Even for small to midsize businesses (SMBs), choosing a new cloud accounting platform or upgrading your existing one can be a difficult exercise made more challenging not only by the need to satisfy your organization’s immediate requirements but also because you’ll need to anticipate the future, too. To help, here are four important trends you’ll want to inquire about when speaking to potential vendors.
First, you’ll want to know if the software you’re browsing utilizes machine learning (ML). Then, if it does, how does that ML translate into digital assistance via artificial intelligence (AI)? After that the rubber really meets the road where those first two trends and all your existing data intersect: namely how well does your prospective package handle data analytics? Finally, you’ll want to know how extendable your software is when it comes to integrating its data with that of other back-office applications, which could be anything from digital marketing to your point of sale (POS) systems.
1. Machine Learning (ML)
At its most basic level, ML refers to a software system’s ability to modify its own internal algorithms to improve performance. You know how Facebook knows which friends to tag when you post a photo? That’s because Facebook has been gathering information from all of your previously tagged posts. You ever watch a movie that Netflix recommended to you? Netflix knew to recommend that movie based on your previous selections.
Now, how does this relate to accounting software? Well, ML helps do things such as automatically sort billing statements, recommend account codes, and suggest repetitive data placements. More importantly, as you continue to use your software and as you continue to accept or reject suggestions by your ML algorithms, the more intelligent the software becomes. Instead of using ML to receive recommendations and sort information, your software will begin to suggest multi-step workflow automations.
“Machine learning will result in better decision making,” said Jon Roskill, CEO of enterprise resource planning company Acumatica. “It will also increase productivity and provide tighter controls and more data insights to see around corners. Budget and forecasting today is based on looking backwards over long trend lines, not on recent developments and forward-looking projections. Better reporting results in better decisions.”
If this all sounds, well, expensive, don’t worry. Many of the larger enterprises using accounting software are already employing ML in their systems. It won’t be very long before this technology becomes the norm for even the smallest business’ accounting solution.
“As with many accounting and finance software innovations, it’s likely larger enterprises will lead the way in building or requiring solutions that include some form of machine learning,” said Scott Davisson, co-founder of small business software company Acclivity. “From there, millions of small businesses can inherit those innovations as they apply to their needs/requirements. But small business owners are utilitarian as it relates to accounting technology innovations. In other words, they’re busy and stretched for resources, so they tend to adopt solutions that demonstrate a tangible benefit. So, while it may take some time for machine learning to trickle down to the SMB space, it’ll likely provide key, quantifiable advantages when it does.”
2. Artificial Intelligence (AI)
Before we get into how AI will impact small business accounting software, it’s important that we distinguish between ML and AI. Although they’re similar, both terms are often used interchangeably (and incorrectly). Here’s the basic difference between both terms: ML systems use intelligence to improve performance by offering you recommendations and ways to streamline processes, whereas systems that utilize AI give autonomy to the software to carry out tasks and make decisions without human oversight. ML is Netflix making movie recommendations; AI is a car driving you to work while you take a nap in the backseat.
Okay, you’re probably asking yourself how a self-driving car relates to SMB accounting. Good question. Remember in the previous section when I mentioned that ML would recommend and suggest inputs? What if you trusted the software to input data itself without requiring your oversight?
“Artificial intelligence will automate mundane tasks and there’s no shortage of mundane tasks,” said Roskill. “AI will provide an infinite level of speed and accuracy, removing mistakes and human error, resulting in better accuracy.”
Certain tasks, such as inputting and auditing expenses, answering basic client questions, and assessing and rejecting loans based on automated risk assessments, are just a few of the many useful ways AI is already impacting large enterprise accounting firms. But this level of automation will soon be coming to accounting tools of all sizes.
“Artificial intelligence will open finance and accounting software to a new set of users who don’t need to speak accounting to get insight from the system,” said Aaron Harris, CTO of financial management software company Intacct. “Smart accounting software vendors are designing their artificial intelligence interactivity with the right set of users in mind.”
3. Data and Analytics
A key area where AI, ML, and reams of accounting data intersect is business analytics. And while you can certainly deploy a third-party tool, like Editors’ Choice winner Tableau, to help parse all those disparate data sets into actionable insights, you should also take the time to examine what you core accounting platform is doing on its own in this regard. In the past few years, all kinds of business apps responsible for generating or sifting through large sets of data have been exploring data analytics as a core value-add and accounting is no exception.
Accounting packages are focusing on several areas in this regard, notably auditing and risk assessment as well as fraud detection. By integrating additional data sources from other apps in your organization’s portfolio, such as customer data from your customer relationship management (CRM) system, sensor data from manufacturing, and purchasing data from your supply chain and inventory management apps, accounts versed in data analytics can provide deeper insights and higher levels of visibility into how your organization really works and makes money.
For those organization subject to compliance regulations, the trend towards using data analytics to spot fraud can save companies big money while salvaging endangered customer and partner relationships. Advances in data visualization and the ability to splice in date from alternate sources is allowing some accounting applications to spot even the most subtle problems and determine if fraud might be a factor.
4. Integrations and Extensions
Anyone who has used cloud-based business software understands the importance of tying data sets from one tool to another. For example, your customer relationship management (CRM) and marketing automation software might come from different vendors, but the distinct data sets in each tool are relevant to users of both systems. As a result, being able to pull data from one system into another or tie workflows across both systems without a deep technology background, will make your life easier and your work much smarter.
Davisson said flexibility for accounting software is important because it allows small business owners to act as software developers. “They can assess their internal needs, where they need more efficient workflows, or what apps needs what data,” he said. “And they can implement solutions without embarking on expensive, complicated development projects.”
Tools such as IFTTT and Zapier not only bring disparate systems together, they let you automate complex workflows across multiple systems—and they let you do it with minimal technological experience. An excellent example of what you could accomplish by purchasing an accounting system that can tie into one of these connector tools is the following: When a new transaction is logged into your system, the workflow creates an invoice on Zoho Invoice, posts a notification in Slack, creates a row of data on Google Sheets, sends an email to relevant co-workers, and schedules a future payment. You get the idea.
“Flexibility for accounting tools is paramount,” said Harris. “Even consumers who have opted for suites will likely deploy many solutions. Accounting solutions like Intacct are designed anticipating access to more than just standard accounting information and are designed to be part of company-wide business processes. Connecting all these systems will not only enable a richer data set from which to gain insights, it will also reduce data latency.”