Brian Sommer's update on what he found during a 'summer of love' among accounting professionals provides us with solid insights into how showing not telling works with functional leaders. Sommer's story is an excellent starting point from which to open up a debate about the role of accounting in the 21st century and how this translates to challenges for the office of the CFO.
Accountants - of which I am one by profession - are an interesting bunch.
Often characterized as technology laggards, many see their role as keeper of the business purse. That is correct in the context of compliance and governance. But that is only one role among many that compete for time and effort.
There's the cost accountant, the management accountant, the reporting accountant, the forensic accountant and on and on. Each uses technology in different ways and from different perspectives but at the heart of their work are the immutable governance frameworks, often encased in legal concrete. That isn't going to change any time soon. What has changed are the expectations of those who are advised by accountants and the pivotal role that CFOs take in this transformation.
We see the transformational outcomes most clearly at the bottom of the accounting food chain among the small and medium sized businesses that have taken up SaaS based accounting solutions like Xero and QuickBooks Online. For the full year to 31st March 2015 (PDF), Xero reported 475,000 paying customers. In February 2015 I reported from the UK:
As Gary Turner, MD Xero proudly showed me the empty auditorium for an expected 800 person crowd at Xerocon London, we both reminisced about the first Xerocon a couple of years ago at which the company was hard pressed to get 120 people into Chartered Accountants Hall.
Intuit is claiming global cloud status although some find that a stretch. Fast forward to Workday's latest quarterly report and we find it has more than 150 customers using Workday financial management, 80 in production. Somewhere in the middle we have Intacct that claims 9,000 customers.
The delta in customer acquisition between Xero, Intacct and Workday may seem huge but everything is relative. The SMB SaaS accounting market is huge but fiercely competitive. While the SMB market runs many millions, the enterprise market is much smaller, perhaps 100,000 around the world. The gyrations in the market we first saw back in the mid-2000's provided fertile opportunity for me to comment on it between 2005-12 at AccMan (now defunct but you can find pieces at the Wayback Machine.)
If you agree with me that change in the accounting world is a bottoms up affair then an understanding of how this has worked at the SMB level is important for enterprise observers looking forward to big data initiatives.
The SMB battlefield is not so much for the end user who has already bought into a services approach to technology. Instead, the target is the professional adviser who has seen compliance work eroded over the years as legislation was relaxed for that segment. The new professional firm is much more likely to see compliance as the entry point to useful and lucrative advisory work. While not explicitly stated, the emerging advisory profession is the world Sommer is envisioning in his discussion.
What's not discussed is how this changes the finance department as a whole. For instance, Sommer's illustration identifies big data impacts on cost of sales and overheads that point to important shifts in the notion of what cost accounting means in manufacturing.
I've never been a fan of the prevalent standard costing model because it is an artificial construct that assumes relative stability in the cost profile. In the big data world, costs become predictive in a way that will be unfamiliar to the current crop of standard cost trained professionals but it is disruptive to the standard cost model and requires a fundamental rethink about the role of cost accounting. Some examples help illustrate the issues at hand.
- Will materials purchasing continue to be based upon negotiated amounts run by procurement operations that are communicated back to the costing office?
- What about the impact of 'time to buy' data? How for example will the cost office and procurement professionals collaborate to ensure that surprises are kept to the minimum?
- Can seasonality be influenced in the cost cycle?
- On the other side of the management coin, how will accountants who advise on pricing strategies straddle both marketing and manufacturing to ensure margins are maintained or grown in both retail and business-to-business markets?
- To what extent will insights from fresh data sources encourage elastic pricing to the end user?
Like it or not, each of these examples necessarily require accounting input at multiple levels, across multiple disciplines and, most likely, in real time.
As a former professional accountant I find the opening up of these kinds of discussion exciting, inspiring and invigorating. I wonder the extent to which others see things the same way. One thing's for sure, spreadsheet wrangling will never be the same again.