The future of accounting: How technology is revolutionizing financial management
In the past few years, technology has changed the world dramatically. And one sector that has seen particular growth is financial management.
Pre-pandemic we were already seeing the march of the paperless office, cloud computing and digital money. But lockdowns have accelerated our relationship with the internet, and transformed how we go about our work and personal lives.
Having lived online for almost two years, we were forced to embrace technology – from online meetings to digital payments. As a result the importance of technology in business has grown dramatically.
In this article we explore now how technology is revolutionizing financial management and look at the future of accounting.
How technology has changed financial management
In the past few years, technology has revolutionized financial management. No longer do we need to painstakingly fill in (and then store) large paper ledgers. Today our finances are managed only using software, and stored and accessed instantly using cloud computing.
At the touch of a button we can access and share records, generate forecasts, calculate budgets, compete and distribute complex financial plans, and manage our day-to-day transactions using accounting software. Not only does it save painstaking labour, but software reduces the risk of errors and gives you far greater oversight of and control over your money.
And things are only likely to get better. As technology races ahead, so will the capabilities of the accounting software available to businesses.
How digital payments are helping businesses
Today, thanks to technology, we can accept and make payments digitally (and instantly), send digital invoices and manage our bank accounts online or via an app. This reduces the cost and inconvenience of sending money, writing cheques and making payment transfers in person at a bank branch.
This, in turn, makes trading easier and quicker. E-commerce has become the norm for many businesses (especially post-Covid), and we can now trade more easily with overseas organisations. Cryptocurrencies have also provided new financial solutions for businesses, making it even simpler, quicker and cheaper to make and receive international payments. Money is held in digital wallets and transactions recorded for security using blockchain.
While cryptocurrency is still in its early years, and yet to be adopted wholesale among businesses cross the board, digital payments are very much the way of the future. And cryptocurrency is very likely to have a place in that.
AI is changing the way accounting works
We can’t write an article about the future of any industry today without mentioning automation and AI. Technology has been transforming the accounting industry for many years now, and this trend will only continue.
Automation and AI enables accountants to streamline repetitive and time-consuming tasks like data entry, reconciliations, and report generation. As a result, accountants can spend more time on value-added activities, such as offering advisory services to clients. So advisory services, including financial planning, tax planning and business strategy are likely to become an increasingly important part of many accountancy businesses.
Cybersecurity has become more important
The increase of digital technology has led to a rise in cybercrime. Today no one needs to sneak into your office and break into a filing cabinet to access your documents and steal from you; they reach through the internet.
This has made cybersecurity an increasingly important issue – and as technology gets more and more sophisticated, so will criminals, and therefore so will cybersecurity and fraud prevention.
It is essential, therefore, that accountants invest in technology and apply best practice to protect their clients’ money and details. Companies need to be proactive in ensuring they are properly protected from the very latest risks.
Regulation and legal issues
All of the advancements in technology we have covered – and more – are having (and will have) a significant impact on regulation and legal issues in financial management.
We are likely to see regulatory frameworks evolving and becoming more complex, particularly as financial systems become more interconnected and international. Regulators will need to stay one step ahead with stricter compliance to reduce risk and safeguard financial systems. As a result, organisations will need to invest in robust compliance programs.
Cross-border compliance will be more challenging too, as financial institutions and businesses operate on an increasingly global basis. This will require cooperation internationally as countries and organisations attempt to ensure compliance with multiple regulatory frameworks.
We’ll also see more regulations designed to protected data privacy and security, such as the General Data Protection Regulation (GDPR) in the European Union, the California Consumer Privacy Act (CCPA) in California, the Act on the Protection of Personal Information (APPI) in Japan, and the Personal Information Protection and Electronic Documents Act (PIPEDA) in Canada.
What is certain about the future of accounting?
No can can genuinely predict the future, but we can make fairly accurate predictions based on past history and what we see happening today. And whatever happens with technology there are a few certainties we can rely on, especially in the world of accounting.
The first is that it is important to embrace new technology, with a little caution. Thoroughly research and test any new advancements before adopting them wholesale in your business – and always bear security in mind.
Companies who take advantage of new technology will have significant advantages over their competitors. Early adopters will reap the rewards of more streamlined operations, lower costs and superior service, all frequent benefits of technological advancements.
Clients particularly expect their accounting firms to be aware of, familiar with, and able to advise on the latest software. If you are unable to work with the software they use to run their business, they’ll find a company who can.
It’s also essential that you pursue best practice. Cutting corners or looking for loopholes is often a short term win – if even that. Regulators will ultimately catch up with new loopholes created by technology and close them off. And potentially punish those who took advantage of them.
Following best practice is always well advised, and a much more profitable long term approach. This is true of any new technology, but especially in accounting. Compliance and security aren’t nice-to-haves in financial management; they’re a bare minimum.
