Before we dive into technology’s role in accounting, let’s take a stroll down memory lane to the early days of tech. In 1981, a local television news report in San Francisco revealed how the 3,000 or so owners of personal computers in the Bay Area could use a phone line to download the text-only content of a local newspaper. At a cost of $5 per hour and about two hours’ download time, this technology innovation didn’t have a great return on investment. Especially when compared to a 20-cent hard copy of the paper.
In the late 1980s, only about 1% of the world’s technologically stored information was in a digital format. Fast forward to 2012, about three decades after a smattering of San Franciscans started downloading their newspapers, and 99% of technologically stored information was digital. Experts say that every three years or so, humanity stores more information than since the beginning of civilization. That’s a lot of knowledge—and a lot of homemade dance videos.
Most of today’s technology would have seemed like something from science fiction in 1981. Today, it’s a critical part of our daily lives. And it should play a critical role in your accounting firm, too. If you’re hesitant to invest in technology because you don’t understand or completely trust it, you’re not alone. But technical innovation doesn’t need to be scary or baffling. If you don’t fear using your phone, you shouldn’t fear accounting technology, either.
Some accountants remain hesitant about adopting technology
A recent Rightworks survey on accounting technology revealed the value of tech investment. Firms fully committed to technology earn 39% more revenue per employee than those that are less committed. And 88% of survey respondents said technology positively impacts workplace efficiency and client services. Beyond that, 76% of respondents said the value of the cloud was either high or very high.
And yet, cloud adoption is not as widespread as it could be. A surprisingly high 43% of respondents said they had less than 75% of their data and applications running in the cloud. Why? Some hesitation seems to stem from nervousness about technology. Some firms have also adopted a “wait and see” approach with the mindset that what they have is good enough for the time being. Still, respondents cited a big factor for not fully committing to the cloud: lack of technical expertise and resources (a barrier for 44% of respondents).
There was a time when that concern would have been not only legitimate but also a genuine barrier to technology adoption in accounting firms. Until fairly recently, managing information technology was a difficult task for all but the largest of companies, and even some big companies struggled. But technology has evolved, and the cloud gives firm leaders the opportunity to turn much of their IT management over to experts. And this allows firm owners to focus on running their firms.
The evolution of technology in accounting leads to the cloud
In the beginning, there was the mainframe. Well, maybe not the very beginning, but the first mainframe computers appeared sometime in the mid-1940s, which is far enough back. For decades, mainframes connected only to terminals connected directly to them. They have since evolved tremendously, and modern mainframes are widely in use. However, the modern version bears no resemblance to the monster that caused some anxiety on Mad Men.
The next big step in computing was client-server technology, which advanced the untethering of the computer from the mainframe. In a client-server model, the computer sends a request to a server, which returns a response. A computer can connect via a network to one or multiple servers rather than to a single, isolated mainframe. Client-server technology was the conduit for consumer use of the internet in the 1990s, and it remains heavily in use today. If you’re maintaining a server in your office and connecting computers to it, you’re using the client-server model.
The problem with client-server is that if you use it for your business, it’s your responsibility to update and maintain the server—and the applications running on it. There are also limits on where you can use a client-server model. Generally, you’ll either need to be networked in close physical proximity to the server or dial in through a virtual private network (VPN). Using a VPN can be difficult and unreliable since it depends on the knowledge and capabilities of each remote user to know how to do it effectively. You also have to assume they will follow the instructions and not take shortcuts that expose the firm. And if your server stops working for any reason, you or someone else needs to go fix it in person.
The cloud liberates business users
The evolution of technology has revolved around being able to use devices to access data in more and more places. The early mainframe required a physical connection to a central processing unit. Client-server offered a more distributed model that let users reach different servers, sometimes from remote locations via VPN. The cloud takes the final step.
In the cloud, the client-server model meets scalability and outsourcing. The essential way a computer or device connects to a server is the same as it is in client-server. However, the server is located with many other servers in a data center managed and staffed by experts. Moving a server out of the office and using one located in a data center instead takes the burden of server management off your plate as a firm leader—and puts it firmly on the shoulders of a partner you trust. This is particularly true if that partner is knowledgeable about your industry, the specific applications utilized and the nuances of your business cycle (tax season and year-end).
Running your firm in the cloud shifts costs from being unpredictable to being easy to budget for. This is because a cloud provider charges a monthly fee that can scale with your firm. It also shifts your technology budget from a capital expense to an operating expense.
And then you have all the benefits of the cloud that basic client-server doesn’t. With the cloud, you get anytime, anywhere access to real-time data; enhanced cybersecurity managed by experts; trained support staff available at any time; and significantly better backup and recovery capabilities. Having regular backup and business continuity included is particularly important since most firms don’t do an adequate job of it.
Technology evolution is a positive, not a negative
Perhaps the biggest advancement from the basic client-server model to the cloud is the ability for users to unburden themselves from the task of maintaining and updating servers. The cloud model lets experts handle those chores. In that sense, the cloud takes technology evolution to its logical conclusion.
From mainframes to the cloud, technology has gradually become easier to use, more mobile and less difficult for end-users to manage. Computing has become more powerful, cheaper and easier to manage all at the same time. The cloud gives you nearly unlimited power and availability at a manageable price. And you don’t have to do any real work to enjoy the benefits of it.
In the cloud, you’re not losing control of your technology infrastructure. You’re delegating it to a partner who is at your service so that you can run your firm. Yes, the concept can be a little daunting, especially if you remember the days when downloading a daily newspaper took two hours and cost $10. But in the context of the evolution of technology in accounting, the cloud is the most obvious destination for the journey computing has taken for nearly a century.
Technology doesn’t go backward, and it rarely stands still. If you want your firm to operate like a modern business and move forward, you need to be in the cloud.
If you’re ready to move to the cloud, we can help. Get started today.
