How Technology Is Transforming Modern Accounting Practices

Introduction

Technology and the internet have changed many aspects of professional life in demonstrable and perhaps immeasurable ways. Nowhere is this more evident than in the field of accounting. This paper examines several key ways in which technology has emerged and transformed accounting practice. Topics covered include pivot tables, API feeds from banks, credit card processing, vendor communication, and enterprise resource planning (ERP) systems. The four main dimensions through which these technological updates are evaluated are speed, accuracy, timeliness, and applicability. While rapid advances in technology have created logistical, training, and security challenges for many accounting and other professionals, the benefits of technology for accounting far outweigh the drawbacks.

Excel Pivot Tables and Data Summarization

The gold standard program in the history of accounting software is arguably Microsoft Excel. There have certainly been other game-changing programs for accountants — QuickBooks among them — but Excel was perhaps the first major step forward in the transition from paper-based, handwritten accounting documents to the computerized methods that are so common today. One of the most prominent and powerful tools to emerge from Excel over the years is the pivot table. The beauty of a pivot table is that it allows a large amount of data to be summarized and quantified in a relatively simple fashion.

There are, of course, other ways to calculate averages, counts, and similar figures in Excel and other programs. However, those who have mastered pivot tables understand that Excel is far more robust than most other available solutions. The complexity and ingenuity of the pivot table has also evolved considerably over time. For example, earlier versions of Excel struggled to produce a distinct count of unique values — a limitation that has since been addressed by a new data modeling feature. When it comes to accounting-heavy records such as customer lists, item catalogs, and sales figures, this capability is especially valuable. As technology, software, and computers become more sophisticated, so too will the solutions required to properly account for the associated behavior and activity (Jelen, 2014).

Evaluating pivot tables against the four key dimensions: speed is largely a function of how quickly the user can identify what they want from the data — the tool itself is fast. Accuracy is strong because computerized programs do not make mathematical errors; as long as the pivot table is arranged correctly and the underlying data is sound, the results will be as well. Timeliness is high because users can assemble and analyze data very quickly. And applicability is evident because pivot tables do precisely what accountants have needed for decades — they simply do it much faster.

API Data Feeds in Banking and Finance

Another major catalyst for change in the accounting and financial sphere has been what are known as API feeds. API stands for Application Program Interface. While it has broad applications in the general information technology sphere, it has increasingly been harnessed for accounting and banking purposes. A significant and growing amount of banking and other financial data is now transmitted over API feeds, not unlike a social media or news feed of information.

Both established and newer companies have entered the API feed space as a business model. One example is SNL Financial, whose entire business is centered on data feeds. This data can be used for accounting as well as for other analytical purposes such as investment analysis and auditing. SNL offers sector-specific data feeds in formats including plain text, XML, and others. Data is commonly transferred through file-transfer protocol — raw data that is packaged and assembled is then offered in feeds to the parties that have requested it. Customers can request feeds on a daily, weekly, monthly, or quarterly basis, and feeds can be specific to a single firm or broader in scope, covering revenues, cash flow balances, and information from other companies or broader industry sectors (SNL, 2015).

SNL reports nearly fifty thousand data points for public company financials, regulated industries, investment details, capital structures, capital offerings, and mergers and acquisitions. Banks are also getting into the API feed business in earnest. SNL boasts feeds from more than thirteen hundred banks and thrifts, partnerships with twenty thousand depository institutions, and coverage of more than one hundred thousand bank branches. API feeds, while not yet universally prevalent, are becoming more common and are being used as a means to automatically deliver relevant data to accountants rather than requiring those accountants to find and collect the data themselves.

Against the four dimensions: API data feeds are fast because they are transmitted over the internet and processed quickly. They are accurate because the data originates from properly configured software and systems and is simply passed along without alteration. They are timely because transmission occurs when requested and covers the time periods specified by the customer. And they are applicable because the recipient is, in principle, only requesting information that is relevant to their job, company, or industry.

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