Preparing for The Future of Technologies in Management Accounting

Introduction

Nowadays, the specifics of working in management accounting profession is significantly different from the traditional adopted model, this transformation is due to the development of Information Technology (IT), which has revolutionised this industry in recent years. The emerging usage of technology has an effect on the efficiency and effectiveness of performed work by management accountants, preparing for the future (ACCA, 2019ᵇ). Therefore it is vital for finance professionals to have strong IT skills, as well as developing their digital skills to adapt to the changes. In addition, the expanding digital technologies have changed the shape of the finance function, the traditional hierarchical triangle, with a broad base and a small number of roles at higher levels, to a hexagonal structure, in which expert teams co-operate and work as equal to achieve common corporate objectives (CGMA, 2019).

The related technological development that has an effect on management accountants is Industry 4.0, also recognized as the fourth industrial revolution, or the internet of things. The fourth industrial revolution is currently in the embryonic phase, however, it is set to modify the way accountants perform their work. In addition, it represents an opportunity for those prepared to embrace it (Deloitte, 2018). We can distinguish seven specific types of technology included in the Industry 4.0, which have an impact on the Finance Function. These are Cloud, Robotic Process Automation, Big Data, Artificial Intelligence, Machine Learning, Advanced Analytics, visualization and blockchain (Popkova et al., 2019). This report will focus on how Robotic Process Automation (RPA) and big data affect early career management accountants, as well as examining future potential changes.

The use of constantly developing technology in the finance industry creates a model of intelligence growth in which technology augments human intelligence. The technical abilities of robotics, together with the empathy and creativity of accountants, allow the technology to enhance the financial professionals’ capabilities, therefore, the work of accountants is more efficient and productive (CGMA, 2018). Technologies are able to learn from finance professionals, they can be personalized to fit the particular needs of the finance function. The term in which physical and robotic systems work together, has been called Industry 4.0 or Fourth Industrial Revolution, in which the role of accountants remains vital (Deloitte, 2018). Examples of technologies that are within industry 4.0, which have an impact on the management accounting role, are Big Data and Robotic Process Automation (Popkova et al., 2019).

First Technology: Big Data

A specific technology, which is included in the Industry 4.0, is Big Data, a term referring to large, variable and diverse data sets. The processing and analysing is difficult but at the same time valuable, as it can lead to the acquisition of new knowledge by businesses (Ke and Shi, 2014). Big Data is often available from many sources and arrives in many formats, it includes the volume of information, the velocity in which data is produced and collected, and the variety of data points which are covered (Baker and Andrew, 2019). It is believed that 90% of data has been produced in the last two years alone, and according to IDC (2011), it might double in size every two years. Furthermore, as little as 0.5% of all data produced is being used or analysed by businesses.

While the use of Big Data technology is strongly embedded in IT, management accounting as a progressing profession, gradually uses data sets, as well as analytical techniques to advise financial experts about forecasting decisions within financial markets (Cockcroft and Russell, 2018). An example of using Big Data by management accountants, is analyzing the market and economy changes.

Advantages of Big Data

Big data is vital for every organisations’ decision-making strategies and operational strategies in the future. Although data has been used in accountancy prior to the development of technology, it has never reached the capacities it presently has (Berawi, 2018). Management accountants are considered to be in a favorable position to gain considerable advantages from Big Data to support top managements’ decisions making. The utilization of Big Data is able to support management accountants in expanding their role to deliver improved insight into the future perspectives of the organization. Consequently, Big Data allows management accountants to be traditionally seen as having a historical viewpoint on the company, to help the leader managements accomplish better decisions based on the accessibility of real time insight, which management accountants possess. Therefore, management accountants are becoming strategic business partners and advisors due to the accessibility to the valuable insight of big data (Chambers el all., 2015)

Disadvantages of Big Data

A management accountants’ role has always been decision making, turning raw figures and facts (data) into meaningful information, which enables decisions to be made. However, one of the primary disadvantages of Big Data for management accountants is the quantity of data sets available. According to Șerban (2017), digitization is described as “the process of collecting, converting, storing, accessing and processing information in a format understood by digital devices”, therefore it has caused a large increase in the amount of data available. There will be twice as much data available by 2020, which makes it more challenging for management accountants to examine the valuable information that helps in decision making. The probability for data to be transformed into value-adding information is almost too high to be considered. As stated by Myler (2017), a 10% growth in the implementation of data would have a direct impact on the rise of revenue by $65 million, alongside companies recognized on the Fortune 1000 index. However, majority of data is not utilized, therefore the benefits never materialized.

Second Technology: Robotic Process Automation

Another specific technology, which is included in the Industry 4.0 is Robotic Process Automation. RPA is an essential technology within management accountancy, according to Ciufudean (2018), around 33% of finance experts state that RPA is a vital tool for companies. RPA is a software which enables management accountants to automate repeatable, simple and large-volume tasks traditionally completed by finance professionals. By implementing RPA, firms are able to computerize manual and excel based finance activities, in which the compliance risks and errors are minimized (Häuser and Schmid, 2019). One of the examples in which RPA is used by management accountants, is by comparing budgets against actual results, the results are then analyzed and investigated by management accountants. As stated by Fernandez and Aman (2018), RPA allows the business to increase efficiency and drive the costs down, in addition, management accountants are able to focus more on the strategic work, enabling them to focus on the strategic work, which adds value to the business.

Advantages of RPA

One of the prime advantages of an RPA for management accountants is the reduced time dedicated to routine tasks, and according to KPMG (2018), RPA enables 40.5% of companies to concentrate on high-value work, by decreasing manual labour. Therefore, using the RPA enables management accountants to utilize their time for higher-level tasks, as well as better decision making. For example, Quad Graphics computerized around 50 finance processes, as a consequence, it improved their cash-flow by ten million per day (Automation Anywhere 2018).

In addition, the advantage of RPA includes increased efficiency and effectiveness for management accountants, as a result of reduced errors. Robots are constantly (24/7) able to perform their work independently, which is classified as a step towards real-time accounting. Traditionally, accountants manually entered data into each system separately, accordingly ‘swivel chair processes’ refers to manual and repetitive tasks in the finance department, and the introduction of RPA caused ‘swivel chair processes’ to head towards extinction. The software helps with automated tasks, for example data transfer between systems, with no errors, brings the potential for increased efficiency. Moreover, management accountants will be able to improve their judgment as the data is free from errors (Madakam et all., 2019).

Disadvantages of RPA

Manual tasks performed by management accountants, have been automated due to an introduction of RPA, It could be classified as a disadvantage alongside the financial profession. As a consequence of the decreasing need for an accountants’ input, management accountants could potentially lose their jobs if their work consists of repetitive tasks. It represents a key threat to the financial market as most automation technology, like RPA for example, has the ability to reduce jobs (Fernandez, 2018).

Skills and Competencies

Nowadays the majority of organisation consists of two distinctive categories within an Accounting Department, which are Routine Accounting and Advisory Accounting, rather than comprising multiple specialists, for example, Financial Accounting, Management Accounting, tax, and internal audit. Management accountants fall into the Advisory Accounting category and traditionally management accounts would perform their work in isolation, providing spreadsheets over floating with numbers. However, currently management accountants are expected to work in co-operation with business units and internal customers. In addition, words such as ‘Analysts’ or ‘Finance Business Partners’ (FBP’s) are conversely used to describe management accountants. According to CGMA (2015), the Finance Business Partnering role ‘begins after standard reports and analysis have been produced. At this point, the focus then shifts from Accounting to Management. This is when the disciplines of Management Accounting are applied in the business, and insights are developed which inform decisions and improve performance’. Consequently, to be an effective FBP, management accountants have to develop appropriate professional (or soft) skills and technical competencies to adapt to the changes, which are due to the emerging growth within technology. Moreover, The CGMA Competency Framework was created to help finance professionals, for example, management accountants to identify the skills required for both current and future positions (CGMA, 2019a).

It is essential for management accountants to improve their data analytics and visualization skills, it is due to analysing or using as little as 0.5% of all data produced by businesses (IDC, 2011). After generating the data, accountants will need the capabilities to draw valuable insights from the finding to assist in the process of decision making (O and Wang, 2019). Therefore, this indicates the trend of management accountant taking on a more strategic position within a company. In addition, financial professions will need to develop their data visualization skill, management accountants will be required to assess data visualization choices in order to present it to stakeholders, moreover, it will be vital to examine complex Big Data through simplicity of design, often using advanced visualization tools (O and Wang, 2019).

As well as technical skills, it is necessary for management accountants to improve their soft skills such as, communication and team working. This is due to the finance function evolving from a traditional triangle shape to hexagonal structure, in which expert teams collaborate to achieve shared objectives, therefore finance professionals need to work together and communicate with other business functions, for example marketing or sales.

In addition to improving these skills, it is essential for management accountants to develop their technical competences. According to CGMA (2015), in recent years finance function hugely involved the technology innovation, for example, big data and RPA to improve decision making. However, the current finance sector might lag behind other customer-facing departments, which extensively invests in digital technologies to acquire valuable data. Furthermore, many companies provide training for employees who may struggle to adopt to the technological changes. An example would be, an FHR Company, which provided a Robotic Process Automation software training for their management accountants, therefore, the finance staff that did not have appropriate IT skills were effective in using the software after successfully completing the training (Hagel 2018).

Preparing for the Future of Technological Advancement

The pace of technological changes is significantly increasing, consequently, it will affect the role of an accountancy profession. The vital technology, which will have an effect on the finance professionals in the future, is the fourth industrial revolution, hence the prospect of the arrival of the Industry 4.0 which is both intriguing and credible, and it is essential for accountants to anticipate its possibilities. Although there are numerous claims which state that several management accountants’ positions will be made redundant, there will be many opportunities for individuals with an understanding of the new computerised system to become experienced in the emerging technologies, for example, the fourth industrial revolution are likely to remain in demand (Vetter, 2018). In addition, employers’ requirements for employees’ skills change correspondingly to the emerging development in digital technology, therefore it is necessary for Early Career Management Accountants to identify skills and technological competencies required currently, as well as in the future by employers.

Big Data might also be used in the accounting profession in the future, it offers financial experts the opportunity to acquire a strategic, future-facing role in the organization. Trained to collect and analyze financial information, management accountants are able to apply their basic skills to other datasets, for example non-financial, hence it will increase the value they bring to the business (ACCA, 2018 c). Over the next five to 10 years, there could be a valued transformation in which the finance department progress from a service function to critical business service, therefore a fundamental department to decision making. It indicates that accountants will need to overcome the gap among the IT department, which commonly manages data, and the business, which requires insight to improve new products and develop processes (ACCA, 2018 c). According to ACCA (2018), the financial experts of the future are known as ‘new professional hybrids’, implying that accountants might be data scientists or software engineers in the future.

Conclusion

In conclusion, the emerging technology within management accounting has changed the way financial professionals perform their work. For example, the vital benefit of technological developments in financial industry, which has happened over the recent years is allowing accountants to spend significantly more time on adding value to the business, by the elimination of manual practices, therefore speeding up the process (Allahyari and Ramazani, 2019). In addition, the elimination of manual practices enables accountants to actively participate in higher-value work, which hugely impacts the way they perform their duties, as well as having more time for improving the business. As a result, accountants are moving away from stewardship and bookkeeping to become strategic business partners, hence routine and process-driven roles will fall, whilst roles which require more complex thinking will be in considerable demand. Moreover, there will be fewer traditional accounting involved and more Finance Business Partners required as a result of the finance function changing.

In addition, it is vital for Early Career Management Accountants to focus on adapting to the changes, as a consequence of development in technology. Management accountants should be developing their skills, such as data analysis and visualization skills in regards to Big Data and RPA. Furthermore, the capability to use the evolving technology and acquiring the valuable insight from the data sets, provide management accountants with an opportunity for the future to become Finance Business Partners, in which they will be able to advise to the business, therefore lead it to success.  

References

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