Digitalization continues to be a disruptive force for every industry and business function within the business territory. However, none experienced a more dramatic shift than the realm of finance, whether it be financial institutions within private sectors or a small accounting team in a startup company. The changes are so dramatic that even educational curriculums in academic establishments adjusted how accounting faculties teach young generations the basics of the field.
The need for real-time, accurate, and secure financial information has necessitated a dramatic shift in how businesses handle accounting. And while we can say that digital transformation is happening everywhere, the accounting sector might be the only business function moving towards 100% digitalization and still thrive without a traditional counterpart.
With businesses and financial institutions collectively transforming the processes and workflows for accounting, let’s explore how this dramatic shift happened and where it’s headed.
Why Accounting’s Digital Transformation Was Inevitable
Accounting is no stranger to digital transformation. The profession has long been using technology to streamline workflows and improve efficiency. However, the adoption of new technologies has accelerated in recent years as businesses strive to keep up with the rapid pace of economic change.
There has always been a significant problem with a largely manual process completed with paper ledgers and physical calculations. This system was prone to errors and manipulations with ill intentions. It was also slow, meaning businesses couldn’t get up-to-the-minute information on their finances. Here are a few other issues with accounting before digitalization:
- Lack of transparency and accountability: The old system was paper-based, making it difficult to track where the money went and who made what decisions.
- Inefficient processes: From invoicing to tax filings, the entire accounting process was time-consuming and often required repetitive tasks.
- Limited scalability: With manual processes, it was difficult for businesses to grow beyond a certain point without hiring more staff or investing in new infrastructure.
- Lack of data insight: It was challenging to gain detailed insights into financial data without digital tools. The flaw made it challenging to make informed decisions about allocating resources.
- Fragmented data: Businesses often use different software for different parts of the accounting process, making it difficult to get a holistic view of the financial situation.
Digital transformation has addressed all of these issues and more. Businesses have gained real-time insights into their finances by automating repetitive tasks, integrating financial systems, and using data visualization tools. It increased transparency and accountability, improved decision-making, and enhanced efficiency.
The Foundations of Digital Accounting
Accounting became a much more manageable business function with mountainous paper trails and error-laden numbers out of the picture. However, businesses pursue those technological and digital changes not because of how easy it is to perform accounting duties but because of the benefits that come with them.
The benefits of digital transformation are numerous, but you can broadly categorize them into three main areas: efficiency, transparency, and insights.
Efficiency
Digitalization has helped businesses streamline their accounting processes, saving time and money. For example, online invoicing and payment solutions mean that companies no longer have to spend time manually processing invoices and payments. Similarly, automated tax filing solutions take care of the tedious and error-prone tax filing task.
But perhaps the most significant benefit of digital transformation is moving from a paper-based system to an electronic one. It has helped businesses save time and money by eliminating the need for manual data entry, storage, and retrieval. Gone are when one or two rooms dedicated to financial paperwork were necessary for businesses.
Transparency
Digital transformation has also increased transparency in the accounting process. By integrating financial systems and automating workflows, businesses have gained real-time insights into their finances.
In addition, digital tools have made it easier to share financial information with stakeholders. For example, cloud-based accounting software allows businesses to share financial reports with investors and creditors globally. Imagine going on an international trip that could take more than a day to get the company’s president to sign a classified financial document.
Insights
Finally, digital transformation has helped businesses gain insights into their finances that were not possible before. By using data visualization tools, companies can see where their money is being spent and identify areas for improvement.
It has led to more informed decision-making about where to allocate resources. For example, a business might use data insights to decide to invest in new inventory management software to save money on warehousing costs. Data insight has always been necessary for accounting duties, but top-of-the-line software and programs weren’t available for accounting specialists to better understand the data.
Those three areas serve as the foundation for any accounting-related advancements pursued globally. With its blueprint, the transformation will continue to grow better moving forward for accounting.
Future Trends for Accounting
It seems likely that digital transformation will continue to reshape the accounting profession. We can expect to see even more innovations in the field. It is apparent in the many advancements present today that digitalizing accounting is a priority, especially with these tools:
- Blockchain: Blockchain is a distributed ledger technology that allows for the real-time reconciliation of transactions across multiple accounts. It will pave the way for faster, more efficient accounting processes.
- Artificial intelligence: Smart machines will help automate much of the work done by accountants and bookkeepers, freeing up time for strategic decision-making and business growth.
- Cybersecurity: As companies collect and analyze more data, they become more vulnerable to cyberattacks and theft. Businesses will need cybersecurity tools to protect sensitive financial information from outside threats.
- Robotic process automation: RPA can automate repetitive data entry and invoice tasks. The advancement will help businesses save time and money while reducing errors.
- Cloud-based technologies: Cloud technology has allowed businesses to scale their accounting processes without investing in physical infrastructure.
As these tools continue to evolve and improve, it’s clear that digital transformation is here to stay in accounting. Businesses are reaping the benefits today and will continue to do so.
So how can businesses prepare for this continued digitalization of accounting? The key is to continue investing in new technologies, adopting streamlined processes, and prioritizing data security. Whether you are a finance professional or business leader, it is crucial to stay up-to-date on the latest trends and innovations in the field to stay competitive in today’s economy.
So, while it may seem that digitalization has disrupted every industry and business function, the accounting sector is thriving thanks to these changes. As long as businesses continue to embrace new technologies and stay ahead of emerging trends, they will be well-positioned for success in the years ahead.
What Does It Mean for Accountants?
Offshoring accounting to the Philippines is a popular method for businesses of any size and shape as the country has many accounting specialists. Also, unlike other offshoring regions like China and India, the Philippines can easily communicate with Western nations in the same time zone. Lastly, Filipinos are known for their impressive English proficiency level comparable to those in America, Australia, Canada, and many more countries. In short, these factors make the country ideal for companies seeking to offshore accountants while getting high-quality services in return.
iSupport Worldwide, a Philippine-based offshoring partner for accounting services, provides small and medium-sized businesses access to a wide range of accounting professionals at considerably affordable rates. With our experts, you can now focus on your core competencies while ensuring that mission-critical financial data is always correctly handled by the right people. Contact us today to learn more about how we can help boost your growth in this digital age.