Automation and artificial intelligence have been hot topics in accounting for some time now and experts have warned us for years that bookkeepers and accountants will soon be replaced by technology.
This bleak outlook has the entire industry scampering to stay competitive in the ever-changing landscape of automation and new technology. But really, how far are we as an industry into this transition to total automation?
To shed some light on the issue, Intuit does a rate study about every two years to learn about the billing methods and rates practitioners are charging clients for various services and to learn how technology and other factors such as education, location and the use of technology affects the rates they charge.
Understanding the Technology Adoption Lifecycle
The theory of innovation diffusion suggests that people can be broken into five segments based on how readily they will adopt innovation:
2. Early adopters
3. Early majorities
4. Late majorities
Innovators and early adopters both have a higher than average tolerance for risk and are eager to try new technology as soon as it is available, but only 2.5 percent of the population are innovators and 13.5 percent are early adopters. These pioneers in the adoption cycle influence the attitudes of the early and late majority who rely on their opinions of the technology before they will consider adopting it themselves.
The early majority makes up 34 percent of the population and tend to be more cautious when adopting new technology, relying heavily on the testimony of the early adopters to provide them with proof of the benefits and value before they will consider adoption. The members of late majority also make up 34 percent and typically won’t adopt a new technology until they feel that not adopting will affect their acceptance by their peers.
They avoid adoption until the technology is mainstream and an accepted norm in their industry. The final 16 percent are the laggards, who will hold out on adoption until the technology they currently use is no longer available.
If we map the percentage of respondents who said they are using a specific technology from the results from the recent Intuit study as the market share in the diffusion model we can see approximately where this market is the lifecycle. Please note the majority of respondents to the survey (over 82 percent) were solo practitioners or small firms with less than five staff members which means that the adoption by larger firms may be different from the results presented in this article.
Because many of the same questions were asked in the previous survey that was conducted in 2016, we can compare the data from the previous survey to the one conducted this year and get an idea of how fast the adoption of cloud accounting is occurring.
Moving to the Cloud
According to the Intuit Rate Survey results, cloud-based accounting and business applications has reached mass-market acceptance and is moving from the early majority into the late majority. In the 2016 study, only 40 percent of respondents to the survey said they had their own accounting data in the cloud. This number jumped by over 20 percent in the past two and half years to over 60 percent.
When asked which other cloud-based technologies accountants are using in their practice, we found that not much had changed in the past two years. Clearly cloud-based email and file storage have reached maturity in the accountant market with more than 80 percent of respondents telling us that they use this technology in their practice.
Cloud-based note-taking applications use has increased slightly but it still under 40 percent which means that accountants are using other methods to address these needs such as note fields available in other applications they use like a CRM or practice management solution.
The survey also found that more accountants have begun their transition to a paperless office in the past two years and are making great strides in this area! While those who are 100 percent paperless has almost doubled, the number of those who haven’t yet started going paperless was cut in half. Overall, the percentage of practitioners who are at least 50 percent paperless increased by 15 percent since 2016.
Where Do You Stand on the Adoption Curve?
Do you consider yourself on the cutting edge of technology or do you take your time to ensure that technology you implement has been proven to provide value and benefits? It’s important to understand the adoption timeline of new technology from introduction to the market to industry acceptance can take a long time.
Cloud computing isn’t a new idea, but many factors must be present for any innovation to be accepted by the majority, especially in a heavy regulated industry like accounting. Just because a technology is available doesn’t necessarily mean the market is ready for it.
There can many cycles of innovation and application before there is an emergence of a paradigm that allows majority acceptance of the technology. To gain a frame of reference, the idea of cloud computing was first introduced in the 60s by a scientist named JCR Licklider, according to this article on www.computerweekly.com.
Staying Relevant and Competitive
The best thing a firm can do is develop a strategy to stay competitive during periods of rapid technological change. Recognize how your firm reacts to change and come up with a plan to make sure that you don’t get washed over by each wave of new technology.
Successful firms are changing their business focus from transactional and compliance services to advisory and consultancy services and developing expertise in specific industries or business processes and leveraging this new technology to stay ahead of the competition.
Here are some key things you can do to get your firm ready to leverage new technology:
- Set aside time to learn about new technology in the industry through webinars, courses and other professional resources.
- Connect with other professionals who have already transformed their practice and implemented technologies you would like to explore.
- Involve your team in discussions about new technology and opportunities for new and value-added services that they can bring to your practice and clients.
- Consider adding an experienced technologist to your team who can focus on implementing technology in your firm and with your clients.