In the broadest sense, the internet of things — or IoT — refers to any physical thing connected to the internet. Increasingly, it is a phrase used specifically in relation to items that are transferring data or information amongst themselves.
As Caroline Gorski, the head of IoT at Digital Catapult, told Wired, “It’s about networks, it’s about devices, and it’s about data. The Internet of Things brings those networks together. It gives the opportunity for devices to communicate not only within close silos but across different networking types and creates a much more connected world.”
Accounting, like most industries, is being radically impacted by the increasing influence of the IoT. Accountants would do well to take a note of the influence of the IoT and to recognize that there are a great many ways it can be leveraged to benefit firms, as well as ways it can potentially create new types of challenges.
Assets and Inventory
The IoT makes it easier than ever before for organizations to keep tabs on their resources, and that has direct implications for the accountants who are responsible for overseeing the budget and its relation to assets.
Not only does the IoT make it possible to track inventory without manual counting — with the use of smart shelves that keep up-to-date, virtual records — smart storage also allows companies to know at all times where assets are being stored.
Additionally, companies that go paperless and store records virtually save big financially and enjoy the benefits of virtual data storage where items can be organized, saved, and searched for with just a few keystrokes.
For accountants, the implications are clear: the IoT shifts the budget and makes understanding the specifics of where money is being saved and wasted a streamlined process.
Social Media and privacy
The digital transformation has impacted countless industries, and while there are many positive implications, there are also challenges associated with the massive amounts of data and information sharing.
Given the often sensitive nature of the information accountants utilize, they must acknowledge the challenges related to IoT-related advances and move forward with a commitment to transparency and safety.
For example, Dayna Roane writes for the Journal of Accountancy, “Despite publicity about numerous data breaches, many clients remain unaware of the threat of identity theft. They email tax returns or send banking information without considering the risk. Some schemes are very subtle or rely on a fear of the IRS to extract data or payments. CPAs should impress upon their clients the potential dangers.”
Accountants are responsible not only to make sure they take precautions, but also to include safety education in their communication with clients. The IRS encourages efiling, but the cyber security experts at DeVry University note that despite the apparent safety in doing so, there are additional precautions that can be taken. Professionals should work alongside nonprofessionals in the implementation of those precautions.
Provide Actionable Insight
Perhaps the most pronounced way the IoT will alter how accountants do their jobs relates back to the way it will change financial decision making for professionals. Areas that were previously about absorbing large amounts of historical data or were even matters of intuition can now be regulated to factual, accurate documentation.
“The IoT can play an important role in financial decision making by providing real-time visibility that complements data from enterprise resource planning (ERP) and accounting systems and allows for a more holistic view of the enterprise,” writes the Forbes Insight Team.
The IoT can provide historical data on past jobs so that accountants can bid the right amount on prospective jobs and not be stuck getting underpaid for a long-term project. It can track the economic data related to marketing campaign touchpoints so that organizations have a better idea about the budgetary requirements of future projects. Additionally, predictive maintenance means companies can predict when their physical assets will need work beforehand, thus ensuring max efficiency and an accounting department that isn’t blindsided by costs.
The End of Audits
Audits likely top the list of things professionals aren’t fond of doing. Months after the primary work has been completed, they require an attention to the minutest of details so that companies can successfully assess themselves. However, the IoT removes the need for the grunt work connected to audits.
According to Jean Loh for D!gitalist Magazine, “With the volume of IoT-generated data, journal entries, and transactions that will need to be processed, audits will quickly become a ‘near-real-time activity that will change the mindset of the audit function.’ Audits will no longer merely entail ensuring that numbers are tallied and reported correctly, but will now add an understanding of the source data, where it is coming from, and how it is captured.”
Essentially, the technology will be able to take audit-related data and instantly capture it so that accounting professionals have an in-the-moment understanding of the state of things, and are thus able to make better actionable decisions based on that information. Audits have predominantly been retrospective, but in the future they’ll be realtime and more translatable.
Ultimately, there are clear ways the IoT is already and will continue to shape the accounting profession. In the majority of cases, there’s a clear benefit for professionals. Much of that which was time-consuming and often punctuated by human error is being removed from the equation.
There is certainly a level of risk associated with harnessing the power of the IoT. It’s interconnected nature means that there are more access points for those with ill intent to target. However, accountants who endeavor to couple the power of the IoT with an informed, proactive approach will be well-served by the technology.