The new year is upon us! It’s already a few weeks into 2020, and it’s time to focus on the challenges ahead. New trends are emerging in almost every branch of business, and accounting is no exception. Keeping track of your finances is a driving factor to your organization’s success. Staying current with the latest technological advancements in the accounting world will help your business keep up with competitors and thrive long into the future.
Here’s a look at some of the most important advancements to be aware of in 2020.
The growth of automation and AI
Automation is making its mark in many fields, and it has already made its way into the accounting realm. It’s one of the biggest advancements that accounting has seen since the introduction of double-entry bookkeeping. You can automate mundane tasks that take you away from other important accounting activities. Workflow rules, bank transactions, payment reminders, and recurring invoices and billing are just some areas where automation has proven its worth. Another kind of technology that is shaping the future is AI or artificial intelligence. While automation is based on programming rules and makes software run without human intervention, AI is data-driven and is more concerned with making software smarter. AI is achieved through machine learning (ML) algorithms. The main advantage of adopting AI into your accounting system is to reduce errors and achieve near-perfect accuracy. Businesses that use AI in their accounting will be able to provide real-time data insights and more accurate financial reports than those that do not commit to AI.
However, since automation is relatively new, and machine learning algorithms take time to perfect, there is no accounting system that has achieved 100% automation and accuracy. With better algorithms, we can expect automation and AI to play an increasingly important role in accounting in the years to come.
A more efficient O2C cycle through automation
Order to cash, or O2C, is the sales process from the creation of a sales order to receiving payment. Businesses must manage their O2C cycle efficiently to stay ahead of their competition, and this is one of the areas where automation can help. Employ automation at any or all levels in the O2C cycle to cut down your expenditure on resources and reduce manual intervention. Automation can help you sort and process sales orders, send them for approval, and convert approved documents into invoices. Once confirmed invoices are received and paid for by the customer, the payment and status of the corresponding invoice will be automatically updated in your accounting software.
Although many businesses have already adopted automation to take care of their O2C process, some are still apprehensive. With automation technology becoming more reliable every day, we will see a steady rise in the number of businesses trusting it to handle their O2C tasks.
The adoption of blockchain
Blockchain, in simple terms, is a distributed ledger. It’s used to manage fund transfers and finances in a more advanced way than traditional bookkeeping. Every time a transaction is created, it’s time-stamped and linked to the previous transaction. This latest transaction becomes the next “block” in the chain, hence the term “blockchain.”
In today’s financial transactions, the bank often acts as a middleman between the sender and the receiver. Distributed ledger technology aims to remove this middle entity, allowing users to make transactions directly. Data can be updated only by participants in the system, and once added, the data cannot be erased. This brings enhanced security and accuracy to the system because every data entry becomes an auditable record. Distributed ledger technology is also transparent because transaction data is stored on thousands of servers across the globe. Anyone with access to the network will be able to see the changes in real time. This makes it almost impossible for one person to gain control over the network. Blockchain is still new, and it will be years before it’s fully adopted by businesses for accounting. However, it will be no surprise if we see localized blockchain adoption and usage in the near future.
Comprehensive fraud detection
Fraud is one of the biggest and most important threats that the accounting industry has to address in a digitally evolving world. Fraud can include banking fraud, suspicious invoices, duplicate payments and more. It can deal a severe blow to your business success and productivity even if you aren’t responsible for committing it. It also leads to revenue loss, and you could end up shelling out a lot of money to settle legal cases. The best defense against fraud is detecting it early. Today’s accounting software helps you create digital approval workflows. It also has document management tools built in so you can filter duplicate documents and weed out potential fraud.
Machine learning is another advancement in technology to counter fraud. Machine learning algorithms can save investors from painstakingly analyzing financial data to detect fraud. Machine learning techniques like neural networks and support vector machines (SVMs) allow organizations to combat financial malpractice more accurately than traditional data analysis. They can process large data sets in a relatively short time and weed out dubious documents based on previous learning. Although machine learning is more efficient and time-saving, it still has a long way to go before being completely adopted by businesses to fight fraud. Even still, it’s predicted to make a big impact on how your organization tackles accounting scams in the future.
Accounting software and mobile banking integrations
Banking services have seen rapid development in the last decade. More businesses have started using online banking, and the dependence on brick-and-mortar branches has diminished considerably. Banking services are now being offered through mobile devices, and integrated banking technology is emerging. Accounting and banking are no longer separate entities. Most modern accounting solutions offer bank integration, making account reconciliation simpler and faster. In the future, as more mobile accounting apps connect with mobile banking apps, business owners might no longer depend on their computers. They’d be able to accomplish their banking tasks right from their smartphones.
Online collaboration tools and remote work
In today’s fast-paced world, your organization’s success depends on how quickly you can get things done, and working as a team makes it easier. One of the most useful functions of modern software is remote collaboration. You can work easily with all the members of your team and coworkers in different business departments. Online collaboration tools will put an end to departmental silos and increase productivity. It will also help you organize and prioritize tasks better, complete projects faster, and save huge amounts of time and money. Involve your accountants, too. Collaboration tools will allow business owners to give accountants access to organizational data so they can handle the company’s accounting processes from wherever they are.
Better ROI and conversions using social media
In the past decade, social media has evolved to become the easiest and fastest way to know what’s happening around the globe. It has been such an influential factor that it’s practically unavoidable for today’s businesses. There are billions of people on social media at any given moment. Creating a digital presence for your company will greatly improve your chances of getting recognized and remembered by potential customers. Social media marketing is primarily used for brand awareness and sharing content. It helps segment audiences, identify leads, and reach out to them effectively. This gives potentials a greater chance to consider and evaluate your product, leading to more conversions.
Today, accountants of top accounting firms swear by social media as a marketing strategy because it’s quick and efficient. In the future, more businesses will jump on the bandwagon of social media marketing to capitalize on better conversions and increased ROI.
Decentralized accounting operations
Cloud-based accounting needs no introduction to established businesses. But if you’re just starting out, you might need some clarity. The cloud offers on-demand access to computing, data storage, and shared resources over the internet. With the cloud, you don’t have to worry about storing your data on physical drives or losing stored data. The cloud is also superior to on-site software platforms due to faster deployment, timely updates, and better security.
Moving your accounting operations to the cloud allows for better resource sharing, easier access to financial data, and more robust security. Cloud accounting software is also scalable, making it easy for your system to seamlessly adapt to the growth of your business. The main advantage of the cloud model is that users can access their accounting data from anywhere they want and at any time. An internet connection and a compatible device are all you need. In the future, accounting operations will become decentralized as more companies start using cloud-based applications for their businesses.
Technology is advancing, and successful businesses adapt to these changes. With that in mind, it doesn’t pay to be in the dark about accounting trends. Technology like automation, artificial intelligence, integrated platforms, scalable and collaborative software, and digital media are big influencers for the accounting world. As we go further into 2020, it’s in the best interest of your business to learn about these advancements and leverage them to keep your accounting processes efficient and reliable.