I love the magic of cloud software. Fire up your browser, click on a bookmark, enter login details and you’re away. From your computer, a friend’s, in a hotel lobby or cafe.
A new app still gives me a buzz: checking out all the things it can do, dipping from one tab to another, discovering how it can help me work better.
Talking about the cloud and its impact on running a business has been a full-time job for the past six years. I never get tired of it. Online access, work from anywhere, accountants and clients looking at the same screen, syncing data between apps – compared to desktop software it really is magic.
And then I realised, late last year, that cloud was no longer the headline. The story of the day is fading towards the back pages.
Incredibly, the story is changing before even a majority of accountants have shifted their clients to cloud accounting software. Plenty of accountants and business owners are yet to discover the efficiencies of using online apps to run their businesses.
Yet the software industry is moving at a far faster pace than both sets of users.
The next topic accountants will need to face is how to work with artificial intelligence. Not in a theoretical sense or among the musings of a futurist but in the here and now of 2017.
Software CEOs have talked about AI for a good while but late last year it became clear just how much AI is in development, how close it is to production – and how much is operating around us already.
AI and bank rec
The most common usage of AI in the accounting world is the machine learning that drives auto-matching in bank reconciliation. The changes have been subtle; many are already used to matching transactions to invoices and bills. (This just compares dollar amounts in unreconciled entries in the databases of bills, invoices and bank transactions.)
Now we’re seeing the machine learning kick in with suggested account coding for non-invoice transactions. Sometimes it’s hard to spot because you could mistake the auto-suggestion as the result of some long-forgotten bank rule you conjured up.
It is a bank rule, but you didn’t write it. An algorithm did. It wrote that rule based on how you had coded that type of transaction previously. Or it could have coded it from the behaviour of hundreds of thousands of other accounting software users.
The end game is to automate bank rec as much as possible, well over 90 percent. No-code accounting, Accounting is done – software vendors are finding different names for the same thing.
Until we move to a blockchain economy where there is no doubt about the source of a transaction and its purpose, accounting software will always require someone to check the coding. But that role will become smaller and less important as AI marches on.
This will put huge pressure on business models that rely on bank rec.
AI and advice
We have seen a couple of apps experimenting with rule-based advice in the accounting software ecosystems. This is about to go mainstream in the next six months.
When you review a balance sheet, a P&L or a three-month cashflow forecast your mind is running through hundreds of rules to work out the next best step. These can be written down into “If this then that” statements which an algorithm uses to select the most appropriate paragraphs of advice from a series of templates.
Run the algorithm, spit out templated sentences written in plain English, and you have automated a basic level of business advisory. All the major accounting software vendors are working on this right now. MYOB previewed an AI startup My Advisor (run by ex-MYOB exec Ben Ross) at its roadshow this week. Intuit previewed something similar at QuickBooks Connect in November 2016.
Business owners will no doubt want an accountant to deliver this advice so they can talk it over. But it’s something they will quickly expect their accountant to be able to do. Client expectations will probably drive change faster in firms than outdated, compliance-based business models.
AI and mobile
It’s one thing to have auto-coding transactions and automated advice sitting in your browser. It’s another to hold it in your hand. I was very surprised to see how fast these technologies are moving to voice-operated mobile interfaces.
Last year at Xerocon we saw a FaceBook Messenger-style app from Xero that could display outstanding invoices. Intuit demo’ed a more complete concept at QuickBooks Connect that could create invoices on voice command or from appointments in your email calendar.
Intuit had mocked up a futuristic video of a woman sitting in the backseat of a Tesla having a conversation with her QuickBooks mobile app. The app congratulated her on a new sale, warned her that the margin was a lower percentage than usual, and suggested a bulk purchase from a supplier to reduce costs.
Turn it into a cartoon and you’d have the Jetsons. Yet the first version of the mobile app (likely without the advisory) will launch before the end of the year, Intuit’s VP for developer platforms told me.
Smartphones are reaching mass adoption among business owners. One can only imagine that they would jump on this new way to interact with your accounting data.
AI and automation
In December I heard that Bunnings New Zealand used an AI-based document scanning service to automate their accounts payable department. The company reduced the number of accounting employees from 35 to four. Yes, nearly one-ninth the size.
Today I spoke to an enterprise technology company that takes data from the Internet of Things and uses AI to make business decisions. (The Internet of Things, or IoT, is a term for the wave of embedding computer chips in every object imaginable, from buildings to clothes to chairs.)
And guess what? They told me law firms are moving into “IoT accounting”.
Collapsing workflows, expanding data sources, faster and faster cycles in business. As MYOB CEO Tim Reed said at the roadshow, today is not always a good predictor for tomorrow.
What does all this mean for accountants? Honestly, I’m not really sure. Exactly how AI will break in each area remains to be seen. I’ll be investigating and reporting on these trends throughout the year from accounting software conferences and other events around the world.
Whatever the details, we can assume that the adages must still hold – enormous opportunity for those who move quickly, and a battle for relevance by the laggards.