You may have read one of my earlier posts titled Accounting careers may not be as good as they once were, and if you did then you would know that I am a bit pessimistic about the future of our industry in its current form.
One of the key reasons for my pessimism is the rise of cloud accounting, and I thought I should give a bit more of an overview of cloud accounting to show exactly why I think this technology is going to kill jobs. I realise that many readers of this blog aren’t actually accountants, but the automation of finances and what it means for the future of finance/knowledge jobs must surely be of interest to many people.
What exactly is cloud accounting?
At a simple level, cloud accounting is a bit like anything else cloud-based in that the information is stored online or “in the cloud” rather than being on your desktop computer.
While cloud products are traditionally about secure backup of your information so that you can’t lose it (e.g. if your computer is stolen), cloud accounting brings a number of advantages that are far more important, including:
- Multi-user access, from anywhere: Accounting records are often used by multiple people such as the client’s finance team (depending on how large the business is, this might be only one person, but is often more than one), the bookkeeper and their accountant. The problem used to be that you had to make a backup of your information and email your data to each of these parties if they needed access, or they had to physically go to the premises where the information was stored.The creation/restoration of backups created version control problems, and also required that an accountant enter/provide adjusting entries to balance a client’s file to their final reports. Without going into the details, entry of adjusting journals by uneducated clients often created problems so everyone being able to work out of one system made a big difference.
- No more upgrades to software: With cloud-based software, there is no need for clients to run upgrades, as all of this is taken care of at the software provider’s end. Upgrades and different versions were often a source of frustration for clients and accountants, and this problem is completely solved with cloud software as there is only ever one version.
- Automatic import of transactions from online banking: This is the big one, as it means that there is no longer the need for basic data entry. All payments and receipts are automatically imported from your internet banking into the software, and once they are in there you just need to allocate them to the right spot.
- The ability to learn from previous transactions and suggest how to treat future transactions: It sounds a bit like the dream of artificial intelligence, but it’s nowhere near as complex as that as the software is just using previous transactions to suggest where to allocate future transactions. The software can learn based on the narration on the bank statement (supplier/customer name, invoice number, etc), or suggest that a specific transaction amount might be to pay for an outstanding invoice for the same amount. All of this sounds simple in theory, but it has never really been put together in a comprehensive way until cloud accounting was introduced.
- Quality reporting formats: The reporting that comes out of cloud accounting products is much better than traditional software, and allows a far greater level of customisation as well. These customisations are sometimes so good that there is (or soon will be) no longer a need to generate financial statements in an accountant’s in-house software.
- Future potential to automate tax lodgements: Many cloud accounting packages are working on the ability to generate tax lodgements (such as tax returns) automatically within the software. As always, there would still be the potential for clients to screw up these returns, but much of the automation built into the software greatly reduces the likelihood of major screw-ups.
As you can probably appreciate, the above benefits make cloud-accounting a no brainer for anyone with accounting records. What has often been seen as a tedious task by many business owners is now much less tedious, and the role of accountants has diminished as a result.
The main cloud-accounting packages
There are lots of cloud accounting packages on the market, with more being released all of the time, but the packages that have the bulk of the Australian market are as follows:
- Xero: Dubbed “Beautiful accounting software”, Xero is a bit like the Apple of the accounting software world. They are real innovators, and if there is something on your wishlist from Xero then chances are that they are working on developing it.
- MYOB: AccountRight Live and Essentials: These guys are the old Australian giant, but they were a bit slow to get into the cloud. Xero (who happen to have a stack of ex-MYOB people as founders/developers) got the jump on them, but they have fought back in recent times. Their software isn’t anywhere near as “beautiful” as Xero. Perhaps they’re a bit like Microsoft to Apple’s Xero. Their product works just fine, it just seems a lot less sexy and a little bit clunkier.
- Intuit: Quickbooks Online: This product comes from the American giant that originally brought us Quicken back in the 1980s. I actually quite like this software, and it is relatively cheap compared to the other two.
I won’t go into detail on these packages (perhaps that’s a subject for another post), but check out their websites if you are interested in investigating them further.
Jobs at risk
As I hope you can appreciate by now, many of the tasks that have historically been completed by people in our industry will be automated/eliminated once cloud accounting software really grabs hold of the market (which it will). So in a way, you could say that cloud accounting really is replacing our industry’s jobs of the future (and will continue to do so).
Which jobs exactly? I believe that the jobs most at risk are as follows:
- Bookkeepers: These jobs face serious risks, since data entry is one of the most time consuming tasks that they take care of and it is being largely eliminated with cloud accounting. While there are of course plenty of other useful tasks that some bookkeepers attend to, a large portion of bookkeepers out there don’t actually know how to do much more than basic data entry, so their pool of work will shrink significantly over coming years.
- Entry-level accounting staff: Many new accounting staff learn basic accounting concepts through the completion of tasks that bookkeepers attend to. Given that much of this work will be eliminated, I think that we are entering an era where we need to get more out of less people, and unfortunately the people that are in the “less” category is entry-level accounting staff. Of course entry-level staff will still be needed over time, but not as many as we have needed in past.
- Administration staff: Many of the tasks completed by administration staff sometimes cross over with tasks that entry-level accounting staff could do to understand a firm’s systems more. I have a feeling that administration roles will reduce over time, partly through automation of their tasks, but partly because the reduced need for entry-level accounting staff will push some of these staff into doing tasks that administration staff previously attended to.
Obviously there are lots of people working in the above roles in our economy, and if you are one of these people then you really do need to be aware of what is coming. While these changes are connected to the rise of cloud accounting, I think that cloud accounting itself is a perfect example of the automation that is going to happen to our economy in the future.
If you don’t think that this risk is real, then I suggest that you watch this video that was released in August 2014.
It’s funny that only one year later, cloud accounting is a real life example of exactly what this video predicted. Don’t say you haven’t been warned!