The Future of Accounting (#375)
/The Future of Accounting
What do you think the future of accounting might look like from a business perspective? Will there be more AI, fewer people, will skills change, and do you see anything other than the current accounting process being used?
If you drill down right to the root of what causes changes in the field of accounting, it’s not changes in the accounting standards, and it’s not changes in the labor market. It really comes down to technology changes, and how they’re incorporated into existing accounting systems. Over the last few decades, what I’ve seen is small bolt-on applications being introduced, and which gradually get incorporated into the major accounting software packages. Or, if you use a lower-end accounting package, then you just acquire them on the side and use them on a non-integrated basis. But either way, it would be reasonable to expect that someone will keep dreaming up more efficiencies over time.
Will there be major efficiencies that really cut into the need for accountants? It’s impossible to predict a future invention, since it hasn’t happened yet, but based on the history of accounting systems advances from the past few decades, I would say no. If anything, accounting is a fairly secure field. So, one of the questions posed was, will there be fewer people? If you look at the cost of the accounting department as a percentage of sales, it will probably drift down slowly over a really long period of time, because there will be more efficiencies within the department, simply because best practices are incrementally being installed. That does not mean major layoffs. And, since the economy is usually expanding, that would mean that the market for accountants will probably expand, not contract.
Artificial Intelligence in Accounting
Next, will there be more artificial intelligence? I got a request for a podcast episode on this topic last year, and I haven’t done one yet, because I just don’t see it. There are certainly some niche areas, like using AI to scan transactions for any hints of fraud. And it could be used to write the footnotes for financial statements – though in that case I’d be petrified of putting out incorrect footnotes, so it would take a heavy manual review. Overall, though, I just don’t see the impact. And yes, I will probably do an episode on this later in the year that’s a bit more specific. But overall, I think AI will have a fairly small impact on the accounting profession.
Changing Skills in Accounting
Next, will skills change? Yes, of course. Skill requirements always change. That’s been an ongoing feature of accounting in general, because each best practice that comes along usually requires some extra knowledge. For example, there was a time when inserting a bar code on an invoice was useful for scanning invoice information into the accounts payable system – so you had to learn about bar codes. And then there were biometric scanners for timekeeping systems, which were followed by timekeeping apps on employee phones. And now there’s artificial intelligence, so I’m sure there are accountants all over the world who are going to conferences to figure out how they can use it to become more efficient. For most organizations, I would guess that there’s always some new skill set that’s required for the next new incremental advance. And there always will be.
Changing Accounting Processes
Next, do I see anything other than the existing accounting process being used. No, I don’t. The standard accounting process is baked into every accounting software package on the planet, and every accountant is trained to use those systems. There have been some advances for specialty applications, like backflush accounting, but those only apply to niche areas, and are only available on the most expensive accounting packages anyways. For everyone else, the standard accounting process really hasn’t changed very much.
Variations in Accounting Changes
Now, to go a bit beyond the initial set of questions. If you split accounting into two fields, which are financial accounting and management accounting, then the future of accounting looks a little bit different. Financial accounting is the very standardized process of recording business transactions and generating financial statements. This is the area in which most technology advances occur, because it contains lots of high-volume activities that can be standardized. If you’re going to see job losses, this is the place for it, because ongoing best practices can always make high-volume applications a little more efficient.
Management accounting is intended to assist management with its decision-making, which means reporting on unusual variances, and capital budgeting analyses, and product profitability analyses, and so on. These are much lower-volume applications, so it’s not as cost-effective to implement best practices in this area. Which means that the nature of the work is more likely to stay the same, which means that there’s less risk of accounting jobs going away.
In short, some areas within the field of accounting are more subject to change than others.