AI will cause accounting automation. That’s great news for millennials

This article was first published on the GetApp Lab.

It’s starting to seem like no industry is safe from robots. An oft-cited Oxford University study warned that 47 percent of all jobs in the U.S. are “at risk” of being automated within the next 20 years. Even if you’re not worried about your own job being on the chopping block, automation isn’t an abstract idea. It already impacts industries like sales, eCommerce, marketing, and more. And accounting automation is next.

Accounting automation in the AI age

When emerging technologies become more affordable, they also become more widely integrated into popular tech tools. By its very nature, software is designed to automate tasks. So, it’s not surprising that accounting automation is happening now.

Earlier this year, Xero accounting software announced plans to launch a new machine learning system for small and midsize business (SMB) users. This system uses detailed statistical analysis to learn where and when each SMB owner tends to create and file their invoices.

Then, Xero’s machine learning system suggests the right account code when an SMB owner creates new invoices in the future. This keeps the owner from making manual mistakes, and Xero claims that users will save close to a working month each day.

That’s all well and good for Xero’s clients. But how will this system impact accountants?

Accounting’s new frontier

If James Solomons is correct, machine learning will change the profession in a profound way – and not for the worse. Nervous accountants should heed his advice. James is an accounting influencer who serves as Xero’s Head of Accounting in Australia. He’s also a director at Aptus Advisory, an Australia-based consultancy that shares cloud accounting software tips with clients. And his own blog is a treasure trove for small business accountants.

As you might expect, James is bullish about Xero’s foray into machine learning. After beta testing with a small group of small business owners, Xero aims to roll out its machine learning feature for all users this year. But James says that accountants who worry about irrelevancy have nothing to fear. On the contrary, he’s convinced that they’ll have a more important job than ever. GetApp spoke* with James to find out what he means.

Read on to learn:

• Why emerging technologies spare new accountants from doing the most manual work;
• When cloud-based accounting software will become the norm;
• How millennial accountants differ from their predecessors;
• What accounting automation will do to the industry.

You recently wrote a blog post about how technology is changing accounting. You shared your own story about “paying your dues” as a new accountant via more manual tasks like posting bank statements. Why do you believe that today’s new accountants are spared from fulfilling these tasks?

Many people in the accounting industry still believe that new accountants should be required to perform these mundane tasks to learn the art of accounting. However, technology continues to remove the need for some or even all of these tasks to be undertaken. So, [new accountants] are spared purely due to accounting’s evolution!

The big challenge for new accountants is being able to obtain what superiors deem to be “problem solving skills” in a [profession] where fewer problems tend to happen. This is due in large part to the fact that data flows are now automated. But this is also where a mismatch in views occurs.

Manual, mundane data entry tasks did not teach problem-solving skills. But accountants in older generations believe that they did. And because those tasks are dying, these older accountants believe that millennial accountants are unprepared for the job.

Research shows that accounting software users are reluctant about moving to the Cloud. But you’re a lecturer at Macquarie University and say that your accounting students expect to use cloud software. How many years do you think it will be before cloud-based accounting software is the industry norm?

In Australia and New Zealand, we are in the early majority of cloud users and could even be moving into the late majority. By contrast, North America and Europe are still in the early majority – especially SMB owners.

Larger corporations have used different versions of cloud products for some time. But these have tended to be hosted solutions – not the automated cloud solutions that today’s SMBs enjoy.

So, let’s look at the rate of adoption within the last five years coupled with the rate of improvement in cloud accounting products. This combination suggests that cloud systems will become the norm throughout SMBs over the next five years.

Much of this growth will be driven by SMBs who have no choice but to make their taxes digital. In light of this change, small business owners will seek more efficient ways to work with their accountants using online, cloud-based accounting apps.

The Internet is awash with articles about how millennials are changing the world of work. What’s the biggest way that you foresee millennials changing the accounting profession?

Millennials consume vast amounts of data from many sources. They like to be in the know, solve problems, and challenge the status quo. As such, millennials will ultimately provide a service model to clients that is focused on being heavily involved with helping their clients grow and succeed.

This might take the form of pure advisory work or more high-level tax advice. Regardless, millennial accountants will want more autonomy than their older peers.

Being included to lead tax compliance once or twice a year is not enough for them. Instead, they view themselves as strategy consultants who can help small business owners manage their full financial pictures. They believe that they add enormous amounts of value to clients. As such, [millennial accountants] will want to only work with clients who buy into this value proposition and engage them as such.

How do you foresee automation changing the accounting industry within the next decade? Why is this good news for millennial accountants?

Over the next 10 years, accounting as we know it will be vastly different. Debits and credits will exist while the fundamentals of accounting remain.

However, the way in which financial statements are prepared – and how tax returns are completed and lodged – will be either partially or fully automated. In the future, most accounting work will happen before transactions – not after.

What does this mean? Well, the reporting function as we know it now is all about collecting company transactions, then distilling them into financial statements and tax returns. This is manual work that accountants do right now. But in the future, automation will complete these components based on machine learning and AI.

When this happens, all that the accountant will have to do is check each report before it’s sent to the tax department. And this means that accountants’ core value to companies will change.

In the future, accountants will provide assistance when clients set up their accounting systems of choice. They will ensure that these systems are set up properly for clients. Then, they will move on to setting up data flow systems for work advising small business clients.

This is great for millennials as they don’t like to just be there at the end of a process to look at what happened. They want to be involved wherever they can add value. And with clients, it’s easier to add value by helping them succeed in the beginning. This allows accountants to contribute before the big work starts rather than trying to help after the fact.

So, in the future of accounting, clients will look for help at the start and millennials will be there to assist!

*This interview was edited for length and clarity.

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Lauren Maffeo covers trends in the project management, finance, and accounting software industries for GetApp, a Gartner company. She focuses her research on strategies and tools to help small and midsize businesses create unique value. Lauren previously managed content at Aha! and covered technology trends for The Guardian and The Next Web.