Catherine Dahl (CPA, CMA) is co-founder and CEO of Beanworks, a Canadian accounting automation software
Innovation is a necessary part of any industry, but some sectors are slower than others when it comes to embracing technological change. In recent decades, accounting has become one of the worst laggards.
The blame does not rest entirely on the shoulders of accountants either, but it does represent a systemic issue – accounting departments aren't typically viewed as a strategic pillar of the business.
According to a 2017 survey by the American Institute of Certified Public Accountants, nearly three-fourths (74 per cent) of CPAs say finance and accounting should play an important role in an organization's innovation efforts. However, just 30 per cent of respondents said finance and accounting actually contribute to innovation.
This disconnect can be detrimental for businesses as we push further into a future in which big data drive decision making. We know that automation is an essential tool in both aggregating and parsing that data. However, only a small percentage (14 per cent) of executives say that their current financial technology is actually able to support data-driven business planning, according to a CFO Research survey.
Accounting and finance innovation lags behind partly because, until fairly recently, IT departments have been the primary champions and gatekeepers of new business technologies. Allowing the burden of innovation to rest solely on the IT department's shoulders means that other departments – especially accounting – fail to understand that they, too, play a critical role in propelling the company's innovation forward.
With the rising popularity of cloud services and the Software-as-a-Service (SaaS) delivery model, however, accounting departments can no longer sit back and let IT drive. IT's role has diminished significantly, as software purchase decisions are increasingly being made directly by business line buyers without the CTO's intervention.
And the role of cloud and SaaS in the new horizons of accounting innovation cannot be understated. While a majority (71 per cent) of finance executives recognize that moving to cloud-based financial systems is "fundamentally challenging," 66 per cent of executives surveyed also admit that the value of cloud-based automation software in accounting departments will undoubtedly outweigh the cost.
The meteoric rise of e-mail marketing software and project-management applications over the past few years shows us that the roadmap to the accounting SaaS revolution is already clear. Typically, the initial launch of SaaS in a given software category will start out with niche products that solve specific business problems. As more products are created, early adopter businesses will begin to recreate their entire system with SaaS products, often resulting in a patchwork of disparate products, or as we've heard it called, "death by a thousand SaaS cuts." Eventually, more comprehensive SaaS products that provide a full-system solution will enter the market.
This is happening right now in accounting and it's started with automation.
More specifically, a slew of new niche products have emerged to automate select accounting tasks: accounts-receivable collections, bank feeds and billing. And with new products becoming available, there is a growing need for education among financial professionals. Since software purchases are no longer under the exclusive control of the IT department, the onus is on accountants to push for change and learn what tools exist that can help them do their jobs more effectively.
What we're likely to see is that the younger generation – new to the work force and not yet entrenched in the norms of manual accounting processes – will fight against monotonous data entry and endless Excel spreadsheets – typically seen as a necessary evil by accounting veterans. As an example, at our company we measure the time we've wasted on mundane or routine tasks, which helps us guide best practices and improve efficiency. We've now automated processes that previous generations didn't mind completing by hand, but the new generation will not fall in line with so easily.
They will be the champions of change, or else companies that refuse to adapt are at risk of losing them all together. Stagnation can only lead to frustration, and new accountants will find other opportunities to use their skills in environments where they can achieve higher job satisfaction.
But innovation is much more than using technology. It's about noticing trends and recognizing new opportunities that will benefit your business, even if it's not the norm. Accountants must be willing and able to move on from the traditional ways of doing business, educate themselves and embrace the new ideas and technologies now at their disposal.