In the global world of Accounting there are (according to IBISworld) approximately 1.27M accounting firms with approximately US$464BN of revenue. Of the revenue 87% is made up of historical services – tax, compliance and audit.
In the past 18 months I’ve asked over 4,255 Accountants from 9 countries what they do with their time every day. The majority said they spend 80% of their time (aka revenue) ‘checking and processing’ client data. Some said they spend all day doing this.
If this is correct this means that around $400BN of the worlds Accounting revenue is all about data checking. Which begs the question – WHY?
Why do accountants check the data? Why don’t they just process the data with the government agencies as it is presented to them? Now all the accountants reading this are going to say the same thing – because the data will be wrong. But why is it wrong is the critical question.
Here’s why the data that an Accountant receives is wrong…always wrong.
Accountants spend 80% of their time checking data because the data is old, dead, incomplete, redundant data. They are checking it because the systems used at their client site are poor and the people operating the systems (client) are not Accountants so consequently the data that goes into the systems is wrong.
That’s it. It’s all about the clients systems and the people operating them.
Here are some examples of bad systems at the clients site:
- A check/cheque is a bad system – needs human involvement
- Cash is a bad system – needs human involvement
- Paper receipts are bad systems – needs human involvement
- Bank statements are bad systems – needs human involvement
- Credit card statements are bad systems – needs human involvement
- Hard drive accounting systems are bad systems – needs human involvement
- Anything to do with paper or manual data entry – needs human involvement
Get the idea? If there are human’s involved using the system(s) then the humans will invariably ‘stuff it up’ because they are not (in most cases) Accountants. Because they are not Accountants they will code the transaction incorrectly, put it in the wrong column, forget to enter items & loose things! Then the Accountant has to check it and then fix it up.
This is what is driving around $400BN of revenue in the global Accounting profession. Bad systems and humans who do not know what they are doing!
Theoretically then if the clients (of the Accounting firm) systems were automated and there were no (or very limited) humans involved then there would be far less checking and processing going on at the Accountants side. If this was the case then the Accountants current historical revenue would plummet.
This is happening right now all over the world. The digitization of process workflow at the small business end is driving down the need to check and process the data.
Instead of a human doing a manual task (say data input) the scanner is doing it at point of sale. Once the scanner beeps the bar-code the inventory system is updated that there is one less item. The income statement is updated and so is the balance sheet and cash balance as the payment is processed. All auto-magically and all driven by software and super computers.
An Accountant cannot stop this happening. Massive technology companies, innovative entrepreneurs and wanting consumers will make this happen – whether the Accountant wants it to happen or not.
The ‘bread and butter’ revenue of Accountants is being disrupted all over the world and will continue to do so for a number of years to come.
If I (as a client of an Accountant) have invested in improving my technology systems so the data integrity is much more robust and accurate, then it be-hooves me to have a human (aka Accountant) check it and charge me for doing so. The super computer has already checked it!
Accountants need to embrace this change and speed it up by encouraging their clients to radically improve their systems. Imagine what an Accountant could do with 50% more capacity at their end if there was 50% less checking needed?
Maybe they could use the new found time to add value to our numbers rather than spending all day checking them.
It’s part of the process of moving from being a Redundant Data Accountant to a Real Time Accountant.