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IoT & its Impact on Accounting Practices

Dec 19th 2016
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IoT & It's Impact On Accounting Practices

Simply put IoT (Internet of Things) is basically a system of interconnected devices, machines, appliances, e.t.c. which communicate with each other and exchange data using the internet, without any human intervention or interaction. In other words, IoT is an extended application of the internet, where any device or appliance that you can think of, is connected to each other and share information and data over the internet. This brings along a whole new dimension of interconnectivity and impacts all that we know and see around us today. In this article, we shall briefly discuss IoT and its impact on modern accounting practices.  

What is the Internet of Things? 

To better understand IoT and its influence on the accounting industry, it is important to first comprehend its grand scale and scope. As we all know that the advancements of wireless technology have enabled numerous devices and appliances like smartphones, tablets, computers, e.t.c to be connected to the internet. However, wireless internet connectivity is no longer only limited to 'smart' devices. They can now be implemented on any device or appliance, even mechanical ones with the use of sensors and other IoT-enabled devices.  

Hopefully in the very near future, almost all devices and appliances are expected to be armed with sensors and internet connectivity. This will enable them to provide their users as well as their manufacturers with updates and other important data. IoT will be able to provide vital information like how many times their appliance or device is used or how many devices does an individual customer have in their home to manufacturers. Now imagine this same concept implemented with the modern accounting industry. 

And this is just the tip of the iceberg, with real-time updates enabled by IoT devices, the analysis of vital and relevant information will surely give businesses many new avenues for better business planning and resource allocation and will also help to optimize operational processes, minimize expenditures, and mitigate issues quicker. It will also allow organizations to gather customer and client behavioral data to further tweak their business operations. For instance, warehouse storage devices can have sensors which can automatically send out supply orders to manufacturers in the case of low stock inventory. Sensors on delivery trucks can be programmed to track each and every start and stop along with other information like mechanical failure updates to schedule maintenance in the planned route itself. There are specialized sensors out there which can even alert farm owners about the health of their cattle and what not. 

How the IoT will change CPA firms 

We can expect a lot of changes in the accounting industry, especially the auditing aspects of accounting, as IoT slowly gains more momentum. It is stated that proper implementation of IoT will change the sources as well as the flow of data, from billing, resource planning, and core accounting systems. This will consequentially change the way audits are carried out for each of these aspects of business. CPAs still need to present to monitor and manage all data and financial transactions. 

But with IoT, the methods and practices will change dramatically. For example, with IoT assisted accounting, CPAs will automatically receive all associated data through a digital system, rather than having to go to a  bookkeeper to gather client information. With IoT implementation, CPAs will also gain access to real-time transactional data, along with many controls and exposures in the existing operations, increasing the need for continuous auditing processes. This will also allow a wider and more comprehensible risk evaluation, which will help to quicken issue assessment and remediation. It will also offer real-time management which will enable businesses and CPAs alike to respond to issues immediately. 

Audits are not the only aspect of accounting which will be influenced with IoT. CPAs now have to keep becoming more and more tech-savvy. According to the accounting genius Doug Sleeter, CPA/CITP, founder of the Sleeter Group, proper implementation of IoT will bring "accounting closer to IT". This will consequentially result in professionals from both industries to come together more often and work together to create smoother work and data flow mechanisms. They will also have to collaboratively consult with their clients on how to properly set up an IoT-based business structure. In short, they have to become data specialists who can dabble in both profiles and use critical situation analysis to recover maximum ROI. 

The rate with which IoT is emerging is astonishing, to say the least, and yet it is a simple application of interconnected devices and systems. The accounting industry has recently come to terms with the previous technological advancements and implementations like cloud hosted accounting solutions and services. But now IoT is here to change the way accounting is done, again.  

But the real excitement about accounting implementation of IoT comes from the fact that it enables accountants and CPAs to serve their clients with IoT assisted data connectivity. This will also give rise to many specialized enterprise services and solutions which help derive the maximum potential benefits from IoT assisted accounting. IoT along with the various accounting, payroll, human resources, and order and inventory management processes will categorize data is such a manner that makes it very easy for CPAs to determine the correct issue resolution process, income stream, and generate immense business value for their clients. 

Small and medium businesses, CPAs, and accounting firms, adopting and implementing cloud hosted accounting services is simply to help them shape their practice for the future. But now as the entire industry is coming to terms with cloud accounting, there's another technological advancement which is set to debut. IoT in all of its intricacy and scale will bring forward data connectivity of grander scale. It will help provide significant insights with meaningful and structured data collection and analysis. And just like cloud accounting, IoT is all set to change the accounting industry and yield exceeding business growth and profit, along with creating tremendous business value for CPAs and accounting firms leveraging IoT and its data benefits.