Accounting And The IoT: Time To Simplify Processes

Jean Loh

“CFOs and treasurers, listen to what is out there. Do not take it as a science fiction, but rather a science fact. It is coming right at you, so get ready to figure out how to best leverage it.”

Attention, CFOs! In these 39 words, Seth Marlowe, Wells Fargo senior vice president, treasury solutions consultant, and treasury insights leader, sounds a compelling alarm that should make you sit up and pay attention.

What is “it”? Real-time budgeting? Fraud detection? Cybersecurity? Not. He was referring to the power of the Internet of Things (IoT) to improve all of these initiatives.

Seth Marlowe joined Jeff Hattendorf, co-founder and COO of Macrospect, on April 6, 2017, for the “Coffee Break with Game Changers Radio” episode presented by SAP and produced / moderated by Bonnie D. Graham (follow on Twitter: @SAPRadio #SAPRadio). The two experts shared their expertise and revelations to help listeners decipher how the IoT can help accounting teams simplify deadline-driven, paper-intensive work and help mitigate high levels of risk. Click to listen to the full episode.

Signs of IoT-driven opportunity are everywhere, even if CFOs don’t see them yet

According to Jeff, the IoT is a new topic for CFOs who may benefit from a Fitbit, Apple Watch, or Garmin GPS in their personal life but do not necessarily relate these innovations to their business operations. “Once they understand its power for the accounting area, they are going to be eager. It is just a little bit early in the adoption cycle.”

For example, some companies have consolidated their accounting processes to reach economies of scale and redeploy headcount. However, as Seth noted, they are still dealing with too many manual processes. To get over the gaps inherent in systems that do not “talk” to each other, organizations are “starting to leverage robotic process automation (RPA) software tools.” Seth believes that by combining RPA software capabilities with the IoT, CFOs can create a “game-changing environment in the back office of finance and accounting groups.”

Jeff observed that the data generated by IoT can help finance organizations realize “greater visibility into day-to-day operations – not just financials, but the actual inner workings of what the business does out in the field.” The data can also support speedier decision-making, which means “the audit team, the accounting team, or the finance team is going to have to have greater access to the office of the CEO.”

Seth cautioned that some unintended yet positive consequences may arise from adoption of IoT. “The audit function will start to play much more of an operational, day-to-day role as opposed to an after-the-fact review.” With the volume of IoT-generated data, journal entries, and transactions that will need to be processed, audits will quickly become a “near-real-time activity that will change the mindset of the audit function.” Audits will no longer merely entail ensuring that numbers are tallied and reported correctly, but will now add an understanding of the source data, where it is coming from, and how it is captured.

IoT will impact all facets of accounting and the office of the CFO

Seth expects that the trajectory of the IoT, as well as other technologies such as blockchain, will bring significant change to the finance and accounting functions. “A large part of my role is educating treasurers and CFOs about emerging technologies to get them thinking about the changes necessary,” Seth added. “Change is hard. But getting them to embody change and be the ones to have the vision to make it happen is so important. The IoT is another great touch point to get them to take some action.”

Jeff added that it is also important to find ways to leverage IoT-generated data to improve operations. For example, “It is very easy to put sensors on plant property and equipment to use large sets of data to predict when machines are going to experience downtime and if preemptive maintenance should be done.” But once analytics are applied, accounting can “begin to predict where the world is going from a business standpoint and then measure the financial impact on top of that.”

Seth echoed Jeff’s insights: “There is a huge tangible benefit from all this information that can be gathered from the IoT.” Seth noted that GE, where he previously worked, embedded sensors in its aircraft engines to help customers determine how to best optimize their fuel costs by tracking the relationship between the weight of the aircraft and flight speed.

And the IoT can greatly improve processes around cash-handling. Jeff stated, “Going cashless is brilliant. It is a tremendous drain on organizations to count it, lock it up, put it into an armored car, and move it physically. It reduces the return on investment.”

Crystal ball predictions: Will the IoT simplify deadline-driven accounting?

Both panelists predicted that as the ubiquity of the IoT grows by 2020, finance organizations may not yet know how to handle a massive volume of IoT-generated information. “There is going to be a lot of messiness as people in the consumer space, professionals in the corporate space, and municipalities and governments try to figure out how to manage and weigh all of this data and control it,” according to Jeff.

On the positive side, Seth underscored the relationship between the IoT and future success. “The companies that are going to be successful over the next five to ten years are the ones that are adopting the IoT. The laggards are going to find it is harder to compete without the IoT, and it is going to become even harder to catch up once they fall behind.”

Listen to the SAP Radio show “Accounting and the Internet of Things: Does This Compute?” on demand.

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Jean Loh

About Jean Loh

Jean Loh is the director, Global Audience Marketing at SAP. She is an experienced marketing and communication professional, currently responsible for developing thought leadership content that is unbiased and audience-led while addressing market challenges to illuminate and solve the unmet needs of CFOs, CIOs, and the wider global finance and IT audience.