Introduction: Background and Motivation
Digitization should not be disregarded in MA because it has essential economic benefits, including increased quality, efficiency, speed, decision-making, value-added opportunities, and increased resource availability. Mechanization and the outsourcing of repetitive tasks to Shared Service Centers (SSC) lead to efficient planning, prediction, monitoring, and consolidation. Similarly, prognoses, analyses, and decision-making are improved based on enriched data and verifiable findings produced from predictive analytics and machine learning. Because of automation and predictive analytics, forecasts are more accurate (Agrawal et al. 40). Furthermore, mobile systems allow management to make high-quality decisions wherever they are based on real-time data collected via smartphones. Risks can be mitigated when judgments are made on a firm foundation. Besides that, data can be examined faster, and judgments can be formed more swiftly with a faster response time. Productivity gains result from observing development potentials and promptly maximizing patterns in cause-effect connections.
The utilization of IT solutions, notably automation, leads to resource availability, owing to a significant decrease in the needed capacity for repetitive operations. As a result, management accountants may assist with strategic issues and judgment. There is numerous room for clever value-adding operations; new business models, a shift in the focus of management accountants, and real-time performance insights and reactions are all elements in support. Overall, effective management of the data and information made available by digitization can help businesses gain a competitive advantage (Puhovichova et al. 140). It is not easy to use all of these advantages due to a slew of regulations. Any significant change scheduled to be implemented in a company needs a proper strategy and the overall plan. Open communication and constructive criticism are critical for the growth of a performance management process. Without solid employee engagement, change drivers will struggle to implement changes. In addition to change culture, a trial-and-error culture must be formed. Disruptive changes add to the strain in an environment where less stability is inevitable and more uncertainty must be managed.
Allowing workers to try and learn is crucial in dealing with environmental changes, but it is difficult because it goes against another strategic vision that emphasizes safety through defect prevention. Therefore, digitalization in the management accounting sector plays an essential role in ensuring workers are updated on new technology such as artificial intelligence and ERP implementations to reduce complexities and ensure work is efficiently done. Before automating anything, it must first be established which activities and duties are appropriate, then ranked. As a result, management accountants who engage with digitization must understand which technologies are accessible and where they could be applied (Puhovichova et al. 141). Thus, they must examine their corporation’s funding issues, as well as the feasibility of integrating new technology into existing systems and the ease with which existing know-how may be used. Another point raised here is the high cost of developing sound IT systems. However, proper data management is essential to secure beneficial outcomes from any technology. One of the most significant challenges is that management accountants’ skills must be updated to capitalize on digitization appropriately.
Literature / Theory
Accounting is the language of business; language is a means of communicating information. It also entails alerting all parties involved in the implications of company activities. Engineering should make a serious effort to learn about a firm’s accounting methods to communicate with senior management more successfully. Accounting study focuses on past and current financial occurrences. Accounting offers the services required by a business unit; it gives a significant amount of past financial data that can be used to estimate future financial conditions (Campbell et al. 50). Accounting is an essential source of data for future research. A thorough understanding of the sources and relevance of accounting data is required to appropriately use or not use accounting information in forecasting the future and comparing actual versus projected results.
The American Institute of Certified Public Accountants defines accounting as the art of recording, classifying, and summarizing visibly and terms of money, exchanges, and activities that are, in part, at least of a company’s financial transactions and interpreting the results thereof. The American Accounting Association (AAA) defined accounting as “the act of locating, measuring, and communicating economic data so that users can make informed judgments and decisions.” Accounting can thus be defined as the process of recording, categorizing, evaluating, analyzing, and understanding banking transactions and communicating the results to relevant parties (Accounting Defined | Financial Accounting Paragraph 2). Accounting procedures are the product of a tendency that originated during the Renaissance in the accounts of entrepreneurs in city-states. Commercial companies’ requirements to retain records of their dealings with outsiders and enable accurate values according to the multiple parties participating in the business’s activities spawned the first types of accounting.
Much has changed in the last century; the rise of industrial organizations has led to large production, competition, and market expansion. In recent years, technological advancements have brought a tidal change in the profession of accounting. Accounting provides various information that may guide management decisions and actions. It has become well-known as a method for handling a wide variety of economic challenges that a firm may face. Accounting can be split into two main categories: managerial and financial accounting. People who are not engaged in the company’s day-to-day operations, such as debtors, investors, creditors, and employees, benefit from accounting. Hence, financial accounting considers the interests of those with a financial stake in the company’s activities.
Management accounting is used for operational purposes in a firm, that is, to provide data on how various components of the company, including costs, money, and profits, are performing. The purpose of management accounting in a firm is to assist management in planning, regulating, and assessing a company’s operations and strategic orientation by obtaining, processing, and disseminating information that helps management make competitive decisions. The fact that someone with the title of “management accountant” is unusual within a firm is fascinating regarding management accounting (Maheshwari et al. 1.5). Several people are working as accountants in businesses, although most are fiscal accountants, tax professionals, cost accountants, or audit members of the committee. Thus, finance professionals, marketing and sales managers, chief executives, and information technologists, among others, must be able to plan and implement proper management accounting.
Management accountants work for public companies, private businesses, and government agencies. These professionals are cost, industrial, management, and corporate accountants. The capacity to compile data for internal use is one feature that distinguishes accounting professionals from other types of accounting occupations, like public accounting. Management accountants usually supervise lower-level accountants who do basic accounting tasks such as reporting income and expenditure and managing tax liabilities (Maheshwari et al. 1.6). This data is used to create cash flow statements, income statements, and bank balances. In a smaller company, you can end up handling these tasks yourself. A management accountant examines performance and plans to forecast, plan, measure them, and then presents them to upper management for operational decisions.
Digitalization has the potential to disrupt the management accounting field. It could affect the company’s digital environment, related business strategies, management accounting and management procedures, and the controller’s position. This editorial examines these trends by defining digitization and discussing its influence on management control and accounting (Moller 4). Digitalization is the process of transforming a business model into one that generates new revenue and value (van Tonder 114). As a result, it has impacted a wide range of corporate practices, involving supply chains and business models and supporting functions like accounting and human resources. Digitalization allows for new collaboration among businesses, providers, customers, and employees, resulting in new products and services.
Incumbent organizations face a challenge in digitalization because it forces them to reconsider their current strategy and consider new business opportunities. The robotization and automation of routine procedures, the adoption of knowledge management, and data analytics have all come from digitalization in the finance department. The function of controllers is being impacted by digitalization. The transition to an online format from traditional business transactions is a big step in a country’s digitalization process. It takes a long time to become used to it. The digital transaction is a time-saving and convenient concept because it simply requires a computer and an internet connection and the transaction’s personal information.
The digital era has brought all forms of information to our fingertips due to data centralization and accessibility. People today, for instance, depend heavily on digital and world wide web mobile phones to get immediate inquiries they may have. Digitalization has also altered human communication, thanks to numerous apps that allow users to transmit information to one another quickly and in several formats (Moller et al. 8). Making a video call or using somebody’s name in a social networking communication are two instances. People’s capability to communicate fresh concepts has also improved due to digital innovation, enabling them to disseminate quickly. We no longer have access to the thoughts of society’s wealthiest and most influential individuals; now, everyone can speak up.
Digitalization has opened up a whole new world of career opportunities due to the internet’s purpose of allowing for remote working. There are also totally new professional professions available, like online scientific specialists, and anyone may start their online business, which is a huge benefit (Lazarova 97). Finally, it has increased commercial competition to the degree where clients now have more choices, which is a positive element because it implies the most significant firms and their costs no longer govern people. Another advantage of the digital era is that it allows for faster and more effective financial transactions, especially global trade. Check out the latest advancements in each type, such as Bitcoin News. Cryptocurrency may soon become our only form of currency, so keep an eye on it.
A Framework to Understand Digitalization
Businesses, particularly management accounting (MA), are being impacted by digitalization in various ways that have yet to be investigated. MA will evolve dramatically in the coming years. Hence, organizations must recognize the importance of digitization for their performance; therefore, the consequences of digitalization on MA and the profession of a management accountant must be understood. Organizations must effectively analyze the endless amount of data accessible to remain competitive (Lazarova 98). However, this is not the only indicator of what should be done; improvements must be made on multiple levels. Initially, there are several different definitions for MA, with some of them ranging significantly and no clear primary one. Nonetheless, several groups sought to make a strong message.
Management Accounting Processes
Knowing what activities are present in MA provides a foundation for optimizing processes and adopting new IT systems. As a result, activities in this sector are examined to identify how and where digitalization might be implemented in MA. At the start, a general overview of MA procedures is provided. Following that, it will be discussed which of these processes can be altered and adjusted by new technology.
The IGC established an MA process model in 2011, which was modified six years later to include the effects of digitization and Big Data. The model identifies ten essential procedures that occur in MA. Figure 1 illustrates the initial concept; the dark grey segments indicate the seven key processes. Planning, predicting, accounting, budgeting, reporting, and risk management are just a few examples (Stransky et al. 76). Furthermore, functional controlling, business consulting, and enhancing the organization and its components are necessary.
The improved version of the IGC process model is shown in Figure 2. The changes have been noted by Möller 12, which include the following, but are not limited to: First, the seven essential procedures were limited to the five dark blue ones since strategic planning, project management, and risk management were no longer considered core processes, while business partnering was added; data management was added as a new process, and function controlling was shifted to a second level ranging all ten main processes (Stransky et al. 77). The cyclic management process of target formulation, planning, and steering surrounds these MA operations. Finally, analytics was used to change the model, which has become an essential element of the MA process. Digitalization has a different impact on each central process, and it is the specific activities in each of them that change rather than the overall output. The domains of planning, reporting, and cost accounting would be the most affected by digitization.
The four process categories of information management include; planning, reporting, budgeting, forecasting, and the evolution of organizations, processes, and so on, are projected to be the most severely impacted. Cost accounting appears to be the most affected, as all of its sub-processes are affected somehow, with the most significant effects on quote plan computation and standard order pricing. Nonetheless, several management reporting sub-processes document significant effects (Stransky et al. 78). These include reporting system management and data process, the numerical part, deviation analysis, and commentary for report generation. Reporting will become faster and more sophisticated as real-time approaches, more extensive databases, and simulations are used. Paper reports will gradually become a thing of the past as cloud-based versions take their place. Immediate reporting and portable solutions dominate the reporting process, allowing management to obtain ad-hoc information for business steering swiftly.
Dashboards and drill-down tools, for example, can be used to analyze deviations quickly. As a result, either fast information availability or prescriptive technology provides prompt countermeasures. There are a variety of software solutions that can help with the reporting process at all phases. Data is retrieved and consolidated from several various software systems like e-mail programs, Microsoft Office, and ERP systems; for example, using RPA, list numerous changes that have been made feasible in planning, budgeting, and forecasting. They foresee the most significant influence of digitalization in the information and a number-driven part of planning, where prescriptive modeling is involved and outside and internal data is added to the data basis (Stransky et al. 79). As a result, planning becomes predictive, as computers automatically forecast facts and numbers, leaving workers only to confirm them. Furthermore, data is automatically generated and imported into the systems, affecting not only planning but also planning and budgeting.
With RPA, planning sheets could be constructed, and their input data could be acquired from various sources. Despite this, the use of algorithms in the planning process has limitations. They can only work well within a specific range of parameters. Inputting data outside this range would result in possibly inaccurate results rather than more valuable alternatives. As a result, it may be beneficial to limit the use of predictive to particular time-consuming planning subfields at first. The original planning method can further be carried out in parallel, with regulatory standards monitoring the stated parameters and their adherence. Internal cost accounting will be more closely integrated with financial accounting. Imputed costs, for example, are more easily matched with financial accounting as a result of this (Stransky et al. 84). In addition, profit and cost contribution possibilities will be calculated highly automated. While remarking in reports and offering business advice will not always be automated, the steps followed can be based on a more extensive data set. The advancement opens up the possibility of expanding the scope and quality of service supplied for a business associate.
Moving from computerized to ERP system
Information Technology is not new to Management Accounting (MA). Computers and Enterprise Resource Planning (ERP) systems have been in use since the 1970s (Katuu 38). Spreadsheets and business intelligence, relational databases, and data warehouses began making their way into the sector a decade later. As a result of digitalization, several new methods and technologies have emerged, catalyzing the latter. However, there is a lack of novel MA instruments due to the IT software. Established instruments like target costing are merely applied with IT tools, and these tools enable the instruments to be used more efficiently in MA. The possibility for IT-driven improvements of conventional equipment. Knowledge of the technologies that management accountants are built on is vital in determining which types of software are available on the market and acceptable. Big Data is a complicated topic with a variety of technological foundations.
In-memory computing, NoSQL databases, and analytical databases are examples. Data mining and sentiment analysis approaches are applied in several analytical databases. Artificial intelligence and machine learning can be used in automation, notably in Robotic process automation (RPA) (Winkler 36). Cloud computing and mobile cloud computing are two more critical technologies. In the digital age, in-memory computing is fundamental. This in-memory platform might be regarded as a driver of digitalization in MA, especially with the advent of SAP S/4HANA by the established ERP systems vendor SAP in 2015. In-memory computing is stored in the main memory rather than on a hard disk. The former is far more efficient, allowing for speedier calculations and analysis. Complicated disk queries take milliseconds to process, whereas in-memory database queries only take nanoseconds.
Current Time and Future of digitalization
The accounting industry is rapidly evolving due to technological advancements. Automation, machine learning, mini-bots, and adaptive intelligence are now part of the financial team at rapid speed. Even though intelligent technology appears relatively new, many firms still rely on conventional automated accounting procedures. Computers can improve accounting tasks such as supplier engagement, auditing, accounts payable, buying, procurement, cost optimization, closure processes, and customer queries. The types of accounting careers possible in the future are being influenced by intelligent technology (Rijanto et al. 3079). As intelligent technologies handle repetitive activities, humans conduct more analysis, making them the crucial link between data and users. Hence, technology will influence accountants’ jobs and demands in the future.
An online master’s degree in accounting can help students develop data analytics, managerial accounting, complex financial reporting skills, and a deeper understanding of modern accounting technologies and advanced analytical processes. In general, AI refers to attempts to imitate cognitive capacities in computers to solve issues independently and improve their solutions through time (Hassan et al. 143). There are two types of AI: “strong AI” and “weak AI” or “narrow AI.” Strong AI refers to ideas that strive to mimic and imitate human brain functions, whereas narrow AI is concerned with systems that only display intelligent behavior in specific areas. “Artificial General Intelligence” is also referred to as software that can solve complicated issues in various disciplines while also controlling itself. Weak AI is now a more practical application and is included in modern AI software.
The ability to learn, referred to as machine learning in AI, is a typical prerequisite. In reality, the term AI was coined in 1956, but it has only lately gained traction due to a few additional causes. One of these is Big Data because when AI encounters new scenarios that require choices, it draws on vast amounts of highly qualitative data. Artificial Intelligence is the second wave of digitization. Hence, it emphasizes how new the technology is in its application in management accounting. Several scholars emphasize the relevance of AI and predict that it will inevitably become a highly relevant part of business in the future. Future scenarios could include AI suggesting specific decision-making suggestions to the management accountant or systems autonomously making judgments and developing steering measures based on management practices.
IBM Watson Analytics is a well-known Artificial Intelligence software example. This tool could be helpful in MA, especially for processes like reporting tools and risk management, where data collecting, correlations, visualization, and forecasts can be beneficial. Artificial neural connections are technology powerfully relevant to the present AI and replicate human-machine learning. These networks learn from analyzed data by looking for patterns, altering connection strength, and considering incorrect outcomes to identify solutions for previously unknown circumstances. As a result, artificial neural networks are the foundation for machine learning. Thus, it helps applications improve the quality of their analysis and findings as the amount of data being analyzed grows because the algorithm can understand the magnitude of factors and how they are related constantly.
One disadvantage of AI is that it functions in a black box, depending on the algorithms used. The choices taken are often incomprehensible, posing a risk of acceptance or legality in some circumstances. BA models, for example, can be continuously updated and refined to reach the maximum possible analytical quality; DataRobot, BigML, and PredictionIO all offer IT solutions (ibid, p. 34). The term “cloud computing” refers to the storage and processing of data and applications on the cloud.
Blockchain and data analytics
Another trend that will affect the demand for accountants is blockchain technology, a machine recording system that employs bitcoin in a customer network. While bitcoin, a virtual currency that keeps account of transactions and allows for the creation of new currency systems without a bank, has boosted blockchain’s appeal, the systems have evolved way. Blockchain’s attractiveness in accounting originates from “the promise of a new kind of integral approach – one that can be updated regularly and verified without the risk of being changed or damaged. It is not surprising that accountants are interested in blockchain because it enables real-time access to books and records, the creation of smart contracts, and recordkeeping. Some accounting companies, including the Big Four — EY, PwC, Deloitte, and KPMG have already embraced blockchain. While blockchain information can confirm an asset’s ownership, the asset’s condition, location, and true worth must all be guaranteed.
Blockchain can improve audits by decreasing the costs of conserving and maintaining ledgers and providing comprehensive openness into financial assets and history. Accounting organizations could use blockchain to gain visibility into their companies’ available resources and liabilities, allowing them to focus on strategy and valuation rather than recordkeeping. In combination with other automation technologies like machine learning, Cryptocurrency will increase transaction processing accounting, but not by professionals. Instead, good accountants will examine the genuine economic implications of blockchain records, tying them to economic reality and valuation. The existence of a debtor, for example, can be verified using blockchain, but its recoverable valuation and financial value are still up for debate. Blockchain could broaden the scope of accounting, allowing more aspects to be included that are now deemed complex or untrustworthy to quantify, such as the value of a company’s data.
Role of Accountants in Digitalization
The types of accounting jobs that will be possible in the future are influenced by intelligent technology. Innovative technology will perform repetitive jobs, allowing humans to do more research, making them the crucial link between data and consumers. Technology will undoubtedly influence financial work and the necessity for accountants in the future. An online master’s degree in accounting can help students develop skills in financial management, business analytics, and advanced income statements and get a more profound knowledge of current automated accounting systems and complex analysis procedures. Due to technological improvements, the career of accountancy is reaching new heights.
Working on the cloud is a significant advancement in technology as it allows an individual to access resources such as data and computing power quickly. A cloud-based program’s ongoing data updating is a significant benefit, allowing accountants and clients to study insights based on the current data. Cloud-based technology can ensure “constant monitoring, instead of sporadic analysis,” when data on the system is updated. Cloud computing is booming as new advanced technologies such as the Internet of Things, machine intelligence, and machine learning are merged into the cloud. Since cloud-based technologies are becoming more common, the future of accountancy appears to be cloud-based. One of the most pressing needs is for accounting professionals to have IT and technological abilities to know what tools are available and how to utilize them and comprehend the logic behind discussing technical issues with those in authority.
Automated Accounting Tasks
Audits, tax preparation, finance, and payroll are just a few of the labor-intensive accounting areas that will soon be completely automated. Several organizations will utilize artificial intelligence (AI) to build self-learning systems, which will take over the repetitive and time-consuming tasks, leaving humans to perform the analytical and managerial tasks. Major software providers such as Intuit, Sage, One-up, and Xero use artificial intelligence and machine learning technologies to offer autonomous data entry and reconciliation options in company bookkeeping. Another application is robotic process automation (RPA) to reduce audit and contract order processing from months to weeks. Larger businesses that use RPA AI integration have “increased productivity and higher-level services” compared to smaller, non-AI competitors.
Future Accounting Professionals’ Required Skills
Accounting of the future will surely need to be technically sophisticated to keep up with the changing business. To provide customers with up-to-date financial statement analysis and stay competitive, accountants need to become skillful in utilizing the cloud as intelligent technologies progress and more institutions shift their information to cloud-based platforms. Accounting experts who want to use blockchain technology will need to know how to set up data transfers for account balances, agreements, and records and use essential software programs.
With automation predicted to become an extensive accounting system in the coming days, it is vital to learn how to do the administrative, managerial, and analytical tasks that technology cannot. Furthermore, several accountants may be required to advise clients, which requires them to analyze vast volumes of data to spot patterns and trends. Analysis of data and other machine learning tactics are required skills. Accounting professionals will also have to know how to use data visualization techniques and tools to help clients and executives make sense of this information. Accounting experts would provide tactical advice to clients or organizations with these skills using predictive analytics and forecasting. Because automation frees up time spent on more simple functions, accountants may focus on these enhanced analytical talents.
Digitalization has already had a significant impact on MA and will continue to do so in the future, mainly as this phenomenon is still in its early stages. This essay highlighted the impact of digitization on MA by first explaining the current changes, which examined four areas. The first, the methods and technology used to digitalize MA processes; second, the positions in MA that emerged or gained prominence due to digitalization; and third, the influence of digitalization on MA skills. RPA is especially essential for reporting because numerous standardized processes can adopt it, and in-memory computing derives data regularly. BA, significantly advanced analytics, is valid for planning and forecasting because it may use algorithms and statistical approaches to construct extrapolations.
Data miners can also use prescriptive analytics to derive future-oriented counsel for business partnering. When Big Data is used, more data and external variables produced through data mining might be considered. As a result, projections and planning scenarios can be developed that are less biased. When scientists augment technologies with machine learning to produce intelligent tools capable of spotting patterns from previously analyzed data, Big Data plays an active role. On this foundation, experts can apply Artificial Intelligence to emulate human intelligence. In the long run, it may recommend or make judgments based on detailed studies, and it will almost certainly be employed in MA. Finally, while all of these technological advancements may appear to have enormous promise to propel the MA forward, they can only be fully realized if a consistent 43 and high-quality data management is at the core of everything.
A digitalized MA requires the following roles: Because of rising digitalization, one of the most significant roles a management accountant can play is that of a strategic partner. As a result, they will collaborate closely with the firm’s IT team and cross-functionally with other departments. Several management accountants in the expert interviews emphasize the importance of cross-functional knowledge and interactions at multiple interfaces. As a result, they see the function of the business partner as extremely important in the future. Key responsibilities are change leaders, inventors, pathfinders, explorers, project managers, consultants, and corporate governance. Furthermore, new positions have emerged due to digitization, particularly business consultants and data scientists. The transformation in a management accountant’s functions and responsibilities necessitates acquiring new abilities.
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