[IMGCAP(1)]More than 20 years ago, QuickBooks and other desktop software products made bookkeeping unimaginably more efficient. No serious business today would consider doing work without these essential tools. Now, the next wave of essential technology has arrived.

Cloud computing is not a helpful term—it turns something that all of us already use into something new and exotic. Emailing in Hotmail, shopping on Amazon and banking online are all everyday examples of “cloud computing.” The cloud has already arrived and it is so much better that we all already use it.

For bookkeeping, cloud applications have arrived over the past five years. These applications are another huge leap forward. They have already delivered three features that change the economics of bookkeeping: (1) the bank feed, (2) the single ledger and (3) the API.

The bank feed decimates the time required to upload and reconcile the bank statement. The single ledger removes all the lost time and confusion with sharing the ‘client file.’ The API? The API unlocks a whole new set of potential benefits that are likely to be specific to each client.

An API is best thought of as a plug or port. In the same way that your monitor can plug into your computer, the API in your cloud accounting package allows you to plug in your client’s point-of-sale system, expenses system or inventory system. It enables another level of efficiency.

However, despite the next generation of tools being readily available, many firms have yet to deploy them. This is a mistake. In 2011, one of Silicon Valley’s leading venture capitalists, Marc Andreessen, wrote in the Wall Street Journal that “Software is Eating the World”. In this essay he succinctly described the trend that we had been witnessing over the past 10 years: that when a task can be performed by software, it will be. The fall of Blockbuster, the rise of Skype, the disappearance of Kodak, and the dominance of Apple and Google are all explained by software eating the world.

Cloud technology is already changing bookkeeping. The firms that have been early adopters are already more efficient, with higher margins and better service levels. They are using these advantages in different ways: some are decreasing their fees to accelerate their growth and exert fee pressure on everyone else. Others are using the margins for increased marketing, to make further investments in the business or to increase their take home. All these options are still open to all firms in North America—these are the benefits of cloud accounting.

But these opportunities will not remain open forever. Technology creates winners and losers. Bookkeeping will have its Kodaks and its Blockbusters. In bookkeeping these will be the firms that ignore cloud accounting, the firms that “wait and see,” the firms that stick with the old ways. This was the wrong strategy 20 years ago when QuickBooks first arrived and it’s the wrong strategy today.

Software revolutionized those industries and many more, and it continues its march to change more sectors. New businesses pop up every day to capitalize on the driving force of technology, all recognizing one crucial fact: customers now expect and want services delivered through software.

Accounting isn’t immune from the technological revolution. In fact, as research from Carl Benedikt Frey and Michael Osborne at the University of Oxford in 2013 pointed out, accounting is one of the sectors most likely to suffer job losses due to technological innovation and automation. It’s clear, then, that we need to react as an industry, and embrace these changes before we’re wiped out by them. If we move now and don’t resist the urge to bury our heads in the sand, we can make technology our friend.

Some accountants and bookkeepers might think that this is all pie-in-the-sky thinking that doesn’t apply to us, but the rapid rise of software like Xero and QBO shows otherwise. Our clients demand ease and access, and won’t stand being told that it isn’t possible. If they can order takeout or make a bank transfer instantly through their phone, they’ll want the same from their accountants. And ultimately, people are fickle; if you can’t offer the tech your clients know will make their lives easier, they’ll go to your competitor down the road who’s happy to use the software they want.

Bookkeeping in particular is one of the areas of accounting that will fall prey to the pressure to adopt new technologies. Its manual data-entry focus makes it easy to automate, and software designed to reduce the burden of such manual tasks is already here. The fears of bookkeepers are therefore understandable, but they are misplaced: new technology presents an opportunity for bookkeeping to thrive. But this requires a radical change in focus.

As it currently stands, the bookkeeping process is heavily weighted toward data entry and extraction. Important as these activities are, it’s inevitable that they will eventually be replaced by automation. It’s easier said than done, but we need to act fast here. If we accept that bookkeeping will become automated, we can start working on transforming the role of bookkeepers from data entry to valuable data analysis. Our clients are often way ahead of us on this front: if they adopt the technology before we do and start to manage bookkeeping themselves automatically, they’ll demand lower prices from us—one thing we absolutely don’t want to happen.

Technology will mean a big shift in the way we work, but this transition of bookkeeping from a data entry function to data managers is key. With the data gathered from software, practices can look at the information they accumulate each month with a new approach: how can data give us an insight into processes? And how can this insight be used to improve productivity?

By analysing the data accumulated each month through new accounting and bookkeeping technologies, practices will not only be able to quantify staff and client workloads, but also identify where the most frequent delays occur in the bookkeeping process. The result of this will be the ability to prioritise tasks by urgency, whilst assigning team members the tasks most suited to their skill sets. For the first time, the cost of efficiency can be determined across a number of differing factors. These results will not only benefit practices internally through reduced expenses and improved productivity, but they will also enable them to significantly improve client relations.

Of course, recognizing how this data can help you manage a practice more effectively is only half the battle. We now need to take action. Technology will help to move this process of data management out of the back room and into the forefront of a practice’s growth strategy. Modern bookkeeping may not necessarily equate to cloud bookkeeping (yet), but it can be dramatically improved by technology that has the power to strengthen the positions of those who use it correctly.

If we ignore technology, it will become our enemy. We need to change our way of thinking, not only in the approach to bookkeeping but the attitude of professionals. If we can manage it, the potential gains we can make with technology will be huge. We’re currently sitting on vast amounts of data, waiting to help us transform the role of bookkeepers. The question is not whether technology will threaten bookkeepers (it will) but how long it will be until we realize its true value in driving this industry forward.

Michael Wood is the co-founder ofReceipt Bank.

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