BIIA thanks its partner organization Cyber Security Intelligence for providing this premium article for our members.
New technologies and the impact of Covid-19 on the labour market have been radically transforming the way that organisations conduct business and the type of skills their talent needs to help them thrive in this new age of work.
Nearly 50% of companies expected that by 2020, automation will lead to some reduction in their full-time workforce, while more than half of all employees will require significant re-skill and upskilling. The Covid-19 crisis has exacerbated these trends, increasing the need for large-scale, informed and collaborative action.
As the Fourth Industrial Revolution impacts skills, tasks and jobs, there is growing concern that both job displacement and talent shortages will impact business dynamism and societal cohesion. A proactive and strategic effort is needed on the part of all relevant stakeholders to manage reskilling and upskilling to mitigate against both job losses and talent shortages.
Now accounting is recognised as one of the areas of business that can be automated and supported by Artificial Intelligence (AI) and cyber effects on big data.
AI has exciting potential for the accountancy industry, but some accountants wonder how to put it to use without losing their personal touch. There has also been the discussion as to whether AI will put Certified Public Accountants (CPA) out of business.
In 2015 the UK media widely picked up on American media organisation NPR’s calculator that could predict which jobs are susceptible to computerisation. The calculator, using research by the University of Oxford, said accountants have a 95% chance of losing their jobs as machines take over the number crunching and data analysis. But as a recent report from Deloitte highlighted, technology advances have historically eliminated some jobs and created others. There’s no reason to suppose that this trend will not continue, says Deloitte: “We cannot forecast the jobs of the future, but we believe that jobs will continue to be created, enhanced and destroyed much as they have in the last 150 years.”
It’s easy to get overwhelmed by the prospect of AI becoming widely used in accounting, especially if a CPA is replaced by automation. But instead of fearing these advancements, CPAs should embrace them and find ways to augment their skills rather than replace them. However, AI is here to stay and so don’t try to ignore this technology in the false hope that it won’t affect your business. Instead, educate yourself on the potential of AI to improve your business. Invest in new systems and put them to use so your company.
Accountancy is a traditional industry and its businesses are often departmentalised, meaning accountants tend to focus on accountancy and the high level of new legislation and regulations that come in, and it is not their natural stance to think about security.
In the accounting world today, AI is most commonly used to complete repetitive tasks, such as recording data, sorting transactions, reconciling accounts, inputting and matching data from scanned receipts and invoices to transactions, comparing employee expense reports against company policy and tracking price et cetera.
With the development of artificial intelligence technology, artificial intelligence has entered the accounting field more and more deeply, which plays an important role in improving business efficiency, reducing work errors, preventing and controlling enterprise risks, improving enterprise competitiveness, and improving human resource efficiency.
Artificial intelligence technology is like a double-edged sword. While promoting the development of accounting work, it will also cause accountants to face the crisis of unemployment in the workplace.
Embrace AI In Accounting
If you are worried that technology will make your employees obsolete, consider that some expert have predicted that AI could improve productivity for your employees and company by 40% and that CPAs should courses in AI accounting and data management to take advantage of this technology.
The first step to using AI for your firm is identifying tasks where it can have the most benefit. AI is ideal for mundane, repetitive tasks like uploading files, payroll, auditing and others. It is excellent for collecting and sorting through large amounts of data. This is where you can see the biggest increases in productivity while giving accountants more time to work on tasks that take critical thinking and creativity.
When you have so much to do that you wish you had an extra set of hands, AI is that extra set that will take care of the more mundane repetitive work
- Eliminates almost all the repetitive mundane tasks from bookkeepers’ daily workload.
• Makes data readily available, which also saves a lot of time.
• Automates the gathering, sorting, managing, and visualizing data-related processes
• Enables your team to focus on more strategic tasks and assignments
• And finally, because of these benefits, accountants can understand and assess the condition of your company much quicker at any given time.
This clearly means the juice is worth the squeeze! With artificial intelligence, your financial department can save a lot of time and money, automate lots of tasks, and obtain more accurate results. You can use AI-based software to make sure your reports and compilations are flawless and legible. Primarily Computer Vision (CV) and Natural Language Processing (NLP) algorithms can scan your documents, analyse the content, and help you find potential errors, making the whole process not just more efficient but more accurate as well.
With reviewing and auditing financial documents you can use software based on machine learning to make the whole process much quicker. As a result, human accountants and bookkeepers can spend much less time analysing trends and looking for potential outliers.
AI can help you detect duplicate or erroneous invoices and other accounting errors, reduce the risk of financial fraud, determine connections between different payments (money laundering), and even improve compliance procedures. The more data flows through your company, the more probable it becomes for some sort of fraud to happen. This makes the accountant’s compliance task much more difficult to complete.
The most important aspect of AI in accounting is that it helps you make better decisions.
This means the decision-making process in your company is streamlined as well. Your company can grow more dynamically and make more accurate business decisions, for instance, concerning investments, new products/services, and modifications. Moreover, with smart data analytics, you can analyse all the information you can find, from social media activity to your customer expenditures and habits. This knowledge can be easily translated into valuable business information.
You can use accounting data in your company to:
- Perform cash flow forecasting
• Analyse salaries in your company
• Analyse business performance
• Assess financial condition
• Predict possible drops and crises
In fact, with data analytics, accountants in your company can help you with other business areas, and the knowledge you possess is far more comprehensive and useful business-wise.
In mid-2018, the Journal of Accountancy informed the market about a recent project conducted by EY. They used drones to help human accountants audit large warehouses and outdoor inventories. The goal was simple: Drones could scan barcodes automatically and transfer received data to the auditors. So, the result is obvious. The auditing process took much less time and was far more seamless for both the auditors and the company.
You have to understand that AI/data analytics is not a magic wand. It’s only as good as the data you feed it with. Therefore, if you want to ensure that the insights you get are as accurate as possible, ensure that you have everything in place concerning data management and security and that you have taken and continue to up-date and up-grade your AI understanding and effectiveness.
Cyber Security and Data Privacy
Hardly a week goes by without yet another report of a high-profile cyber security breach affecting companies worldwide. And the incidents are increasing: a global survey conducted by PwC shows that the number of attacks reported by midsize companies keeps increasing. These attacks come at a great cost. A single data breach costs US companies more than $500,000 on average.
In the UK, and the average cost of the most severe cyber security breach for a large organisation now starts at £1.46m, although that figure doesn’t take into account the impact a breach has on an organisation’s reputation and relationship with its stakeholders. Smaller businesses are equally likely to suffer, with the cost of a severe breach reported at between £65,000 and £115,000, according to research.
Accountants and other financial institutions are particularly attractive to cyber criminals. In fact, PwC estimate that financial institutions are over 30% more likely to be targeted than other companies.
Kaspersky has reported probably the biggest organised cyber attack on financial institutions to date. A multinational gang of cyber criminals infiltrated more than 100 banks and other financial organisations across 30 countries, siphoning off £645.6m ($1bn) in total directly from the banks rather than from their customers.
Accountants, both in practice and in industry, must therefore understand how to identify and respond to cyber security risks, rather than ignore the issue in the belief that cyber security is the domain of their IT departments or that their organisation’s software will prevent any breaches.
In fact, while cyber attacks are growing increasingly sophisticated, the main reason for security breaches is lax security awareness among employees. Bad password behaviour is one example. Research from password management firm Meldium shows that 90% of employee passwords are so predictable they can be cracked in six hours. Moreover, 18% of employees share their passwords with others. Many employees also have their work emails automatically forwarded to personal email hosts. But hackers often look for corporate data through personal email, which is easily accessible to them because personal email services do not have the same security measures as corporate email services.
While no organisation is immune from cyber threats, there is much that can be done to prevent breaches.
Different countries have different regulations and laws about how information and data is used, with many internet-related services traversing multiple boundaries, so it’s not always straightforward. Not only do financial institutions need to combat cyber threats such as web application attacks; bad bots; ransomware; and phishing attacks, they must also consider how to maintain uptime before, during, and after these kinds of breaches in order to provide seamless service to customers and maintain compliance with regulators.
If accounting firms cannot guarantee the security of information, it could have grave consequences for their clients as well. Small accounting firms could go bankrupt if their data security is compromised. CPAs and firms have access to sensitive financial data.
In today’s digital environment where a piece of small news can travel across continents in seconds, your company’s reputation should never be hampered. Customers can share any negative news or that of a data breach in a jiffy (negative news travels faster than positive news). It will negatively impact your profits and may result in a long-term impact as well. Hence, it is imperative for you to implement the latest cybersecurity standards.
There are some basic procedures you can put in place to assist in your steps to becoming cyber secure:
- Regularly train your staff
Educating your team regularly on the different (and changing) aspects of cybersecurity is critical. This training should include advice on how employees can ensure safety when online or handling sensitive data. Accountants should consider the following areas for cyber security:
- Good password health, and avoiding using the same password for multiple accounts (which is called ‘daisy chaining’)
- Storing passwords in unsecure places, such as in web browsers
- Avoid using unsecured networks for work, such as coffee shops
- Keep systems up to date
- Ensure all computers are up to date, especially operating systems and any software updates or patches.
- Regularly applying security updates, including patches, is a small and convenient step that accounting firms can take to ensure greater security and protection against risk varieties. This means evaluating what software is being run by your computers, especially if any are taken off-site, and ensuring that software is patched.
- Manage levels of access
In a busy office environment, such as an accounting firm, giving all staff the ability to access data is a vulnerability. For example, admin staff may not need to see more confidential data such as financial statements. You should actively manage access to different kinds of data, ensuring that there’s a reasonable chain of authority.
Regulating access levels, like setting up file permissions, can help to isolate any potential breaches and risks.
- Setting up multi factor authentication
By having more than one step to login to software, you can prevent potential hackers and other malicious users. This can be achieved via an authentication app on your phone, using a mobile phone number to get a temporary access code or having to use a USB stick as a ‘key’.
As disruptive as they may be, the truth is the Internet of Things (IoT), augmented reality, and AI are enabling breakthrough solutions and new unprecedented opportunities for growth. As more organisations take an advanced approach to managing their business, they are increasingly exploiting the potential of these technologies.However, even though AI, combined with automation and machine learning capabilities, eliminates routine and pre-defined processes from manual hands, analytical capabilities and other related processes remain firmly rooted in the domain of human intervention.
AI and automation will not be replacing finance and accounting professionals in the foreseeable future. On the contrary, as AI automates many aspects of business, there is a big opportunity for accounting and finance professionals to upskill themselves to meet the requirements of the 21st century.
A few years ago, The Coca-Cola Company began reviewing its existing balance sheet reconciliation process across 50,000 general ledger accounts. Multiple systems and manual processes had created serious challenges which saw more than 800 associates spending 14,000 hours a month on reconciliations alone.
By moving from manual processes to automation, Coca-Cola was able to reallocate 40% of the team involved in manual and routine reconciliations. The team was then able to focus more on activities like metrics, reporting, IT controls, and change governance. Since the shift in 2015, the company has realised millions of dollars in efficiencies that have been reinvested into the accounting function.
As more companies look towards modernising their finance and accounting processes, implementing some degree of automation is a logical step to increase efficiencies and automate time-consuming transactional tasks.
Countries in the Middle East have recognised the importance of such technologies and have seen exponential growth in demand. There are various initiatives in the region that promote the inclusion of these technologies, including the UAE Strategy for Artificial Intelligence (AI), that aims to make the UAE the first in the field of AI investments in various sectors. In Saudi Arabia, Saudi Vision 2030 has made investment in robotics and Artificial Intelligence a pillar of the nation’s economic development strategy.
Accountants who want to ensure career viability and succeed in the long term must develop technical competence in the areas of data analytics, data science, business intelligence, and information systems and expertise in more traditional (yet high-demand) skills like financial planning, decision support, internal controls, and risk management. Not many of these technical skills are covered in college accounting courses, but they can be gained through programs like the CMA certification, new degree and technical certification programs, and courses offered through the Institute of Management Accountants (IMA) aimed at preparing accountants and financial professionals in business for the future.
History To The Present Day
Accounting is a system of recording and summarising financial and business transactions. Record-keeping, accounting, and accounting tools have been used for as long as civilisations have engaged in trade. Many historians hypothesise that one reason writing systems were developed was to record trade transactions. Some of the earliest writings discovered by archaeologists are accounts of tax records on clay tablets. These first examples of accounting come from Mesopotamia and Egypt date back to between 3300 and 2000 BCE. In the 13th century, medieval Europe moved toward a money economy. Merchants relied on bookkeeping to oversee the multiple simultaneous transactions financed by bank loans. As industry moved forward, it was clear that accounting procedures needed to be refined for higher accuracy and efficiency.
Until we got computers and Excel, most accountants did their work pretty much the same way it had been done since Luca Pacioli first described double-entry bookkeeping in 1494. Ledger sheets, pens, and adding machines were the tools of the trade.
The development of QuickBooks in the early 1990s put computerised bookkeeping within the reach of small businesses who couldn’t afford the expensive mainframe computers and ERPs used by finance departments at Fortune 500 companies.
Now, thanks to accounting workflow automation, bookkeepers don’t need to spend hours and days on data entry when bank feeds can pull financial data into an accounting system in minutes.
Automation streamlines processes and converts inefficient, error-prone, labor-intensive processes into efficient, error-free processes that need very little human intervention. Automation doesn’t just save time, but it also gives you more accurate numbers. Real-time updates mean that business owners always know what their numbers are. Automation in accounting has been made easier by the development of APIs, or application programming interfaces, which allow different pieces of software to interact with your accounting system.
Some automation software leverages AI and machine learning to expand its functionality beyond programmed rules. In machine learning, access to a large database of knowledge or accounting transactions allows the technology to figure out the patterns in that data and improve its decision-making, with perhaps minimal correction from humans. Cash flow forecasting software such as Jirav or Helm are examples of this.
We’re a long way from the nearly-human robots of The Terminator, and there are still many things that humans do way better than technology, at least so far. Accounting teams won’t be so much replaced by robots, as augmented. Automation is ideal for the kinds of mind-numbingly repetitive tasks that you don’t need degreed accountants or CPAs to do.
Automation gives accountants the time and bandwidth to do more interesting work and to add value.
They won’t be spending as much time on the low-value work that has to be done before the high-value work can be started. When they can trust that the numbers are correct and up-to-date, combining accounting information with data from different parts of the business and applying data analytics helps them see patterns the naked eye can’t. Those kinds of high-value work are what business leaders need as input for the decision-making process, and it’s what provides those leaders with the actionable insights they need to move their businesses ahead of the competition.
This means that accountants will need to upgrade their skill sets and learn to use different tools.
Being the fastest and most accurate with a ten-key will no longer be a prized skill, but being the one who can use data analytics tools and other new technologies to extract useful insights to improve your company’s operations will make you highly sought after.
Accounting automation has been going on since around 1907, when businesses began using punch-cards for accounting. These days, many accounting teams employ optical character recognition (OCR) as a way to get information into accounting software. Within the next four/five years, about 90% of finance functions should be fully automated, according to a 2020 survey by Grant Thornton.
Accountants and bookkeepers who are willing to expand their IT/AI skills to work alongside machines and who are willing to take on more of an advisory and strategic role for business owners need not fear being part of a dying profession.
Automation, like any method for optimising accounting processes, is an iterative process. And with the accelerating speed of advances in technology, what was cutting edge yesterday may be old school tomorrow.
AI can transform your accounting processes, your customer service and your practice marketing.
The Opportunity for Accountants
By processing large amounts of data and recognising patterns, AI can make recommendations or spot issues. And because these algorithms process larger amounts of data in less time than we can, AI has become a hugely powerful tool for analysing and automating low-level business functions. When Netflix suggests a show you may like, based on your previous viewing, or your bank queries a transaction that doesn’t fit your usual spending pattern, it’s AI that’s powering this.
AI can also process and analyse client data at speeds no human can achieve, and this is where the key advantage of AI comes into play, helping you to spot patterns, trends and issues in data and accounts, leading to deeper, more proactive interactions with these businesses.
Here are four core benefits of adopting AI in your firm.
- Automation and the Push for Efficiency
Improving the efficiency of workflows and practice systems is a key goal of any aspirational accounting firm – and AI-driven automation can be a huge driver of this productivity. The machine learning capabilities of AI – the ability for software to automatically learn and improve through experience and the input of data – make it possible to automate many of the low-end elements of your bookkeeping tasks. Automatically coding your transactions for example, speeds up the input of receipts and reduces the error levels in your bookkeeping. So the job gets done more quickly, the quality of your data is higher – and your junior staff have more time available for higher value work.
- Diving Deep into Your Client Data
An algorithm eats, sleeps and breathes data. It doesn’t get tired and it never has a ‘bad day at the office’. Your AI-based software tools are constantly, and tirelessly, processing, analysing and deconstructing your client accounting data, 24/7. By taking the outputs from this data analysis, AI can offer insights into the numbers and then suggest proactive ways for you and your team to work more closely with business clients.
Software can flag up potential cash-flow issues, suggest a conversation about expense variances or even remind you that a client’s VAT return is due and hasn’t been filed.
- Driving a More Proactive Client Relationship
AI can drive into the data to pull out the hidden pearls of wisdom and to then flag the important issues, opportunities and actions makes it more than just a passive piece of software.
Increasingly, your algorithms are becoming a vital part of your firm. They’re not going to replace a team of qualified, experienced accounting professionals any time soon, but AI is allowing your people to move away from the mundane and routine elements of accounting. With less focus on compliance work, your people can focus their time and expertise on working directly with clients. This helps to cement your important client relationships, improves the commercial experience of your junior staff and allows clients to improve their business finances.
- Enhancing Marketing Through Real-Time Analysis
AI has the potential to revolutionise your financial processes and client conversations. And your business’s digital and social marketing can be improved by applying exactly the same benefits of AI, algorithms and machine learning, helping you to specifically target your ideal clients. This enhanced targeting and analysis of your marketing involves three key stages:
- Collect – client and target data is collected through your marketing campaigns and lead generation activity, and stored in your CRM system. This then becomes an incredibly valuable data source, that can be processed by your AI marketing systems.
- Reason – algorithms in your marketing software analyse this lead data in real time, looking at the behaviour and engagement of your audience. This reasoning process can then segment the audience and suggest productive ways to re-target these businesses.
- Act – in a fully automated AI-driven system, your marketing software then uses its reasoning capabilities to take action. This could mean sending specific emails to one audience segment, or refining a campaign to make it more effective next time around.
The answer is to use AI based smart technology to drive your marketing, by updating your CRM data, running your campaigns and providing key analytics and recommendations. With AI, you’ll remove the complexity from your marketing decisions and you can get on with being that trusted advisor.
Embrace An AI-Driven Accounting Firm
According to the The Future of Work report from the World Economic Forum 35% of current skills will be changed by technology, and accounting is an industry where real change and reskilling will be needed to help firms meet the new challenges of the digital age. Machine learning is automating the lion’s share of the bookkeeping, and AI-driven analytics tools are providing deeper client insights and giving your marketing the edge.
The real task now, for a modern accountant, is coming up with a strategy for optimising these AI tools, delivering high-level financial and business advice to a truly targeted audience of business clients
With complex problem solving highlighted as the number one occupational skill by 2020, it’s time to let the software do the number crunching work, and let you and your team do what you do best, coming up with human solutions to your clients’ financial issues.
Source: Cyber Security Intelligence