For three years, I’ve assisted the American Accounting Association in the development of their Accounting IS Big Data show. It’s been fascinating to watch accounting professionals and academics change their perspective as the evolution of accounting as new technologies come into view. It's a process of that follows the classic denial, resist and acceptance pattern we see in technology adoption. Here’s a recap of what’s happened.
Year 1 (Denial)
Attendees at the inaugural show, were in for a shock. It appeared that an entire show’s worth of attendees poured into the first day’s sessions with a pronounced denial mindset. It was something a Missourian (i.e., the Show Me state) would appreciate: few attendees thought anyone was using Big Data for anything accounting related. It was great to see that mindset get changed as they started to recognize that the evolution of accounting was underway right under their noses.
By lunchtime, these folks went from denial to oh-wow acceptance of the de facto reality. In that event, they heard from an Atlanta firm that uses massive amounts of corporate credit card information, travel and expense reports and other big data stores to detect T&E fraud. Note: did you know that 82% of fraudulent T&E activities are committed by 5% of employees?
In a large case study exercise, attendees saw how big data was impacting most every business process within a business starting with order-to-cash. Some teams saw how hotels and restaurants that manage their Yelp, TripAdvisor, etc. reviews and rankings could see an 8% improvement in their top-line revenue. Some teams learned how Big Data could be used to create better sales forecasts than those developed by the Chief Revenue/Operating Officer – even when that executive has great SFA and CRM data. In fact, dozens of tables of attendees each learned fascinating business uses of Big Data that all had an impact on most every line of the P&L statement. At this stage, attendees recognized that Big Data was already impacting finance and accounting by virtue of the impact on the businesses to which they report and advise.
Year 2 (Resist)
The next year saw another shift in mindsets. That year saw a generation gap emerge within the audience and the show content continued to point out more uses and risks associated with the growing confluence of Big Data and accounting.
While some attendees were still evaluating whether Big Data was impacting accounting, speakers and others demonstrated how big data and related technologies like machine learning and blockchain were making bigger impacts.
At that show, Big 4 firms showed how they were creating new tax tools using vast amounts of corporate transaction and regulatory/compliance data to prepare better corporate tax filings. Attendees also saw how the same Big 4 firm could detect potential Foreign Corrupt Practices Act violations BEFORE the actual event occurs via monitoring of unstructured email and text message data. Future crimes had come of age for the show attendees.
Attendees understood that technology change was not going to be deferred. As a result, audience members had to decide how they would alter their careers, curriculums and businesses to optimize their outcomes and futures. Interestingly, one attendee publicly stated that he’d rather retire early than learn all of these new tools. Change can be tough on some people. But that should not be a surprise. My colleague Den Howlett reports a similar attitude among senior firm partners in the UK, the average age of whom is in the 50s, who are superannuated up to the ears and are counting the days before they put down their abacus and toss their mobile phone into the nearest garbage bin.
Three years into this, attendees now appear to have accepted this raft of new technologies but may have felt some were not ready for mainstream deployment. They wondered if Big Data powered technologies were still in the R&D stage.
A lunch-time panel of recent accounting graduates was a prelude to something bigger. Each of these recent graduates described how they were not interested in transaction posting audit related tasks that have defined the early career years of many in accounting. They want to provide more consultative advice to clients. These graduates see their best value to clients coming from insights not audit tick marks. Transaction processing was out – using big data and analytics to generate insightful analysis was in.
A group activity then showed that not all companies will make the transition to a more digital future – a future built on all kinds of digital exhaust from smartphones, e-commerce and other out-of-the-enterprise data sources. Audience members reviewed short profiles of several companies and debated which ones would/wouldn’t make it to a more big data powered business. They read about big and small firms, growing firms and shrinking firms.The audience learned that mere access to new technology will not ensure it gets implemented or used. In fact, culture, a willingness to learn/change, an absence of more pressing priorities, etc. were all factors in the adoption of new capabilities and use of Big Data.
The defining moment for that show, though, was when Fred Laluyaux of Aera Technology did a TED style talk. At one point in his remarks, he said that instead of talking about this stuff, he’d show the real world application of Big Data, workflow, natural language processing, AI and other technologies in three short financial accounting applications. Fred connected his cell phone and asked it ONE question: “What’s our revenue situation this month?”
The application didn’t just respond with an answer, it took it much, much further. In fact, the software initially said something like this:
(Software) “Fred, your current revenues are at $110 million month to date.”
It then provided an insight into the revenue value.
(Software) “This is approximately 8% behind plan for the month and is 2% below last year’s revenues at this same time”
It then assessed whether this was good or bad news for Fred and offered up the following
(Software) “If you’d like to increase revenues for this month, you might consider these three options. First, there is an open sales contract for $6.9 million that requires your signature before its revenue can be booked. Second, ….”
Then it offered to complete any of these options
(Software) “If you’d like me to help complete any of these options, press the corresponding option number on your phone”
Then it offered to serve up more suggestions
In seconds, Fred showed how natural language technology understood his request. AI technology had already learned that people follow patterns in how they deal with shortfalls or excesses in revenue. The software assessed the current situation and recommended relevant courses of action. And, finally, it was linked to workflow and the underlying ERP and other operational systems to make the changes happen.
The audience spontaneously burst into applause at the completion of his example. And, in that moment, everyone knew this: Big Data, AI, etc. had not only intersected with accounting, but, the technology was no longer a vision but very real and do-able.
That show ended with attendees pondering: what’s next for the profession?
Side note: Fast forward to today and I hear that yesterday, Jon Reed,another diginomica colleague, saw, or rather heard a demonstration of Amazon's Alexa doing much the same thing at the business decision maker level. In this case, the report is served up as a morning briefing the exec can digest as she is preparing for the day. Crucially, this occurs at a time of her convenience, in other words, it is on-demand. That is a radical shift from the accountant's perspective where time is booked in advance of client meetings, preparations are made, PowerPoints and spreadsheets are meticulously checked and then rechecked for accuracy all in background before the client meeting.
I'll repeat something my colleague Den Howlett said when he keynoted the first Xerocon on London five years ago and which is happening today in the UK.
The accounting profession is going to change or will be relegated to a small and irrelevant aspect of business. That is equally true of the professional public accountant. Businesses will want all their people proficient in the new technologies I've outlined and more besides. Despite the advances that appear almost daily, there remains a clear place for the advisory accountant who understands the interplay between cost and revenue drivers. Whether internally situated or acting as an external advisor, the skills requirements are largely the same.
To remain relevant, the profession as a whole must decide to either expand its focus/purview into these new areas or keep its focus narrow and limited.
The narrow route has its issues. Robotic process automation will continue to strip many clerical and repetitive tasks and in turn people from the profession. The numbers of payables clerks will continue to decline. More accounting functions will become automated and the need for basic bookkeeping personnel will decline. Audits are more automated and more real-time, although question marks remain about the precison with which algorithms are applied in the pursuit of ever lowering audit cost.
The profession as a whole may want to develop two tracks: one for those who aspire to be a CFO or partner in a certified public accounting practice and one for those who wish to become deep subject matter experts in the digital technologies that impact accounting processes and decisions. A certified digital accountant perhaps?
In the UK, that arbitrary split took place many years ago with the creation of public (ICAEW), what I call mixed mode (ACCA) and mostly plant (CIMA) accountants. Among members of ICAEW, the split between public practice accountants and those going into industry has been well underway for some years, effectively pitting ICAEW members against ACCA/CIMA members. The U.S. CPA designation has not seen any such formal split - so far. But it cannot be a long way off. How does this work out?
Modest proposals - training the CDA
At the risk of pre-empting any curricula, organizations like AAH might propose to the wider non-academic community, certified digital accountants (CDAs) would understand, in detail, how:
- Big Data is used to detect potential frauds, corrupt practices, etc.
- Algorithms work and what’s inside the black boxed analytics supplied by software vendors
- Companies can better protect themselves from digital risk
- Digital assets should be measured, valued, protected and reported
- To update and improve all manner of algorithms
- Richer financial forecasts are prepared using external, non-transactional and sometimes imperfect data sources
- Technologies like blockchain and its derivatives can be utilized to both protect payments and secure supply chains
This is not an exhaustive list but the start of a conversation that is urgently needed.
Academics must be part of this discussion since much of the founding knowledge is based in academia. Students/graduates need relevant skills that businesses want/need. The chronic shortage of data science, math and other skillsets are well-documented. However, the inclusion of new skills/training into curricula is often tough to complete as ‘accounting core courses’ and other degree requirements often fill up the students’ plate. Should universities create a more digital accounting program to fit the times? I believe there is no choice in this matter.
This also means that the typical accounting student profile will likely change as well. For those pursuing a more digital-driven accounting career, they will need more course work in the social sciences, math, statistics and information systems. Tomorrow's student will not want a career where he/she becomes the CFO of a company but rather becomes the go-to executive in a firm that knows how to drive better operating results from fresh and as yet unimagined insights arising out of the mix of data types that matter to both the industry and the firms within a chosen industry. We are already seeing the early signs of that.
Last week, Den Howlett reported on how Xero is offering benchmarking data to professionals for free. This week, I saw Workday starting on that same journey, starting with HR but assuredly moving towards the inclusion of financial data while all the time capturing relevant external data sources. I'll have more to say on that but in those two customer events alone, it is easy to see that technology is neither standing still, nor is the appetite for business consumption.
In the public accounting domain, automation will reduce the need for large numbers of new, right out of college 'tick and bash' hires. Smaller staff-to-partner pyramids may be coming and absent of new business models, this will impact partner earnings. If the business of accounting, audit and tax is changing, you can bet these firms will adapt.