The Imminent Evolution of ‘Augmentation’ in Accounting and Finance
Kellan Carter, Partner, Ignition Partners
Everyone’s favorite time of year is upon us — of course, I am talking about tax season! What better way to celebrate this time of year than to dive into the latest developments in back office finance and accounting software?
Late last month, I was the keynote speaker at the Tax Executive Institute in San Mateo, CA. This was a gathering of global tax leaders from accounting firms and public companies coming together to discuss the impact of technology in tax and accounting professions. I asked several folks a simple question — how much of your time is spent gathering data compared to acting on it? The surprising response from many attendees was over half of their time — and these are expensive senior leaders! Imagine if instead that time could be spent on strategic initiatives and investing in people.
In light of the growing technology available to streamline certain accounting and finance practices, and by rapidly changing customer demands, here are four best practices to embrace the inevitable software revolution:
Assess the Status Quo: There is often fear associated with adopting any new technology that automates a portion of someone’s daily job. An important first step is asking yourself, “where am I spending time doing repetitive work? How often am I entering data from one system into another? What if we changed the way we have always done it?” Understanding the areas of opportunity specific to your business and workflows is paramount to future integration success, it also informs the types of relevant automation services that would be smart to apply.
Take the Leap Towards Insight and Strategy: The first step to augmentation for a CPA is to shift the mindset from one of a compliance and process emphasis to one of seeing the benefits of automation and data.
One example of this is Icertis, a company that Ignition has been an investor in since Leap Day of 2016. Icertis provides an intelligent Contract Lifecycle Management (CLM) platform that allows enterprises to turn their contracts into valuable corporate assets by increasing contracting velocity, mitigating risk, and managing vendors. One of our key initial theses was that information within contracts would one day become a data asset that can be extracted with software. This is proving particularly true with the new accounting rule ASC 606, whereby revenue is recognized through customer contracts. With Icertis, companies can automate these processes using contract data: Icertis identifies all contractual details, tracks and manages performance obligations, and captures and allocates transaction prices. At present, Icertis has over 5.7 million contracts under management and is the leading provider of Enterprise Contract Management in the cloud.
Culturally Embrace AI: This area of opportunity could be an entire blog post on its own, but the topline is that while Artificial Intelligence (AI) is predicted to eliminate 1.8 million jobs by 2020, it’s also predicted that AI will create 2.3 million jobs in the same time period (Gartner). If AI can solve basic accounting and finance functions, what will employees then be capable of doing with their extra time? It is important for companies to embrace the opportunities created by technology and AI, while investing in their people development and preparing their employees for the more impactful roles of the future. An investment in AI is an investment in your business — freeing your people to leverage information and generate new insights that can have deep and valuable impacts for your clients.
Focus on the human-AI sweet spot: In the rush to adopt automation and AI, firms would be smart to keep in mind that these new technologies serve as innovative tools that complement existing employee skills.
Computers can process data exceptionally fast and exceptionally well. But they still depend on experienced professional insight. And no matter how much automation and AI advances — we are a long way off from computers providing sound judgment, professional skepticism, and client communication. That’s what accountants do best, and always will. It’s hard to put a price on experience.
One example of human-in-the loop is Botkeeper, a Boston-based startup that has built an automated ‘botkeeping’ and accounting platform that Ignition Partners led a funding round for in November 2017. Botkeeper’s role in augmenting accounting is to allow software to do the manual repetitive journal entry and enable accounts to become more strategic consultative advisors to their clients. Accounting, being both rules-based and abundant with data, naturally lends itself to this type of software augmentation. Because of the AI / human combination, Botkeeper can deliver a significantly better client experience, with a beautiful dashboard, at less than half the cost, and at near 100% accuracy (note the average manual bookkeeping output has ~95% accuracy).
Botkeeper and Icertis are just two examples of how companies are leveraging software and data to streamline manual human-intensive processes in accounting and finance functions, and there will continue to be more.
If you have any questions or thoughts about this, or are a founder building a technology that addresses any of the above, I’d love to hear from you! I can be reached at email@example.com or @kellancarter9