The Bob Dylan song “The Times They Are a Changin’
” certainly rings true for what’s happening in the world of Accounting and Finance these days.
In addition to new regulatory guidelines impacting areas, such as revenue recognition and lease accounting, the digital economy is creating new challenges and opportunities for Accounting and Finance professionals.
At the recent Planful Future of Finance Tour events, industry guru Brian Sommer highlighted the impact of the digital economy on Accounting and Finance and “the new game plan” that’s needed to fully leverage these changes. I recently connected with Brian to capture his point of view, and here’s what he had to say.
John: Brian, in your address at the Future of Finance events, you highlighted a number of structural changes you see impacting Finance and Accounting professionals. Can you elaborate on those?
Brian: Sure, John. While there are many new technologies like big data analytics and visualization that are interesting, the bigger impact comes from the collision of these technologies, or what I call “trinities.” One example is the combination of cloud, mobile, and social technologies. Another is the combination of big data, analytics, and in-memory technologies. The power of these combinations is that they re-write the rules of competition and have the potential to cause major disruptions across industries. The upside of this is that it represents a new, more strategic role for Accounting and Finance with the potential for competitive insights, not just financial insights.
For example, advancements in the area of Robotic Process Automation (RPA) will put a lot of pressure on accounting jobs that involve procedural, rote activities. Already, large numbers of Accounts Payable clerk positions are being replaced with RPA bots. While that’s depressing, there will be significant growth in analyzing all-new sources of information. Accountants will need to collect, analyze, and make determinations around all new classes of data from social sentiment data, dark data, big data, and operational data (e.g., sensors). The future will be increasingly shaped by how well accountants can find, visualize, synthesize, and make sense of vast amounts of new information. Careers in accounting will have to broaden beyond just internal transaction processing.
John: Wow, I don’t think accountants ever thought their jobs would be replaced by robots. What’s the broader impact of the Digital Economy on Accounting and Finance?
Brian: This is huge as most firms are already transitioning from being Industrial Age to Digital Age entities. Businesses have no choice but to embrace new methods of communicating with buyers, employees, job seekers, suppliers, etc., and the preferred medium for all of this will be via digital means. Smart phones, machine sensors, social media, and more create record amounts of “digital exhaust” daily. There’s so much digital data being produced and too few business systems designed to handle it.
Specific to Accounting and Finance, new data presents the opportunity for these groups to re-write the value contribution they can make to their organizations. With improved tools (e.g., in-memory, scalable cloud technologies), Finance professionals can identify previously unavailable insights that can dramatically change the fortunes and/or the course of their organizations.
John: That’s certainly exciting and could represent new career opportunities for Accounting and Finance professionals. How do you see Finance systems evolving to support the Digital Economy?
Brian: A number of changes are already underway. Newer systems are now built with Hadoop, in-memory databases, and other tools to support a multitude of new data types (e.g., video, email, tweets). Sub-ledgers are starting to disappear as modern technology is no longer constrained and this design artifact is no longer relevant. The data model for a financial accounting system is greatly in flux as all of these new data types bring massive amounts of new fields into the view of Finance people. Everything is moving to the cloud as businesses want IT and Finance focused on added major strategic value and not wasting energy patching/maintaining on-premises systems.
John: To take that a step further, what’s the impact of these changes to Finance processes and systems?
Brian: The latency in many old Finance systems is a luxury of a bygone era and must go. Old processes and systems that only posted data at month-end are simply irrelevant and counter to the always changing, 24/7 world of business today. Worse, islands of automation (e.g., where pockets of financial processing occur in spreadsheets or manual steps) are equally out-of-sort with the Digital Age.
Processes and systems that contain lots of manual steps, paper, untimely integrations, etc., are leftovers of a bygone era when the speed of business was slow and systems were slow, too. Now, business moves fast, and organizations need processes and systems that move fast, too (not glacial).
John: Well, if we can automate out the drudgery of Finance and Accounting, that certainly creates the opportunity to focus on more value-added activities. What’s the impact of these changes on Finance talent management?
Brian: We’ll soon see people entering into Finance organizations with math/quant skills, social science backgrounds, statistics backgrounds, and other disciplines as the new data that Finance must parse will require more than Accounting knowledge. Already businesses are using big data to plan & forecast almost every line of the P&L. But to do so well, they have to really understand what’s in this big data and how should it be used. For example, if an organization is using social sentiment data, it can monitor what people are saying about its products (or competitors’ products) in the market. If customers report product quality or usage issues in social media, the company may need to increase its reserves for warranty expense or recall costs.
But not all posts in social media are exactly what they appear to be. Some posts could be written by shills for the competition. If someone writes, “I LOVE product XYZ,” are they really positive about the product or being sarcastic? This is why new skills will appear in Finance as the team will need to examine these imperfect data types and make value judgments on them.
The toughest job near term might be for a CFO who must hire these new and quite different people. What does a CFO know when it comes to hiring a data scientist? Probably not enough.
John: Great points – there are certainly challenges here in attracting new talent in Finance. How do you see EPM/CPM software evolving to address the new requirements?
Brian: As you know, the EPM/CPM space is already evolving. In fact, it may be making more of the Digital Age changes and making them faster than many ERP systems and vendors. Specifically, EPM/CPM tools have, for the most part, moved to the cloud. That’s good. Some have alliances or other capabilities to bring in-memory processing to their suites. That’s better. That capability alone allows organizations to smash large amounts of transactional and operational data together.
Longer term, these tools will need to use financial and non-financial data to anticipate (not just report) business results. Big data will undoubtedly play a role here, but so will algorithms, machine learning, and more. We’ll know the evolution has arrived when systems produce continuous planning forecasts without any human involvement or worksheets.
John: I agree, the cloud has become the dominant deployment model for EPM/CPM solutions, but there’s more to do. Given all of these changes, what should be the new game plan for Finance and Accounting professionals?
Brian: Finance and Accounting professionals need to be way more cosmopolitan (i.e., to be aware of one’s own environment). While constancy has been a hallmark of the industry, the amount of business and technology change underfoot will cause many changes to this profession. Your to-do is to become one of the people who is keenly aware of and anticipating these changes. For if you do so, your career (and the fortunes of your employer) will soar.
John: The times certainly are changing for Accounting and Finance. Where can readers go for more information?
Brian: I love to hear from businesses, especially those making bold moves. Please contact me at Brian@VitalAnalysis.com or follow me on Twitter at @BrianSSommer. And if readers are considering anything new in the software space, definitely get in touch with me if you need assistance.
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