When you look at the industries that the IoT is impacting, accounting isn’t the first one that comes to mind. However, if you take a close look and study what’s happening on a granular level, it becomes clear that the IoT is fundamentally shifting the profession for the better.
IoT’s Impact Spilling Over
The impact of the IoT is deep and wide. And though accounting may initially seem like a strange industry to be impacted so significantly by this shift to cloud computing and mobile devices, it’s undergoing a significant metamorphosis nonetheless.
And before we dig in and analyze some of the specific ways the accounting field is changing, let’s make sure we’re clear on what the IoT is and why it matters. In other words, let’s set the table with a dash of context.
There are plenty of definitions from a wide swath of experts in the tech field, but Oracle has one of the best explanations of what it is.
“The Internet of Things (IoT) describes the network of physical objects — ‘things’— that are embedded with sensors, software, and other technologies for the purpose of connecting and exchanging data with other devices and systems over the internet. These devices range from ordinary household objects to sophisticated industrial tools,” Oracle explains. “With more than 7 billion connected IoT devices today, experts are expecting this number to grow to 10 billion by 2020 and 22 billion by 2025.”
The IoT is rather evident in our personal lives (whether we realize it or not). Smart kitchen appliances, thermostats, navigation systems, baby monitors, smartphones, and fitness bands…they’re all part of the IoT. But we aren’t always as aware of what’s happening in the business world.
Fueled by access to low-cost, low-power sensor tech, heightened connectivity, cloud computing, machine learning, and conversational artificial intelligence (AI), the IoT has exploded in the business world and become one of the most important trends shaping the future of the world’s biggest industries.
In the industrial sector, we’re seeing smart manufacturing, smart power grids, connected logistics, smart digital supply chains, and innovative preventative and predictive maintenance that saves businesses billions.
In software, we’re seeing software-as-a-service (SaaS) applications proliferate. And when combined with smart devices and sensor technology, these SaaS applications open up a whole new world of opportunity.
Traditionally, tech leaders have discussed IoT and its catalytic potential in manufacturing, software, automotive, transportation and logistics, retail, healthcare, and even education. But accounting typically gets left out.
This won’t be the case for long. Major changes are coming (and this industry is ripe for the picking).
6 Ways the IoT is Changing Accounting in 2020 and Beyond
The full impact of the IoT on accounting remains to be seen. Many of the changes are happening behind closed doors and won’t be obvious to those outside of the industry. But for those working in the accounting field, they can expect to see the following shifts, changes, and evolutions moving forward.
1. Shifting Learning
Education obviously plays a significant role in the accounting industry. This is a field where conventional wisdom is often flipped. It’s what you know, not who you know, that allows you to be successful. So the shift in education and learning is rather important.
The process of preparing for the CPA exam now takes place almost entirely online. Learning has shifted from classroom-based to virtual and students are benefitting from this evolution. One of the biggest benefits of this shift is the way in which students are able to learn in an on-demand setting. The content is always available, it’s more digestible than ever before, and mock exams and review courses make it possible to prepare for the “real thing” prior to sitting for the exam. Some learning platforms even offer one-on-one mentoring, which allows these education companies to offer support at scale.
The efficacy of these learning platforms is rooted in their ability to tailor content to the student based on real-time inputs and feedback. Adaptive technology means content can be adjusted to help each student address unique areas of weakness.
2. Better Decision Making
From the outside looking in, people assume that accountants are nothing more than Excel spreadsheet whiz kids and Quickbooks aficionados. But the reality is that accountants play a key role in advising businesses. The data they uncover is necessary for making important financial decisions. Thus, it matters what data they have access to and how they access it.
The IoT is helping accounting professionals collect real-time data, quickly transmit it to cloud servers, and then automate and analyze the data using AI algorithms. This all happens in the snap of a finger, which makes businesses more nimble than they’ve ever been.
3. Streamlined Accounting Operations
Accounting operations and processes can be strenuous. And with so many different steps and moving parts, efficiency isn’t always a direct byproduct of these operations.
Within accounting processes, there’s usually collaboration of different departments for both the collection and analysis of data and other financial information. And any delays between the transmission of data and the ability to register and analyze that data can lead to a host of negative consequences (including inaccurate reporting and ill-advised projections). The IoT has the ability to eliminate this delay, thereby empowering departments to make more accurate decisions.
Take the example of buying a computer for an office. The admin department can scan the barcode, and all of the details from that purchase are automatically transmitted to the proper database and logged into the blockchain. This creates an immediate record, and the accounting workflow reflects the purchase in real-time. Payments, invoices, and bills are all received by the accounting department without any need for human intervention.
4. No More Audits
As anyone in any financial position within a company knows, there’s nothing worse than preparing for an audit. Painstaking, excruciating, time-consuming – these are words that many would use to describe audits.
Now imagine for a moment, a world where connected ledgers, donations, journal entries, and all transactions are sorted, tracked, and irrefutable verified right away in real-time. (Not months or years later.) This is what blockchain and the IoT are doing/will do for accounting.
“Indeed, the IoT doesn’t just change things. It permits you to method, consolidate, and analyze, usually in real time, leveraging connected tools can take the strain off of CFOs,” tech journalist Chrisotpher Zach writes. “It’ll also lead to tighter books overall.”
It’s difficult to overestimate how important this will be for businesses – particularly smaller businesses that don’t have the time or financial resources to be as strict with auditing as they’d like. As the IoT minimizes auditing efforts, these organizations will benefit from peace of mind and better resource allocation.
5. Improved Asset Utilization
The IoT is already making it possible for organizations to track assets with better accuracy and efficiency – a trend that will continue to improve in the months and years to come.
“Fixed assets, vehicles and inventories can be confirmed along with their locations tracked automatically. Companies can use RFID tags and hand-held scanners to confirm the items of stock in a warehouse, this facilitates automated stock checking,” IT expert Elena Smith writes. “For geographically dispersed assets, the broadcast of GPS coordinates can monitor asset location. This increases the chances of catching thieves. Also, in the case of migration, this will reduce costly production downtime.”
Asset tracking information can be used with Enterprise Resource Planning (ERP) software to dramatically improve asset utilization across the board. And as organizations become more familiar with the use of RFID tags and tracking software, there will be steep declines in manual error, theft, and losses. Many businesses will see a quick and significant increase in profitability.
6. Superior Risk Management
As we’ve mentioned, accountants and CPAs are often heavily involved in forecasting and, as a result, also have their hands in risk management. As the IoT provides a steady flow of real-time data, financial departments will be able to make decisions based on real-time and (very) recent data as opposed to historical data, which may no longer be relevant in today’s fast-paced, ever changing marketplace.
Superior risk management doesn’t automatically make businesses safer or more profitable. It still goes back to accuracy of data and which metrics and key performance indicators (KPIs) are being tracked. However, as long as these pieces are in the right places, organizations stand a much better chance of accelerated growth.
What’s Around the Bend in the World of Accounting?
It’s impossible to know what lies ahead. These are the trends we’re currently seeing, and they could take on entirely new shapes and arcs as time passes. However, one thing we know for sure: Accounting is no longer the cold, stagnant industry that it once was. Leaders in the space are more willing than ever to embrace change and innovation, opening up opportunities for greater efficiency, increased accuracy, better security, and more cost-effective services.