Automating the future of accounting

Written by Ciaran Ryan. Posted in Journalism

The combination of machine learning and cloud is freeing accountants from the shackles of number-crunching. From Brainstorm magazine.

Hennie Ferreira, Osidan (Karolina Komendera)
Hennie Ferreira, Osidan (Pic: Karolina Komendera)

Hennie Ferreira became an accountant almost by accident. He previously ran an online digital marketing company, leaving the accounting work to the so-called experts – until he realised the expert he had hired to run his books had made a royal mess of things.

Ferreira decided to learn the accounting game himself, and studied under the Chartered Institute of Management Accountants, before going on to specialise in tax.

His wife Melissa studied through the Association of Chartered Certified Accountants, and pretty soon their careers had taken an entirely new direction. Ferreira realised it would be wise to also learn coding so he could automate as much of the accounting grunt work as possible.

The couple co-founded Osidon with the aim of building the ‘world’s first online digital accounting firm’. Having seen the sloppy end of accounting for themselves, they realised that most companies and their accountants are battling to remain compliant amid an ever expanding forest of regulations.

Osidon started using AI and machine learning to automate routine bookkeeping functions and make sure clients remain on the right side of the law. This was pioneering stuff. “We didn’t quite realise what work was involved in automating accounting services when we started, so we were learning as we went. But what we achieved was a world first and we’re still improving.”

Having tested the concept in SA, Osidon is about to take its business concept to the US and UK. It’s currently signing up close to 20 new clients a week, most of them attracted by the low cost (less than R1 000 a month for the basic service) and dissatisfaction with their existing accounting provider.

Focused on the small business sector, Osidon makes it affordable for clients to get the kind of accounting and compliance services that normally cost several times what it charges. Says Ferreira: “We’ve built a custom system that automates 65% of practice accounting work and soon it will be 85%. It integrates with (cloud-based accounting platform) Xero, but our system does all the heavy lifting. This system manages our staff and also does a lot of the actual tasks that our accountants no longer have to do. This helps them focus more on consulting with clients.”

There are scores of software products on the market designed to electronically capture and smooth business workflows, but Osidon has picked what it deems to be the best of these and integrated them.

The complete package

Once a new client is on-boarded, the client’s legacy system is integrated and parked in the cloud, using Xero. All the compliance issues are automated, from tax and VAT submissions, to annual financial statement returns to the Companies and Intellectual Property Commission, labour and compensation return funds. Osidon does all the accounting, annual financial statements and payroll, with a legal hotline to keep clients on the right side of the law and provide advice. Monthly management reports and tax structuring complete the package, providing intellectual insights into areas of greatest efficiency and weakness in the business.

What used to take an accounting team weeks or months to accomplish is now being done in hours. “A huge amount of the accounting and compliance work being done in-house by companies is simply too slow, inefficient, and costly. Most of these tasks can be automated. We’ve added our proprietary AI to further automate workflows and transactions and give managers a much deeper understanding of what drives their business. We set out to build a network of prosperous clients, and it was always our intention to show them how they could perform better. This is where the real value lies, not just in being a record keeper for our clients.”

All this is completed offsite, saving clients multiple salaries that kept the accounting department buried under a tower of paper. Not your typical accounting outfit, Osidon operates a busy Facebook page with regular updates and interviews with inspirational business leaders going out via livestream to more than 100 000 people. The menu of services is being expanded to offer pension, investment and financial products to clients through partnerships with specialist providers.

This is the future of accounting, says Nicolaas van Wyk, CEO of the SA Institute of Business Accountants (SAIBA), which has more than 8 000 members, most of them accountants in business or practice. “Osidon is a great example of the model we encourage our members to emulate. I think the accounting profession has generally been weak in staying abreast of technological changes. It’s now becoming clear that the accountant is an endangered species. Many of the functions performed by accountants today will be done by machines in three to five years’ time.”

In recognition of the changing role of accountants, SAIBA has set itself apart from other professional bodies by fostering an entrepreneurial culture among its members.

It recently launched a number of specialist licences, creating new business opportunities for accountants in practice. Van Wyk says his goal is to make millionaires of all his members.

For example, some SAIBA members have become immigration specialists, others are acquiring licences to become business rescue practitioners, while still others are specialising in providing accounting officer services to schools, farms and churches. The accountant of the future will look more like a stock analyst than a nerdy accountant and had better know something about data analysis and coding.

The future

Adriaan Basson is a chartered accountant who abandoned his cushy job with one of the ‘big four’ accounting firms to set up a small accounting practice, armed with a grandiose vision of where the accounting profession was headed. Rather than spectate from the sidelines, he decided to give it a guiding hand.

He set up Wingman Accounting five years ago and, like Ferreira, saw the importance of automating basic accounting functions. “We’re more a tech company than an accounting provider,” he says. While most accountants sell hours, Wingman sells subscription packages, which allow it to scale up without incurring massive overheads. In fact, many of his staff don’t even have an accounting background.

They don’t need to. What they need is a sound understanding of Wingman’s systems and data analysis.

Wingman’s basic package starts at R3 500 a month, rising to R12 000 a month for more sophisticated services. The basic package includes soft ware fees for Xero, Receipt Bank, which automates the capturing and posting of expenses to the relevant ledgers, and SimplePay, an online payroll soft ware package.

The real sizzle comes in the management reporting and strategic analysis that Wingman is able to provide. Basson wants his clients to prosper; failing clients don’t make good referrals. He isn’t shy to fire clients that don’t share his vision of automated accounting, backed by deep dive analysis of operational and financial progress. Most clients want face-to-face time with their accounting provider, so the idea of a fully digital accounting service may be some way off.

“I doubt you’ll ever completely eliminate the human element in accounting. Your clients want your input and advice, but they don’t want the headache of having to pull together the monthly accounts and ensure that all the compliance boxes have been ticked.” New clients come mainly by word of mouth, which is the best and cheapest marketing you can get, says Basson. “We set out to offer something that wasn’t available to small and medium-sized businesses.”

For small businesses, the big technological leap in accounting software involves moving to the cloud. Packages like Intuit QuickBooks and Xero have invested heavily in building systems that offer some of the functionality of much costlier enterprise resource planning platforms such as SAP, which track real-time workflows across gigantic operations. Oracle owned NetSuite is pitched at the medium-sized enterprise market and has captured more than 40% of the financial management system market.

E-commerce and integration with customers and suppliers – all available on a single dashboard – was once an expensive luxury available only to deep-pocketed corporations. That’s now changing as technology costs and soft ware functionality reach into the lower end of the market.

If accounting is the science of good order and traditional accounting functions are being taken over by machines, the accountant of the future must become a master at interpreting machine data. As SAIBA’s Van Wyk points out, their survival as a profession depends on the speed with which they embrace this new world, and migrate from being pure record-keepers to elite advisors.

Ciaran Ryan

The Writer's Room is a curated by Ciaran Ryan, who has written on South African affairs for Sunday Times, Mail & Guardian, Financial Mail, Finweek, Noseweek, The Daily Telegraph, Forbes, USA Today, Acts Online and Lewrockwell.com, among others. In between he manages a gold mining operation in Ghana, and previously worked in Congo. Most of his time is spent in the lovely city of Joburg.