If you’ve been using the same accounting processes for over a decade, chances are that it might be time to evolve. The accounting industry has become exponentially more high-tech over the past few years, with new advancements emerging every day. To get a feel for the trends that are likely to be most relevant to your small business in 2020 (and beyond), check out these five areas of importance.
1. Cloud-Based Solutions
Maintaining your accounting data on just one person’s office PC is not going to work for the vast majority of today’s businesses. Accounting information must be accessible to multiple stakeholders, and the best way to do that is to keep the data in the cloud. The importance of this was emphasized during the COVID-19 pandemic when companies were completely shut out of their offices but still needed to access important accounting information.
Cloud-based software providers have made these solutions inexpensive, easy to use, and customizable so every business has a way to use them in the most efficient way possible. Also, companies have implemented safeguards to ensure that cloud-based data is accessible to all who need it but impossible to access for those who don’t. Cybersecurity measures ensure that cloud-based data is private, secure, and well protected.
2. Artificial Intelligence and RPA
The use of AI in the accounting world goes far beyond the ability to offer chatbots on your customer service and home pages. AI is used in concert with tools like blockchain and big data to ensure safe, fast, and transparent transactions that are secure and well protected. Also, AI can be used to notify you if bills are overdue, payments are late or the numbers aren’t reconciling.
You can also use robot process automation (RPA) to handle simple tasks like automatically generating month-end accounting reports and producing compliance documents regularly. This cuts the need for human involvement in your accounting process, freeing up your financial professionals to do more thought-intensive work.
You’ve likely heard the term “blockchain,” but you may not be familiar with its utility in the accounting sector. Its uses in the accounting realm are widespread, but one way you can use it is in maintaining a digital ledger that records all of your accounting transactions and traces them from conception through the final step of the payment process.
The blockchain process ensures that every step is timestamped and that entries cannot be deleted or changed, allowing for complete transparency in the entire accounting life cycle. Any auditor (internal or external) can then trust the data within the blockchain system since it’s completely digital and transparent.
With all of the technology being employed across the accounting sector, it can be challenging for a small business to keep up with it. Investing in high-tech solutions (and hiring staff to manage them) is time-consuming and costly for any business to undertake, let alone a small or new firm. That’s why many business owners are turning to outsourcing as the solution to maintain optimal financial processes without breaking the bank.
By using an outsourced firm, a business can be sure that its financial processes are being handled professionally and accurately. They can avoid investing in the office space, employees, and technology necessary for maintaining a strong accounting process because the outsourced firm handles that for them. This allows the business to only pay for the specific accounting services it needs rather than pouring money into the entire process. Ultimately, outsourcing is less expensive and more efficient for the business versus handling the accounting operation internally.
5. Use of Big Data
Finance professionals are increasingly using big data as an integral part of the accounting process. This information can be translated into a multitude of formats to allow businesses to better make predictions for the future, benchmark against goals, and flag areas of opportunity.
Here’s how it works: The accounting and IT teams will work together to extract key insights from data sets. The analyses that result will allow you to plan better and ensure that your accounting department is operating proactively rather than on a reactive basis. This saves time for everyone involved in the process and also gives you the peace of mind that you’re making data-backed decisions rather than using subjective drivers to create your accounting strategy.
About the Author:
Hemant Grover is a senior manager with Escalon Services, where he specializes in accounting, record-to-report, order-to-cash, procure-to-pay, and process mapping, as well as other essential business functions.