The seemingly limitless potential of automation and artificial intelligence (AI) has attracted considerable interest. Andrew Russell is CEO and Managing Director of Class Limited, a leading provider of cloud-based administration software for investment portfolios across SMSFs and non-SMSF entities. He says, “Automation is driving efficiencies across accounting functions, and we are already seeing machine learning happening, particularly across activities that are repetitious.”
Thomas Paule, Chief Digital, Technology and Marketing Officer at Findex, a leading provider of integrated financial advisory and accounting services, says, “The area where we are seeing the greatest application, is in software products that are eliminating waste and driving efficiency. This type of rules-based automation is also having a significant impact on the accounting sector.”
Paule points out that in some respects, governments have pushed adoption forward, for example, through the introduction of Australia’s single touch payroll system. Nonetheless, he says, “The advent of cloud accounting suites has made the cycle of information more efficient, removing a lot of double entry processes undertaken by humans. Plenty of paper shuffling has gone from our industry.”
Finding a place in the value chain
While few will lament the passing of paper shuffling and duplication of data entry, for many in the accounting profession the research being generated around automation can seem threatening.
As far back as 2013, studies suggested that 47% of job categories would be open to automation within two decades, and accountants and auditors were cited as being the second highest in terms of risk, just after telemarketers.
A 2017 report by McKinsey Global Institute predicted that by 2055 half of today’s work activities could be automated, though it warned this could happen even sooner depending on a range of factors including economic conditions.
For an accounting sector facing the prospect of automation-driven change, Paule says it is essential for accountants to identify their place in the value chain. More particularly, he believes technology is driving the need for accountants to focus on analytical and advisory services.
Paule uses the analogy of stockbrokers, whose chief role in the past was to help clients place trades. Fast forward 30 years, and technology has seen stockbrokers morph into a role more closely resembling private wealth managers, with the execution of bull/sell orders being an administrative follow-on.
“I can safely say that accounting will follow somewhere down that path,” says Paule. “Where data structuring was once integral to the role of accountants, functions like this will become secondary to the provision of tailored analysis and advice.”
Redirecting cost savings into other resources
Taking on board new technologies can be disruptive, especially for SMEs and accounting practices that have followed ‘tried and tested’ processes for many years. Russell observes that among some accountants, “machine learning is still a ‘black box’ that isn’t well understood”. As such, new technologies can sometimes be treated with suspicion, though he adds that Class also sees early adopters – firms that recognise technology offers a way to become better practitioners.
“Firms that are thinking strategically can see that automation is a smart decision towards competing in the future,” he notes. “Already our customers are seeing significant benefits of automation, especially around being able to conduct activities in the cloud anywhere, anytime.”
According to Russell, a key benefit of automation is the options it provides accounting firms around the reallocation of resources. He explains, “The cost savings generated by automation can be channeled into the development of new business lines or reinvested in terms of growing more experienced teams to focus on higher order, revenue-generating activities.”
The rewards of an efficiency dividend
Russell acknowledges that investing in new technology does come at a cost, but he believes the pay-off is “a long-term efficiency dividend”. Other benefits accrue also. Russell points out that, “Automation isn’t just about improved efficiency and the cost savings this delivers. It also supports improved accuracy, which flows through to organisations being better able to meet compliance requirements.”
The ability to leverage new technology can be impacted by cost constraints, particularly among SMEs whose budgets don’t extend to having their own data science divisions. The issue however is not insurmountable. The rise of hosting providers like Amazon Web Services (AWS) and Microsoft Azure, has lowered the barriers to entry for many software providers that want a well-structured hosting environment.
Paule acknowledges, “These providers have enabled start-ups to come to market, and it’s a similar story with AI – they are now adding machine learning to their platforms, reducing the barrier to entry for many smaller businesses.”
The potential for fee compression
As SMEs embrace automation, accountants need to face the possibility of fee compression as accounting services become more commoditised.
“A natural knock-on effect of increased automation is that Accountants will feel fee compression for compliance services in the marketplace”, says Paule. “Clients will be less willing to pay for ‘number crunching’ services, and this is likely to further drive the evolution of accounting practices so that skill sets are focused towards activities such as advisory-based work, where fees are more recoverable.
“The big promise of the new solutions coming to market hinges on the ability of accountants to make the shift into the analytical and advisory side of their practice.”
COVID-19 highlights the value of technology
It is ironic perhaps that one of the biggest disruptors of the 21st century – the Coronavirus pandemic, has also delivered the biggest impetus to adopt new technologies.
Russell notes, “COVID-19 is not just changing the way we do business; it is changing the way we operate as a society. Technology has demonstrated its value during the crisis, and there is no doubt the pandemic has bought forward the rate of adoption of cloud technologies by at least ten years.
“It’s been a case of ‘we have to get into the cloud to do business, and we have to do it now’. The result is that we are suddenly seeing less fear of change because it is critically important to keep a business running. This is superseding the resistance to change that we may have seen pre-COVID.”
Russell adds, “Digital signatures for instance will become part of the way we operate, and teams are throwing funding into the development of this – a process that would have been a lot slower without the pandemic.”
Paule agrees that the pandemic has fast-tracked adoption of technology. “They say it takes six weeks to develop a new habit,” he observes. “Many businesses have been in lockdown for at least this amount of time, and it has forced SMEs and accountants to find new ways to connect and do business leveraging technology.
“The pandemic has created an understanding that it is possible to drive forward adoption and management of new technologies into the space of just a few weeks – and that’s very exciting.”
Choose a provider with a ‘partnership’ focus
The efficiencies that derive from automation can depend on a number of factors including the architecture of the software – how intuitive it is, and how quickly teams can adapt to it. Russell explains that “Good software suppliers understand the mindset of decision-makers – especially around cost outlay.”
He adds, “At Class we aim to give clients concrete examples of how the organisation will start to see significant efficiencies through time savings, improved accuracy and a greater ability to meet compliance requirements. We also have a ‘try to buy’ approach that gives each client the option to trial software to see first-hand how it will impact the business and reduce lead times. For us, it’s about building long-term partnerships.”