Repetition may be the mother of learning, but in almost all other instances repetitive actions or behaviors are imbued with negativity. Doesn’t repetition conjure images of mindlessness, boredom, and inefficiency? Does it make you think go-getting, entrepreneurial, progressive?
No, it doesn’t. Bill Drayton (the pioneer of social entrepreneurship) sums it up beautifully: Change begets change as much as repetition reinforces repetition. Why then, are educated, well-paid accountants still stuck in the quagmire of monthly (another repeat) repetition for activities crying out to be automated? Well, I can’t answer for them, but I can tell you that accountants are only saved from being bored to death by aspects of the job because of the stress that keeps them going.
The stress on accountants around the month end close has been covered in previous blogs by colleagues of mine (recommended reading: Things that got better since sliced bread and spreadsheets). This is the act of manually reconciling hundreds, possibly thousands of general ledger accounts in a few days. The late nights, the drag on morale, the duplication and repetition, the time wasted, the inefficiency. What does this inefficiency cost? Well, only this year a technology company investigated by the Securities and Exchange Commission was fined $190 million. If month-end pressures cause the preparing accountant to miss or make a mistake that isn’t spotted buy the reviewing accountant the penalties can be significant. In this instance it was premeditated but the point is, it should never have happened. A lot of times accounting departments just check the box that should only be checked when a thorough review has taken place. Sometimes they just run out of time and check the box blind.
This is the price of inefficiency and as time is money, restating the accounts will only add to that bill. It happens a lot, every year there are many companies that have to restate their books because of a material misstatement (281 publicly listed US companies in 2013). They pay penalties and they pay twice – for their own accountant’s time and the auditor’s time - all because they had to rush and missed or didn’t check on what they should have got right first time around. It is usually not intentional but by misstating the books the company could show an increase in revenue, making it look like it’s doing better than it is. If the stock price goes up the CEO and CFO could catch an expensive cold. The hundreds-of-thousands-of-dollar fines imposed personally on the finance executives of the company I used in the example were for ignoring basic accounting standards to increase reported profits.
All the manual reconciliations that could be set up to auto-certify against pre-defined rules leave accountants free to deal with high risk or key accounts. This means it is much less likely they will miss an error or mistake (or introduce one).
The good old days?
Eventually, I think all companies will adopt automation and that 90% of companies will do it for time efficiency. These companies will need fewer accountants to achieve financial purity; so there will be more accounting talent available for all the new businesses that start up every year. Some will move on to bigger or different roles. Newly qualified accountants starting out on their careers won’t have to endure that relentless, repetitive month end activity we all had to go through. I doubt there will be much nostalgia for the era of manual reconciliation. Modern finance is the change that begets the change that allows the profession to flourish.