), and machine learning (ML).
In this Part 1 of my blog series I will describe the impact that this digital revolution will on the accounting profession and how accountants can mitigate the risks that will affect their careers. In my next blog (part 2) I will describe five accounting functions that will be impacted.
The Need to Embrace and Not Fear Change
We are witnessing significant changes in the nature of technologies available for today’s managers and employee teams with regard to infrastructure, availability, and capacity. These elements have accumulated in 4 key technologies often referred as SMAC – Social, Mobile, Analytics and Cloud. Venture capital investors have recently shifted towards big data and Artificial Intelligence that combine these technologies. These investments are accelerating the impact of this revolution.
Examples of digitization disrupting traditional industries such as Uber for car passenger transportation are just the tip of the iceberg. While the term Artificial Intelligence (AI) originated in the 1950’s, the world turned its back to the promises of AI. This is no longer the case.
Embracing “digital transformation” is the recourse for protection and preservation. This doesn’t mean that accountants should seek to become “data scientists” or build mobile apps. They need the competence to choose the technologies fitting them and be demanding and aggressive in adopting them. In some areas, low cognitive tasks, such as the manual and tedious tasks performed by accountants, can be augmented and monitored, down to key strokes, by an Artificial Intelligence engine. The AI will never take a vacation or get tired. It can operate 24/7.
Mitigating Risk Due to Digitalization Within Accounting
Automation is bound to impact accounting tasks and jobs. In some tasks where complexity is substantial and the volume, variety, and velocity of data are all high, computer software may out-think a human analyst. Automation is also capable of applying what was learned from previously solved problems to new problems. For example, automated analysis to evaluate the financial return from varying capital investments, such as for different assets such as machines, can be used to evaluate acquiring different types of new customers.
Accountants need to face the reality that low-cognitive tasks will soon be performed by a combination of brute computer processing power, big data, and algorithms. The most severe risk an accountant faces due to digitalization and automation is the elimination of their job. Other risks are downward pressure on salaries for some accounting positions, with potential increases in workload and work hours.
Different people have different reactions to change. Some people may deny the change, while others may embrace it. There are several ways that accountants can mitigate the impact on themselves:
- Increasing skills with education and training
As automation increases examining the output of automation, including reports and analysis, will be emphasized. As this emphasis changes accountants can convert their feared risks into opportunities. They can do this by acquiring new skills and capabilities such as with planning, strategizing and analysis which contribute higher value to the organization than simply reporting data. This can be accomplished via education and training. For example, The Institute of Management Accountants reports that members who pass its Certified Management Accountant (CMA) exam earn on average a 35% higher salary relative to comparable accountants without the CMA degree.
- Augmenting digital automation
In certain cases, accountants will find that robotic and analytic software does not fully replace a job function. It will instead automate the repetitive tasks of a workflow process, and the accountant can then augment the automation with value-adding work. For example, as automation reduces errors and generates information more quickly, the accountant can shift from producing reports to investigating discrepancies. In effect, the accountant becomes the machine’s supervisor. As automation occurs many jobs will be redefined rather than eliminated.
- New business models from digital disruption
Entrepreneurial accountants will recognize the opportunities that digitalization, automation, and artificial intelligence can bring for expanding existing business models such as business process outsourcing and tax processing services. Additional opportunities are to pursue new business models, such as financial software implementation services, including providing the analysis generated from the information produced from the software.
need to prepare themselves for less tedious and more fulfilling work
that will bring increasing value to their organizations, their clients
as well as themselves.
ABOUT THE AUTHOR
Gary Cokins, CPIM
(email@example.com; phone 919 720 2718)
Gary Cokins is an internationally recognized expert, speaker, and author in enterprise and corporate performance management improvement methods and business analytics. He is the founder of Analytics-Based Performance Management, an advisory firm located in Cary, North Carolina at www.garycokins.com . Gary received a BS degree with honors in Industrial Engineering/Operations Research from Cornell University in 1971. He received his MBA with honors from Northwestern University’s Kellogg School of Management in 1974.
Gary began his career as a strategic planner with FMC’s Link-Belt Division and then served as Financial Controller and Operations Manager. In 1981 Gary began his management consulting career first with Deloitte consulting, and then in 1988 with KPMG consulting. In 1992 Gary headed the National Cost Management Consulting Services for Electronic Data Systems (EDS) now part of HP. From 1997 until 2013 Gary was a Principal Consultant with SAS, a leading provider of business analytics software.
His two most recent books are Performance Management: Integrating Strategy Execution, Methodologies, Risk, and Analytics, and Predictive Business Analytics. His books are published by John Wiley & Sons.