The use of IT in accounting and finance is continuing to grow as business leaders constantly strive for excellence in business processes. And there is always a danger of over doing anything that we do in life. Virtually every accounting and business functions are now automated which is a good thing but are being misinterpreted by some ‘automation fanatics’ who thinks machines does better.
I really became worried after listening to an aspiring entrepreneur say that he does not need to engage the service of an accountant as his accounting system is fully automated and would do all the accounting job for him. He claimed that his business coach has always hammered on the need to get rid of accountants as they are avoidable costs.
It is just the small and medium sized companies that are potentially guilty of over using IT in accounting and finance as on the flip side of the coin many large companies have so relied on automated accounting system that they have plugged in their accounting system into decision support software that now make certain decision on behalf of the decision maker. In as much as there is nothing wrong with using automated tools to enhance efficiency, the danger here is that accounting is about to lose its human face.
Too much automation of accounting system will inevitably lead to a situation of information overload. The implication of information overload is that there is the tendency of managers will be distracted by irrelevant data to the extent that they will have to time to look at information that really matters.
I know that at this point you will be thinking that I am anti-automation of accounting. Well, you will be surprised to know that I have actually developed some automated accounting system. My argument is that we are dangerously approaching a stage where the consequential risks of deploying and implementing information technology in accounting are almost outweighing the benefits of using IT in accounting.
Some people in business thinks that having accounting software is all there is to accounting. Well, at least this is what they are told and would continue to believe so until told otherwise.
I recently visited Sainsbury’s with my three year old niece and we used the self-checkout service to pay for what we had bought. On our way out, she asked a question which I answered but that really got me thinking. Her question was “how are you sure you have not overpaid?”
I guess you already know what I answered- I have not overpaid because I trust that computer cannot make mistake, really? I don’t think so.
Imagine what will happen to the confidence of investors that rely on reliable accounting information system for the production of accurate financial statement if they realise that the information they are been fed have no human face.
What happens to those areas of accounting that require high level of human judgement? Will the most intelligent accounting software reliably make important decisions in areas like fair value accounting and the valuation of intangible assets like goodwill for example?
The above two points are some example of areas that companies should not hope to get the best from automation of accounting system.
The good news about the somewhat dangerous situation is that most major players in the accounting profession are now embracing the idea of integrated reporting (IR). Integrated reporting is a new concept that encourages companies to fully integrate both financial and non-financial indicators in their financial statement. It is a concise communication of how an organization’s strategy, governance, performances and prospects will create value over short, medium and long term in the light of other external factors.
The integrated reporting sets out to answer some fundamental questions that have not been sufficiently answered by the traditional silos reporting platform. According to the IIRC (the International Integrated Reporting Council), the stakeholders of a business deserve to be kept in the loop about the value creation activity of an organization.
ACCA, a global professional accountancy body has also redesigned its syllabus to capture the concept of integrated reporting framework. This is to ensure that ACCA qualified accountants produce reports that communicates value creation prospects to shareholders and other stakeholders.
Unless we realise that the benefits of using automated accounting system will be lost if we over use technology in processing preparing accounting information, and we take action to ensure that this does not happen, then accounting as a profession will in a short time be extinct and heaven forbid that it happens.
Well-meaning organizations are working tirelessly to ensure that accounting is continuing to evolve and provide real value to the users of accounting information. And their work will yield fruit if everyone plays his or her part.
I hope you enjoyed this article and let me know what you think by leaving comment below.