5 functions that will be impacted by digitization

Written on Aug 21, 2019

By Gary Cokins, CPIM

Despite science fiction movies that present an apocalyptic view of robots, the future should not be feared. This is because robotic software can, for now, only handle low-cognitive tasks and does not have a sense of self-preservation like humans.

Regardless, we need to clearly identify where they will impact work the most. Here are five accounting functions that will be highly impacted:

1. Transactional accounting processes

Clerical accountants are the most vulnerable to digitalization and automation because their roles involve routine tasks like bookkeeping and data entry. These tasks are easy to replicate with software rules because they are not complex. Even if the transactions become complex, cognitive computing software can often apply increasingly more powerful algorithms to complete the work.

Primary examples are customer order processing, invoicing, credit, accounts receivable, payment collection, vendor purchase order processing and accounts payable, payroll processing, and travel and expense processing.

2. Fiscal period-end accounting closes

An organization’s period-end accounting tasks will also be impacted by digitalization and automation. Many companies use outdated systems and cumbersome manual accounting entries. The risk of digitalization for accountants is due to the increasing application of affordable commercial software that automates the workflow processes of the monthly, quarterly and fiscal year-end accounting close.

Current period accounting close tasks often include consolidating two or more divisions comprising a corporation. Some may be in foreign locations and currencies. With software automation, tasks that would typically be left until the end of an accounting period are also executed much earlier. Reconciliations of general ledger income and balance sheet statements and of bank and credit card account balances lend to standardization and automation. Intercompany netting and settlement journal entries are also automatable. Tax statement processing and preparation involves following many rules making these tasks obvious candidates for automation.

3. Auditing

The purpose of an audit is to obtain reasonable assurance about whether financial statements are free of material misstatements and irregularities due to error or fraud. Digitalization improves the quality of an audit in many ways. For example, using an AI-expert system capable of scanning through 100% of the data and applying advanced analytics and anomaly detection in the audit can lead to better-informed risk assessments. It leads to a far more focused and relevant (higher quality based on risk) sample of transactions which increases the speed of engagements and decreases liability.

4. Business process outsourcing of accounting tasks

The general term for third parties who perform outsourced accounting tasks is business process outsourcing. The BPO business model is typically based on fee-for-service pricing. With centralization and economies of scale from having multiple customers, a BPO provider can often perform both front and back office accounting tasks more efficiently.

5. Regulatory filings

Automation and technology have already begun to revolutionize regulatory compliance reporting. The implications are that rather than accountants requiring only mathematical acumen, mastery of tax laws, or bookkeeping proficiency, accountants can devote more time with increased skill to interpreting and analyzing financial information.

The impact on the jobs of accountants

As one begins to more fully understand the impact of software automation and the speed at which it will affect accounting jobs, accountants have two broad choices on how to react. The first is fearfully, wondering if they chose the wrong profession and should pursue a different career. The second is to seize the opportunity for change and embrace the positive and imminent impacts from automation. This includes preparing themselves for less tedious and more fulfilling work that will bring increasing value to their organizations, their clients as well as themselves.

The choice will be their own. No one has a crystal ball, but my bet is they will make the latter choice.

Gary Cokins, CPIM, is founder and CEO of Analytics-Based Performance Management LLC, in Cary, N.C. Hear more from him at OSCPA’s upcoming fall CPE days.

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