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FOCUSBy M Nazri, Steve tak & aaroN LiM

BEAN-COUNTERS NO MORE!

“Use of fintech can help accountants greatly by value-adding beyond producing financial statements” – EAC

F rom its humble beginnings of bookkeeping for merchants, to its present-day recognition as a profession which commands respect for being

the financial cornerstone of any business; accountants have come a long way. From managing financial data to providing financial analysis and advice, accountants have long been trusted by business leaders in crunching numbers and deriving action steps from the observed data.

To obtain a logical understanding of how finance officers such as accountants value-add to an organisation, three distinct roles that broadly categorise their duties and responsibilities have been identified.

They must first become a “finance operator” – one that serves as resource gatekeeper by carrying out financial operations, budget administration and data management. The second role entails being a “finance steward” who needs to establish and maintain structures and processes that allow for effective and efficient resource management, governance, internal control and financial risk management. Thirdly, an accountant needs to be a “business partner” who then brings value by aligning the company’s strategic outcomes with financial insights for effective decision making.

A traditional accountant has been largely expected to fulfil the first two roles. Stemming from their academic and professional training, accountants are trained to collect and maintain financial data, along with ensuring that financial records are maintained in compliance with lawful and accepted procedures and policies.

However, the expectations of what an accountant is changing due to a fast-changing business environment. Fuelled by the emergence of new technologies, stiff competition and changing cost structures and regulations, the world in which businesses operate in is growing increasingly complex.

The 2016 World Investment Report found that global economies are also

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increasingly integrated, as seen in the surge of cross-border mergers and acquisitions of $721 billion in 2015 from $421 billion in 2014. This has translated into foreign affiliates which are part of complex ownership chains with multiple cross-border links. The report went on to observe that organizations, especially very large multi-national enterprises (MNEs) will continue to grow internationally, resulting in the continued creation of legal entities and ownership links.

The findings of a report by ACCA agrees with this by suggesting that accountants are now expected to play a far greater role in everything from strategic decision making to the design of new revenue models, while maintaining a balance between financial stewardship and entrepreneurism in a global economy where businesses are operating in a volatile, uncertain and competitive environment. In other words, accountants are increasingly being viewed as valuable business partners rather than the stereotypical resource gatekeeper.

From accountants to cFosAt the apex of such evolution is the chief financial officer (CFO). Gone are the days where the CFO simply executes instructions (through the finance department) from the CEO or other organisational leaders. Today, CFOs are called upon to support decision makers by providing analysis and insight on business planning, risk management, strategic thinking and even defining overall strategy.

A 2016 report by EY titled “The Changing Role of the CFO” agrees with this sentiment. Among the CFOs interviewed, almost 70% said that they are spending more time on providing analysis and insight to support senior leaders and decision makers than they were five years ago. The survey also identified a belief among CFOs that they need to move further away from day-to-day accountancy responsibilities, taking an even greater role in formulating strategic and organisational decisions.

Interestingly, more than 60% said that they are not currently spending sufficient time providing analysis and insight to support senior leaders, and want to be freed up to spend more time producing information to assist decision-making – generating material such as data driven analytics and strategic risk assessments.

How tecHnology is reinventing tHe proFession

“Despite a challenging business environment, we must not forget that technological innovations will help us be better at our jobs,” explains Nazri Muhammad, CEO and Global Head of the Data Science and Analytics unit of Expert Analytic Centre (EAC), Malaysia’s dedicated centre for Artificial Intelligence (AI) research and development.

“Technological innovations are now boldly disrupting traditional institutions and challenging conventional ways of operating. It would therefore be foolish not to consider whether financial technology (Fintech) innovations can play a part in accelerating the realisation of such changes.”

According to a report by Deloitte titled “The Robots Are Coming”, automation is currently the number two strategic priority for the profession after process improvement. Transactional and routine tasks such as data entry, bookkeeping and compliance work are now rapidly being phased out by accounting firms who see the value in better utilising their human capital.

Even small and medium-sized business owners appreciate this, with 37% from a study done by accounting software experts Xero embracing the idea that they can complete a range of accounting tasks themselves very soon.

Optical Character Recognition (OCR) technology is an example of how labour is being reduced. This technology allows accountants to convert scanned paper documents, PDF files, or images captured by a digital camera into editable and

searchable data. The benefits are obvious: in addition to removing the time spent on “hand-entering” such information, these documents now become searchable, sortable and transferable, effectively streamlining the archiving process.

ACCA considered how the advent of mobile and cloud computing will change the way accountants service clients in their report titled “SoMoClo technologies: Transforming how and where business takes place”.

Perhaps due to justifiable concerns regarding the safety of sensitive financial data of clients, the accounting profession has been slow to move beyond non-remote working. A 2015 study done by business software experts Capterra validates this by finding that 61% of accounting software are still locally installed.

However, this is expected to change as the profession gradually understands the benefits and grow in confidence its security capabilities. For one, cloud and mobile applications allow accountants to collaborate with their clients in a more fluid manner while minimising client disruptions.

Being able to access their financial data in real time is driving significant time savings for practitioners. Cloud software removes any issues with rolling out and updating systems at scale: users merely log on at terminals, everything else is hosted remotely.

While we will see changes in the way accountants become more efficient and how financial data can be accessed, will we be able to leverage on such innovations to help accountants in understanding the implications of the numbers gathered? Thankfully, AI powered accounting analytics promises to transform the way accounting professionals produce financial insights to their organisation.

According to Datuk Dr Mohd Daud Bakar, Chairman of EAC, “Financial data has always been amassed. But, what is lacking is the misalignment of numbers and executive decision making. It is odd to consider that the finance department operated as a standalone unit in a company, when in

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truth, it is the bedrock of a company’s survival.”

Another fintech that is able to help accountants significantly is called MyFinB. Using Natural Language Generation (NLG), MyFinB is able to translate financial statements into strategic narratives automatically, and able to provide the financial health of any company.

“Accountants are at a distinct advantage when implementing data analytics not only because they have ready access to financial data, but because they also have a keen understanding of how that data can help their companies retain a strategic advantage over competitors in the modern business environment,” explains Steve Taklalsingh, MyFinB UK Co-Founder and CEO, who is also a chartered accountant.

EAC, in partnership with MyFinB Malaysia (“MyFinB”) recently conducted a portfolio review of Malaysian corporates across 31 different sectors. In conducting the study, MyFinB deployed its AI technology to generate analysis of 200-plus companies under an hour. Within a short period, and without relying on any manual analysis, insights on the health of companies across several sectors could be obtained.

Over a two-year historical period (2015 to 2016), the corporations examined were assessed across the four “Financial Strength” dimensions, namely business performance, shareholder value, risk & liabilities and productivity – results shown in the infographic (right).

The financial strengths of the corporations are condensed into “roadmap statements” which provide an overview for each of the four dimensions, as well as the key takeaways that are ought to be examined:

a) Business Performance: Some volatility and challenges in their sales and profitability - The portfolio’s sales levels had weakened slightly during the period. This could represent

a slowdown whereby weaker demand for goods and services could be expected in future;

b) Shareholder Value: Limited value to shareholders in terms of profitability, margins and liability exposure. Malaysian companies are not providing adequate returns to their shareholders based on the risks taken (see below);

c) risk and Liabilities: Moderate level of risk appetite for its business operations - Slightly above average level on short-term creditors/financing to support asset base. Malaysian companies do not appear to be heavily dependent on short-term creditors to support working capital needs;

d) Productivity: Malaysian companies were generally productive. They were able to utilise their assets and resources to generate above average levels of profits.

Nazri is confident that such a study could elevate the role of accountants to influence strategic decision making of their respective organisations. Based on the findings, finance professionals could do more to assist millions of businesses in Malaysia based on the gaps that were highlighted in the study. “What is so exciting for finance professionals and accountants is that analytics driven data will arm them with valuable information that they inherently are able to quickly synthesise and take corresponding action in directing their organisation onto the right path.”

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According to Steve, “The process of collecting data is easy to automate. What is much harder is replicating the job of an analyst – deriving analyses and predictions from that data. We expect to see more intelligent computers to continue making inroads in this field, but they are much more likely to augment existing practice, rather than replace it.”

wHat’s tHe Future like For accounting proFessionals?As accounting professionals are all too familiar, it can be a challenge to balance

professionals analyse data in hopes of discovering the best course of action for their companies.

zx CFOs and finance leaders use Big Data to find patterns in customer behaviour and market trends to drive company strategy.

Predictive analytics and prescriptive analytics are now required because they provide actionable insights for companies. Predictive analytics integrates data from various sources (such as enterprise resource planning, point-of-sale, and customer relationship management systems) to predict future outcomes based on statistical relationships found in historical data using regression-based modeling.

One of the most common applications of predictive analytics is the computation of credit scores like those deployed by MyFinB to indicate the likelihood of timely future credit payments.

Prescriptive analytics on the other hand, uses a combination of sophisticated optimisation techniques (self-optimising algorithms) to suggest the most favorable courses of action to be taken. With such game-changing benefits at stake, accountants need to develop competencies in these areas to produce value to their organisations.

The analytics skills an accountant

will differ depending on whether a professional will produce or consume information. Analytics production includes sourcing relevant data and performing analyses, which is more suitable for junior-level accountants. Analytics consumption is using the insights gained from analytics in decision-making and is more relevant for senior-level roles.

CPAs do not need to become data scientists or computer engineers to benefit from the coming data revolution. It is however important for CPAs to become more proficient consumers of analytics to both enhance their current audit practice with available technology, as well as support their client base in undertaking data analytics related activities.

Rather than fear that such technology threatens their job security, accounting professionals should seek to incorporate such innovations as they have the potential to positively transform one’s practice, and the services that can be provided to clients. Rather than rue that their days of describing financial data are coming to an end, they should view this as an opportunity to develop themselves into strategic operators who can have a bigger impact on their company’s overall financial health. mb

running a practice, providing great customer service, keeping up to date with constantly changing regulations and tax laws, and if that was not enough, staying informed on the latest technological trends and innovations.

Practitioners often worry that they could be falling behind or missing out on opportunities when their focus is invested in managing a well-run practice. This concern is well-founded as missing out on new opportunities directly translate into missed opportunities to expand into new practice areas or develop new services.

The proliferation of AI is creating both a need and an expectation that accounting and finance teams do much more than simply report on the numbers. They must now be able to turn financial data into actionable insights and recommendations for the organisation’s key decision-makers.

Now, Certified Public Accountants (CPAs) often find themselves performing tasks that require skills in data analyticszx Both internal and external auditors

are using data analytics to enable practices such as continuous monitoring, continuous auditing, and analysis of full data sets in situations where only samples were audited.

zx Financial planning and analysis