The Impact of New Technology on Accounting Business
It has been correctly said that the only constant is change, except change everything will changes. The above proverb is immensely applicable in modern business and in fact more so now than probably ever before. Innovation and technology has changed the face of business and the way businesses used to operate once. The traditional methods of doing business have made way for innovation and technology. In this document a detailed discussion has been made on the importance of accounting firms to keep up with changing technologies. A look at the opportunities that changing technology presence to accounting firms as well as the threats that such firms have to endure will be discussed in this document.
The introduction provided at the beginning of the document has made it clear that the topic of discussion in this document is to keep up with the new technology. Accounting firms have to endure continuous development of new and improved technology to survive in the market. It is important for the accounting firms to keep up with the new technology to be relevant in the modern day and age. A detailed discussion shall be helpful in dissecting the impact of new technology on accounting business (Andersson, Forsgren and Holm, 2015).
There is nothing in this world that has not been touched by the ever changing technologies. Businesses including accounting firms are probably the most effected by the ever changing technology and constant drive for innovation. The books of accounts once maintained manually by organizations of different kinds in registers are now maintained on computers by using different software and technologies (Luftman, Lyytinen and ben Zvi, 2017). Different accounting software have been developed to suit the needs and requirements of specific organizations. Apart from that customize software are available in the market that can be used to maintain books of accounts by different organizations. Standard Accounting Packages (SAP), Tally Solutions, Oracle, Java and number of other software and system have been developed with the objective of improving the quality of accounting and book keeping system (Kane et. al. 2015).
The ever increasing size of business entities have made it compulsory for business organizations to maintain real time accounting with use of online accounting software. Centralized accounting has been possible with the use of such online accounting software. As a result business organizations now can maintain centralized accounting thus, enabling them to maintain books of accounts of the whole organization from central office even if the organization has number of units and branches stretching to different parts of the country and world. The financial reports are now prepared using different software to provide better quality reporting. The quality of financial reporting has improved immensely with the use of modern technology (Trainor et. al. 2014).
Opportunities presented by the issue if handled properly
From the above it is clear that the roles and responsibilities of the accountants have changed significantly. The accountants must have knowledge of computers and skills to work in different software and systems. It is equally important for an accountant to have knowledge of computers, accounting software and systems as having knowledge of relevant accounting principles, policies and standards. The challenges for the accountants have increased significantly with constant development of new and improved technologies to meet the requirements of large corporations for maintaining books of accounts (Laudon and Laudon, 2016). The margin for error has reduced sharply to almost zero as accountants often now have to work in real time processing system where entries are recorded immediately after occurrence.
Modern day technology if used properly would only help an organization to achieve its objectives efficiently. However, it is important to have a futuristic thinking by the management of an organization in order to make optimum use of the opportunities provided by the new technologies. In case of accounting business the information and technological development have presented the accounting firms with immense opportunity to expand their operations by providing better quality book keeping and financial reporting services (Sharma, Mithas and Kankanhalli, 2014). Before the recent automation in almost each and every aspect of business of accounting firms, it was not possible to provide different kinds of services to large number of entities due to insufficient resources. However, with the increase in automation of various services provided by accounting firms such as accounting, book keeping, preparation of financial statements and other consultancy services, an accounting firm is now capable of providing services to large number of entities with higher efficiency. All these have become possible due to the innovation and technological revolution that accounting business have seen (Christensen, Raynor and McDonald, 2015).
Proper use of technology would help an accounting firm to provide its services to large number of clients. Thus, it is important to have an efficient strategy to make best use of available technology to increase the number of clients in the future.
With the use of new technology the quality of book keeping services will be improved significantly. It is beyond doubt that use of technology has improved the quality of book keeping services provided the technology is handled carefully (Jeston, 2014).
Accounting, financial reporting and all other services provided by accounting firms have improved subsequent to the introduction of new and improved technology. Accounting firms must know how to use advanced technology and innovation in accountings services to improve the quality of services (Rayna and Striukova, 2016).
Efficient and Effective Services by Accounting firms
As a result of development of number of accounting software and other systems it has become possible for accounting firms to improve efficiency and effectiveness of business operations. This is however possible only if accounting firms handle technology and innovation efficiently (Rosemann and vom Brocke, 2015).
With ever increasing emphasis of new technology and software the cost of running business has reduced significantly. Increase amount of automation in operations of accounting firms have led to reduction in operating costs in various areas of business such as requirements of employees and workers have reduced as most of the services have been automated needing less amount of human assistance (Dees, 2017).
Real time accounting is the concept of recording entries in the books of accounts immediately after the transaction takes place. Real time accounting has become possible due to the ever improving technology. With the use of online centralized accounting software it has become reality for large entities to have a centralized accounting and billing system even with branches an operations spreading to different parts of the world (Sekaran and Bougie, 2016).
The use of innovation and new technology will resulted in greener practices by accounting firms provided the technology is used effectively. This is due to extensive automation the requirement of papers in accounting and other services have reduced significantly. As a result the accounting firms can contribute to the initiative of environment protection by reducing the use of paper. In fact the way technology is up-grading it would not be long before the accounting and other services of accounting firms would be completely paperless (Hakansson, 2015).
Thus, the opportunities provided by the new technology and innovation must be handled properly by accounting firms to use the technology to improve the quality and quantity of services to be provided by the accounting firms. In order to handle the opportunities provided by innovation and technology, an accounting firm must have the necessary resources in its disposal. The most important resource that an accounting firm needs to make best use of innovation and technology is human resource. A talented human resource pool of an accounting firm would help the business to grow in the future with the help of technology (Norman and Verganti, 2014).
However, it is not that the new and improved technology have only positive side to it in fact if not used properly the same would have disastrous effects for the business of accounting firms. There are number of threats of using new technology in accounting business. Thus, along with opportunities that technology provides to accounting firms to improve quality of services there are number of threats and challenges that business faces due to innovation and technological development. A brief discussion shall be helpful in understanding the challenges and threats of new technology to accounting business (Pisano, 2015).
The pace at which technological up-gradation is taking place it is becoming difficult to hold on to particular technology even for a relatively short period. The new technologies are becoming redundant after short durations. Thus, the shelf life of new technological innovation and up-gradation is very short. Often an entity finds it difficult to understand a new technology properly and by the time the entity feels comfortable using the technology a new and innovative technology knocks the door in the market (Lovelock and Patterson, 2015).
The new technology is significantly costly. Thus, it pose significant amount of threat to the accounting firms as it has to take risk of investing huge amount of money on new technology to keep up with technological innovation and development. Often small and medium accounting firms have to surrender to the financial prowess of large accounting firms (Cooke and Huggins, 2018).
The use of modern technology is very costly. With the requirements of continuous up-gradation of technology the cost of running day to day affairs of accounting business have increased significantly. Thus, the increase amount of cost pose significant challenge for the small and medium sized accounting firms (Bar, Weber and Pisani, 2016).
Compared to the errors in manual accounting and the cost of error and mistake in new system and software is significantly higher. The accountants must ensure there is no error while processing entries in accounting software or in online processing system. In case any error occurs the cost of such error is significantly higher as a single error resulted in multiple effects in accounting software (Mina, Bascavusoglu-Moreau and Hughes, 2014).
The new technology makes it compulsory for accounting firms to provide necessary training to the employees and accountants. Such trainings help employees and accountants to make effective use of technology. However, there is a huge cost of providing training to the employees and accountants of accounting firms. Often such costs is too much for small and medium entities to bear (Nylén and Holmström, 2015).
Generally the employee turnover ratio in such industry is quite high. Especially employees and accountants who have the capability of running accounting software and processing entries in specific accounting packages will have many opportunities to work with large entities. Thus, there is a significant threat high employee turnover ratio in such industry (Grayson and Hodges, 2017).
As already mentioned that accounting firms require huge amount of investments to acquire new and modern technology. Often due to insufficient funds small and medium entities find it impossible to invest such huge amount of money on new technology. As a result the large accounting firms with huge money power are heading towards manipulation in accounting business (Saebi, Lien and Foss, 2017).
In case of any failure while using new technology an organization may end up incurring heavy losses compared to significantly lower loss under manual accounting system. Thus, the threat of technological failure could resulted in significant loss for an organization (Burns, 2016).
With the ever increasing threat of data integrity with the increase in number of different methods used by hackers to get unauthorized access to confidential information and data of an organization, the threat to the integrity of data has increased. It is specifically due to the increase in use of technology that the risk of unauthorized access to data has increased (Porter and Heppelmann, 2014).
The threats for neglecting the information technology will be very risky for most of the businesses however, the businesses that are not futuristic in their endeavour to achieve excellence in business operations with these of modern technology will be most at risk of losing competitive edge to the upcoming businesses (Herrera, 2015).
It is important to deal with the threats and challenges of new technology by formulating and effective strategy by keeping in mind the various issues as discussed here. It is important to communicate the mitigating strategy to the client by using an effective mode of communication to ensure that the client understands the strategies properly. A meeting shall be organized with management personnel of the client to discuss the details about mitigating strategy.
The mitigating strategy that would help an organization to deal with various threats and risks as discussed in this document is enumerated here with the objectives of imparting necessary knowledge to the client to deal with the issues mentioned here. Following are the effective steps in mitigating strategy:
The accountants and employee must be trained properly: The accountants and employees must be trained properly to ensure they are capable of handling the new technology efficiently.
Due diligence: An organization must conduct a due diligence on the new technology and its usability for the organization. In this case the client must conduct a due diligence on the new technology before taking final decision as to whether to such technology. Due diligence services would help an organization to understand the usability or other wise of a new technology.
Accountants must develop necessary skills to use the technology: The accountants must develop necessary skills and practical insight before using such technology. Only after developing necessary skills and competencies accountants should be allowed to make use of new technology.
Flexibility: The management must be flexible to accommodate necessary changes to adopt new technology and relevant practices to ensure that there is no difficulty in using the technology to achieve desired objectives of an organization.
Review of business processes and functions: Subsequent to the implementation of new and improved technology a review shall be conducted to evaluate the effects of such technology on the business.
Conducting audit on new technology: An audit shall be conducted on new technology after its implementation and use to find an independent opinion on the use of such technology made by the business.
There are arguments both side of the spectrum, i.e. for use of specialist team as well as against use of a specialist team. Those argue in favour of a specialist team explain the importance of having specialist team to deal with different issues that are expected to arise subsequent to the use of new technology. There is increase amount of efforts on the part of hackers and crackers to get unauthorized access to the data and information; to make unauthorized changes to the data and information, compromise with the integrity of data. Use of specialist team would help businesses to deal with these issues effectively. As a result the risk of compromising with the data and information of a business will be significantly less. Apart from that the specialist team is capable of using analytical tools to identify anomalies in the system, evaluate these and provide corrective course of action to get rid of these anomalies.
On the other hand those against the view of using specialist team, discuses that appointing specialist team would itself a compromise with the data integrity and security controls. This is because the confidential data and information will be made available to the specialist team for conducting their procedures and processes on these data and information.
Taking into consideration the arguments of both sides, i.e. for and against the appointment of specialist team, the client would be recommended to appoint a specialist team as soon as possible to provide supporting services necessary to ensure that the implementation of new technology helps the organization to achieve desired objectives in the future.
Conclusion:
Innovation and development of new technology has been constant over the years and especially in the last decade and more the pace at which new technologies have been developed it has become integral to the success of an organization. Those entities that have made effective use of technology has flourished in the new era of technology. Similarly accounting firms that have accepted the changes and managed to make effective use of technologies have become successful compared to those that have not been able to make best use of technology and resources. The accounting firms that have been able to modify their way of doing business have survived and flourished with the constant development and innovation of technology. Whereas firms that have failed to understand the importance of keeping pace with ever changing technology have made way to new accounting firms and businesses.
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