One of the viewers of our youtube channel asked us to cover how technology will change the future of big 4 accounting.
It’s going to change accounting for sure, but you don’t have to worry as long as you are proactive.
Think of all the technologies that have come online over the years excel, oracle, salesforce, thomson reuters tax products, quickbooks among other 100’s of accounting and tax softwares. People have been predicting that accountants will be replaced for years now.
It hasn’t happened yet. Just look at Deloitte. Deloitte hired over 90,000 people in their latest fiscal year.
That is definitely a record for them. That will most likely go down now because of a bad economy, but it is still a high number.
How will technology change what accountants do?
What types of technologies are out there?
There is machine learning, AI, robotics, and visualizations.These are the technologies that the big 4 accounting firms are trying to currently utilize the most. They all dabble in blockchain and other technologies, but the technologies that I just mentioned are the ones they are trying to push staff to utilize more and become familiar with.
The problem with technology is it hasn’t made a huge dent in the amount of work being performed at the big 4 so far, so I don’t see how it can make a huge dent in the near future without a huge shift in public policy or an elon musk type person entering the accounting technology scene. Technology has actually just made the amount of work performed at the big 4 go up over the years.
80% of a big 4 job is admin. I’m not even exaggerating. There is so much administrative work that you have to do. Every year when you work in the big 4, leadership always says that they are working to decrease it. It never happens though. Somehow it just seems to keep increasing.
If you get better at billing, then too bad. You have to get better at selling and entering your sales information into salesforce. You were good at entering your information into salesforce? Fine, now you can turn that into a visualization for your partner.
I see technology as creating more opportunity for accountants, but technology is what you make of it. If you are hoping to get a job and just do data entry, then you are going to be out of luck. You have to set yourself apart somehow. You can use technology to do that or you can utilize relationships within the big 4. Relationships will help you with the political side of the big 4 which is essential to moving up the ranks.
Technology will have more of an impact on the clients of the big 4 than it does on the big 4 itself.
People can use technology to pull reports for them. They can use it to book automated journal entries and run reports.
Automation can run reports on a daily basis and send them to your inbox. It can also book automated adjustments to your tax return if you have it hooked up to your general ledger.
So much of what accountants used to do was just data entry. You used to have your associates pull a report. They’d analyze that report the same way they do every month or quarter, and then they’d propose journal entries. Someone reviews those journal entries, and then they go into the system. Now all that can be automated with less errors. Don’t get me wrong. Not every company is doing this. There are many companies that still book entries to their financial statements using only excel, or they analyze their financial statements in manually prepared excel files. I’m not talking about small companies either. I’m talking fortune 50 companies.
Technology can replace this with automation.
If you think about it, so much of what accountants do is just book entries. Artificial intelligence and machine learning can make all this easier and more accurate. It can analyze transactions and entries and understand how it relates to the financials. It can then automate the movement from the ledger to the 10-k in the future.
There are many complex parts of accounting that will still need more review, but thinking that those complex items won’t be replaced someday is ridiculous as well. Think of M&A. Everyone says that M&A is so complex and difficult. This is because it often requires complex accounting. Many of these transactions are similar though. The only reason there aren’t templates and automations is because of confidentiality. This is true for so many areas of accounting as well. There are best practices that could be implemented throughout accounting, but people are so obsessed with confidentiality that they don’t bother sharing best practices. I’m sure this will continue to be the same in the future as well, but some pioneers will find ways to collaborate even though there is confidentiality
Can technology replace big 4 accountants?
If the big 4 accounting firms don’t move completely to fixed fee engagements and adding value to their clients, then yes there is a possibility they will be replaced by technology. Right now big 4 accounting firms have a nice revenue stream because all large organizations have to use them for financial statements. If there is a software tool or technology that could replace the comfort that an audit provides, then big 4 accountants could be replaced easily. Some people think this might be blockchain technology. However, accountants won’t let technology take their jobs without a fight. They will most likely lobby politicians to make their jobs mandatory. That’s basically the current set up right now. However, you do see that being challenged around the world where accounting firms get caught up in huge scandals and frauds.
Lets cover a fews that technology will change what big 4 accountants do.
Billing in the big 4 is a headache. Billing is completed on most engagements every month and on some occasions every two weeks. The whole process from pulling the latest time charged to analyzing it to turning that into a bill can all be automated. Even sending the bill to the client via email can be automated. Collections can also be automated or sent offshore. So much time is wasted in the big 4 accounting firms on billing. Some of it is also due to clients not wanting to pay the bill or delaying payment of the bill. Clients also usually like to have client personnel call them about the bill instead of being hassled by a third party which wastes a lot of time. However, this costs the clients money and wastes their time, so maybe there is some willingness to change there on the client side as well.
Auditing will also be changed by this. There will be less time spent on ticking and tying workpapers. You used to have to tie everything out by hand which was insane. Now you have to tie everything out in electronic workpapers. This is also a waste of time. Technology has the ability to speed this up and automate it as long as underlying documentation stays the same year over year. People will still be needed to review the final product, but technology should be reliable enough to tie initial workpapers out. I think you can see the impact of technology on audits already as most of the world’s largest audits are coming down in fees. The most expensive audits nowadays are audits for financial services companies that have complex accounting rules or tons of M&A.
Tax will also be changed completely by technology. Tax forms are a pain to fill out. You used to go into software and have to plug all the numbers in manually and check them against the workpapers. Technology will make the automation from the ledger to tax filing software to the tax return seamless. There will be some tax forms and information that will require manual work, but even the preparation of those workpapers can be sped up by technology.
Big 4 Initiatives
There are technology initiatives at every big 4 firm. They either require their employees to reduce hours through technology or they offer huge cash prizes to come up with new technological solutions.
In conclusion, as long as you are proactive and learn about technology you will be ok. If you sit there and hope that you can make it by doing data entry, those days are gone. You can coast for a while in a lot of jobs doing that still, but don’t expect a raise and don’t be surprised when you get laid off. You also can’t coast on your technical skills anymore. By technical skills, I mean technical accounting or tax knowledge. In my experience at the big 4, everyone is being asked to step and implement a technological solution on their engagements. No one is exempt. The only people that can dodge this are people in leadership or people that are good at office politics. Unless you are already in leadership or really good at office politics, you need to learn technology solutions. Go check out the podcast I did on the the 3 technologies every acccountant needs to learn if you want a starting place. You need to start learning in college too. Don’t worry about all your accounting classes as much. Start worrying about learning about technology in school. Ask your professors or school administrators to get access to some of these tools so you can start practicing now.