Digital Financial Reporting

Many business professionals really have no clue about what is about to be thrust upon them over the next 25 years.  Business professionals really have no choice what-so-ever as to whether this change will occur or not.  The change is already occurring.  Business professionals, including professional accountants, can choose whether they deal with this change prospectively or retrospectively.

There is no universal "right" or "wrong" answer to the question as to the best approach to take, proactive or reactive.  But, the choice you make will have consequences.

When I graduated from college in 1982 and showed up that fall in the offices of Price Waterhouse, one of the managers pointed to a room that had two IBM Personal Computers and said something like, "Why don't you see if you can make those do something."

Most of the other 50 or so accountants paid no attention to those new computers.  Me, I took a class in VisiCalc which was the first electronic spreadsheet made for personal computers.  Some years later I learned Lotus 1-2-3, then Excel.  At one point I took a five day class at Microsoft that had to do with macros and Visual Basic for Applications (VBA).

Others.  Well, many other accountants adopted the strategy of avoidance.  There were accountants that figured that they could retire in five to ten years so they were just going to ignore the whole computer thing.

Today, many accountants seem to be adopting a similar approach of retiring or simply denying that anything will change.  Trust me when I say that while that might work for some older accountants, it is really a dumb strategy for those who are younger.

Another thing is that does not work very well is listening what what the majority of the profession is saying and doing that.  The problem with that is that the majority of the profession really has no idea what is coming because they don't have the proper background to understand.

First, what is going to change?  In my opinion based on what I have seen and experienced over the past 20 years the following is going to happen:

1. Specialized artificial intelligence: Computers will become even more adept at doing useful work for professional accountants, other business professionals, and in general.  The primary new capability that will enable this is "specialized artificial intelligence".  What I mean by that is a software program augmenting the skills of an accountant, similar to how a calculator augments your skills for doing math.
2. Structured information: More structured, semantic-oriented information will be used.  This is as contrast to "text search" and computers figuring things out from unstructured information.  What I am talking about is professionals representing information in machine-readable structured form and then computers working with that rich, structured information. XBRL-based general purpose financial reports are a good example of structured information. Artificial intelligence software (i.e. #1) can do much more with structured information.
3. Digital distributed ledgers: Whether it is blockchain based or hashgraph based or one of the many other digital distributed ledger formats available; digital distributed ledgers will have a big impact.  The primary thing that digital distributed ledgers do is turn proprietary, local databases into standard, public databases and make sharing information easier.  Digital distributed ledgers is a method of making more structured information available (#2) which means that you will have more information that AI applications (#1) can work with.
4. Automation of accounting, reporting, auditing, and analysis processes: Enabled by #1, #2, and #3 above; financial transformation and moving to a more modern finance platform is a no brainer.  For example, XBRL-based general purpose financial reports.

So, what should you learn to make sure that you have the skills you need to survive and thrive over the next 25 or so years?  What do you need to understand in order to best grasp the opportunities that will appear in the coming years? This is my view:

• Logic: The single most helpful thing that I did was to take a college class in formal logic.  Now, I would admit that an entire course in formal logic is probably overkill.  But unfortunately, it is harder to find a college professor that is teaching only the portions of formal logic that you need.  What you need, in my view, is to formalize your understanding of logic a bit rather than just rely on your natural, innate understanding of logic that most people have.  Logic helps you understand how computers "think" and helps you understand what they can and cannot do and how to get them to do the things they can do.  I summarized a lot of this information in the document Computer Empathy.
• Information Science:  This hard to define precisely.  First off, you don't need to learn a bunch of "technical" stuff.  What you need to learn is fundamentals of what information is (as contrast to data), what it takes to get computers to do useful work for you, and other things like that.  Again, i tried to articulate as best as I could what I believe you need to learn in the document Computer Empathy.
• Business Analytics: Excel is an excellent tool...except when it is not. One good definition of business analytics is “the study of data through statistical and operations analysis, the formation of predictive models, application of optimization techniques, and the communication of these results to customers, business partners, and business executives.” There are lots of good business analytics tools.  But, what you really need is the understanding of statistics, interpretation of information, analysis methodology, etc.

In my personal view, somewhere between 30% and 70% of accounting jobs will change.  That means that somewhere between 30% and 70% of professional accountants can do nothing different and still do just fine.  Some studies say that 98% of accounting jobs will simply go away.  That just will not happen.

And so some professional accountants are definitely at risk.  Others will completely miss the opportunities that reveal themselves because they were not prepared.  Be very careful who you listen to, they might be pointing you in the wrong direction.  And don't just take my word for any of this, I don't have a perfect crystal ball, I simply have some of the skills necessary and a track record to make a decent prediction.