View from India: Financial reporting is the language of business
Industry 4.0 will impact the accounting industry. It will offer a standardised value for stakeholders, vendors and suppliers. Industry 4.0 should complement the new norms of financial reporting, which will combine business responsibility and sustainability
Accountancy ranks among the world’s oldest professions. India needs to open up research in accountancy by initiating research institutes. “Accountancy firms should invest in technologies such as big data, data analytics, Internet of Things (IoT) and artificial intelligence (AI). The adoption of these technologies will help the accounts vertical to keep pace with Industry 4.0, which is represented by these technologies,” said Vishal Divadkar, partner and head, assurance, BDO, addressing ASSOCHAM’s recent virtual conference on Financial Reporting and Control, 'Recent Developments and Challenges’.
When we look at the finance landscape, robotic process automation can be tapped to capture client data and perform repetitive tasks. Robots can help generate invoices, which can be validated through cognitive AI. Cognitive invoice processing is faster and drives efficiency into the system. “It is clear that technology has a decisive role in accountancy. It also indicates that the accounts workforce should update their skill-sets to whet opportunities and use the technology to the fullest,” said Divadkar.
The use of AI in accounting is on the rise. AI with machine-learning tools is deployed to check data and lower financial fraud. AI algorithms can upload documents.
IoT solutions are being integrated into the financial system. Accountancy IoT can be leveraged to improve risk management; this is much required as accountants are inter-linked with the risk-management aspect of the company. The real-time data emerging from IoT can help mitigate the risk factor; it will pave the way for revenue growth.
Besides Industry 4.0, Covid-19 is also responsible for a wider adoption of technology. “Mobility is a challenge in times of Covid 2.0. This is where digital transactions fit in. They help break barriers of location and facilitate a structural shift in working pattern. With this come other benefits such as speed, accuracy and transparency,” added Preeti Malhotra, chairperson at ASSOCHAM National Council for Corporate Affairs, Company Law and Corporate Governance, and chairman at Smart Bharat Group.
Covid has taught us to communicate with investors through webinars. “Digital transactions have multiplied. The click of a button will throw light on the inventory and the work in progress. Technology is being integrated into the system for a better balance sheet outlook. But we need to be watchful for cyber attacks,” said Amarjit Chopra, member of NAFRA and past president of ICAI.
Physical offices have shrunk and are replaced by virtual ones. Rentals have come down and the real estate footprint has decreased. “Work from home required a mindset change, wherein companies had to invest in laptops and enterprise resource planning solutions. As the logistics were being ironed out, it was important to retain compliance issues in finance reporting. Legacy software tools have been replaced by aggressive computerisation. System-driven data is being used for results,” explained Deepak Dikshit, advisor at Oman Cement Company.
As Covid has necessitated the extensive use of technology, trained manpower is required to execute the technology operations. Traditionally, quality financial reporting happens only when there’s a scam or the organisation collapses. But financial reporting is required for the company’s survival and to build trust with the investors. “Financial reporting is not just about the financial statement but includes transactions and transparency in process. Financial statements represent the entire value chain including the chief financial officer and regulators. The auditor has a crucial role if the account statements lack clarity,” explained Dr Ashok Haldia, chairman at ASSOCHAM Task Force on Accounting Standards, former secretary at ICAI, and former MD and CEO of PTC India Financial Services Ltd.
Businesses don’t work in isolation and financial reporting is the language of business. The financial statements are part of the ecosystem; they should reflect the business and what it does for the society. All this should be measured and shared with the investor in a reader-friendly format. “Financial statements by themselves are records of the past, though they do project estimates of the future. So it becomes all the more important for the investor community to be able to connect the past with the future of the company,” said V Ramakrishnan, former chief finance officer, TCS.
In this fast-changing world, financial statements are relevant to investors, stakeholders and shareholders, depending on the speed at which they are completed. Transparency and consistency are other hallmarks of these statements. This is where technology has a role to play as intelligent tech tools can be used for precision and analysing data. Cloud accounting is catching up with the industry. It enables users to check the accounts metrics and outstanding invoices online from anywhere. As cloud accounting can be accessed through the web browser, it is more affordable than the accounting software.
Covid is a period of uncertainty and uncertainty leads to unprepared circumstances, which can make a dent in the company’s profits Consequently, businesses need to use technology to raise the bar of efficiency when it comes to financial reporting.
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