Q&A with Professor Alnoor Bhimani

August 4, 2021

  1. You’ve written before about big data and digitisation, and how this has shaped the transformation of accounting information. In your view, what have been the biggest break throughs in terms of digitisation and technology in recent years? Can you pinpoint any other key technological landmarks in the last half a century?

I’ve been writing around the area of accounting and technology for over 30 years now and I think that what we’re confronted with today in terms of digital technologies far exceeds what we’ve seen before.

To take a longer perspective, if we think of a relationship between accounting and technology, this has existed certainly from the 18th century with the rise of the first industrial revolution.  The shift from agriculture to machine-based production led then to new forms of accounting controls.  This was further refined with electricity becoming the prevalent means of powering production.  The rise of computer-based technologies in the 1970’s also created shifts in what we accounted for and how we did so.  Technological disruptions until then redefined the architecture of value creation in terms of efficiency and to a degree, information richness enhanced products and services. But the relationship evolving between digital technologies and accounting today far exceeds anything that we’ve encountered before. It’s essentially the biggest transformation in the history of business.

About 30 odd years ago we talked about emerging technologies tied to computers within a business mindset that was largely analogue.   This led to accounting advances including target cost management, activity-based budgeting and management, quality costing and the balanced scorecard.  Many of these techniques continue to be useful today.  Subsequently, the emergence of the internet initially made accountants more concerned about changes that affected business models. What we focused upon to a large degree was dictated by what we used to provide information on.  The concern was in many ways on what firms could enhance through technology.  Today though we’ve entered a very different realm of transition in business.  Digital technology enables things that businesses could not have conceived before.   Digital technologies take us to places we’ve not been able to conceptualise because they are not straight extrapolations from the past.  The beauty of digital is that as it unfolds it opens novel products and services as well as operational possibilities and this means accountants have to adapt.

Digital technologies allow us to capture economic transactions just as we have always done as accountants. But we’re now able to capture in addition transactions that are non-financial but that are indicative of economic exchanges to come. So, the accountant’s role is increasingly going to shift toward becoming more predictive based on data generated insights rather than maintaining a focus on how historical information tells us about the present and suggesting what may happen.  Digital creates for businesses a bridge to tomorrow and influences the way we engage in accounting analysis.  Data prediction is one of the virtues of digital technologies, and accountants will have to move in that direction. 

We are increasingly seeing machines doing a lot of the tasks that accountants used to do. For instance, RPA systems are used by undertaking tasks that accountants were engaged in.  This helps as these are repetitive tasks and allow accountants to do new things more directly tied to value creation.  Beyond this, many enterprises are starting to deploy machines intelligently to engage in decisions that humans used to make based on accounting information.   Such changes in information production by accountants must align with the fact that machines, unlike human decision makers, do not ask for information that exhibits specific formatting or form ordinarily demarcating what accountants need to produce.

Beyond harnessing machine derived intelligence through AI technologies, we’re also seeing technologies themselves entering products via ID tags and IoT systems. This changes accounting as accounting systems used to be separate from the products to be reported on whereas today products and information systems can become deeply coupled. All these effects produced by digitalisation point to novel forms of accounting services to meet the changing needs of decision makers, stakeholders and others interested in accounting information.

  • One of your papers looks at the role of a crisis in reshaping the role of accounting. What do you think the biggest effects of the 2008 crisis were on a) the accounting profession b) the international accounting networks? Are there other crises in the last 50 years that were influential in impacting the professions that you think are worth mention?

At a broad level, financial reporting is deeply intertwined with politics, regulation and even national sovereignty.   The 2008 global financial crisis is a case in point where departures from attempts to harmonize accounting approaches tied to globalisation trends were trumped by national objectives to maintain certain specific controls on the economy.  Global standardisation drives in accounting do not move fast during times of crises where they are seen to potentially hamper sovereign desires.  For this reason, standards either remain quite general to appease a majority of stakeholders or else, splinters result.   Crises also result in less visible societal shifts which are slower in the making.  For instance, the evolution of more quantified forms of verification and assurance has been part of a broadening trust in numbers and the quest for more objectivity in risk management.  This gets reflected in how business environments and management approaches develop.   For accountants, a need exists to assess such broad level changes which eventually affects their work. 

  • One of your areas of interest / expertise is in global development and governance issues. Could you describe how the international accounting landscape has shifted over the course of the last 50 years, and are there any particular regions, beyond the UK and US, that have experienced notable growth or change?

This is a broad question.  International business activities are impacted by governance issues.    Cross-comparisons of transparency, regulatory regimes, entrepreneurial ease of operation, technological infrastructures virtually devoid of fixed costs etc are extensive and need to be part of the accountants’ intelligence.   A key understanding, aside from knowledge of specific governance infra-structures has to be about the sorts of global economic shifts that are in evidence today.   Within ten years, developed nations will have about a third of their populations having been born in the analogue era. If one looks at developing nations, about 7.25 billion individuals will have been born digital.   Easternisation is fast taking place.  Digital technologies enable individuals, businesses and whole nations to fast transition sometimes side-stepping investments made in developed nations.   Many examples exist in relation to mobile money, cloud technologies, 4D printing systems, blockchain based record keeping, applications ecosystems, and decentralized finance among others.  The accountant has a big role to play in understanding the relevance of such changes and advising decision makers about their likely impact.    

Additionally, we are seeing greater diversity of workers and also new generations that have entered the workforce. What’s referred to often as generation X have premised the design of accounting and control systems in place today across most organizations.  But millennials as well as Generation Z – people born in the mid 90s – have very different conceptions of what a business should be about and how it should be run.  They may be more receptive to open communication, different notions of ethics, and more direct ways of interacting with customers as well as about what comprises appropriate levels of transparency.  The more diverse and new generations that are part of the workforce now have different expectations of business and consequently, accounting controls that conform to traditional norms need to be altered.   Further, we’ve got a greater female workforce participation though particularly in more senior positions extensive balance and equity still is lacking. Of importance is that women possibly bring different sensitivities, proclivities and ideas to organizations that create much value. Accountants must understand emerging differences in the workforce and ask what this means for accounting and control systems.

  • Your book ‘Accounting Disrupted: How Digitalization is Changing Finance’ (Wiley, 2021) came out this year.
    •  What are the key takeaways for accountancy and tax firms in the Kreston International network?
    • How can member firms help clients adapt to digitalising economies?
    • Following the big remote working and digitisation switch caused by the pandemic, where do you see opportunities for accountancy/tax firms and collaborative networks?

The book is the result of research on how accounting is being re-shaped through and as a result of digitalisation.  It presents key lessons from a range of enterprises that accountants cannot ignore. First, digitisation allows learning to arise from data itself. And that data generation leads to new actions, decisions, insights and operations, all which yield yet more data from which to learn and all this is happening faster and faster.  An enterprise that remains outside that learning loop will stay a bystander.

In the past, we’ve tended to focus on the idea of running a business or an organization, taking great accounts of scale and scope issues: that is how do we increase throughput, how do we expand volume, what do we need to do in order to react to a market that is altering, etc.   And we focused on the scope of production and services. So you might have had an organization that provided one type of service or that produced one type of product and then efforts were made to bring about an expansion of the product volume over a period of time and then to achieve greater diversity of related products as the organization became more successful.  We’re now moving to a different notion of what it takes to run an organization in digital.   What we’ve done in the past is to have said “Let’s engage in production or the delivery of services and then we’ll get a better idea”. We tried to learn how to do what we did better.  Under digital,  an organization becomes more reliant on data for its learning practices which then engenders more data from which it can learn more and faster and so on. So the idea of learning now is no longer closely connected with the idea of enhancing production and service delivery. It becomes a decision that the organisation makes to become a learning organization that’s going to crowd out others that just don’t engage in that form of learning as fast.

Another lesson from the book is that the linear thinking that is embedded in most executive action is no longer of relevance. Digital technologies allow organizations to develop very different business models with different information flows. With domiensions of platform structures, you end up having a greater pool of avenues to pursue in order to generate what it is that the business is after.

Traditionally, for a manufacturing organization,  one thinks of primary material, suppliers and  supply chains, and possibly engagement in step by step production of the good.  The good then enters the market and continues along basically a linear path of value being added.   Digital enables more interconnected nodes where the impact on accounting is massive. It may be that business activities imply the top line being quite dissociated from the expenses line.  What generates expenses is not necessarily what drives revenues and you may have a different pool of customers that differ from consumers.  The conventional architecture of an enterprise may not follow this path but if the potential exists for it to do so then it is for the accountant to explore this and to be sufficiently adept to detect the possibilities.

A further lesson is that the past 250 odd years of looking at business practices has taught us one thing very clearly. And this is that a strategy develops within an organization to do things differently, the organization then structures itself around that strategy, and accounting systems, then serve that new structure.   The strategy pursued defines the form the organisation takes on which accounting piggybacks.    Now we’re moving into a very different realm where strategy is becoming intertwined with operations. The idea that strategies are about the long term and operations are about the immediate and real time is less true today that in the past.  In enterprises I have visited, you’re finding that a strategy emerges out of understanding and analysing the operations as they take place.  So, we are seeing a confluence between strategy and operations which we’ve been taught to demarcate separately.  This is impacting accounting work.  Getting on to a path of digitalization essentially drives you to a further path in that direction in all sorts of unknown ways that create new opportunities.

With past technologies when investments were made you could pretty much predict why you were making the investment, and therefore you knew the accounting information that was required. Today we have stepped away from that in a big way. We’re saying you’re investing in something where there are unknowns, including accounting’s role in that context.

We’ve always talked about business risk and financial risk, and accountants are familiar with this duality of risks. But now we have a third risk which we need to be concerned about, and this is expertise risk.  There is no technological U-turn in the era of digitalization.  The Accounting Disrupted book makes clear that it would be a mistake to underestimate the power of digital technologies.  The end state of digital never be known and this is why the work of accountants is so incredibly important. Not acknowledging this poses expertise risk.  Understanding and preparing for expertise risk will drive organizations to be much better prepared to gain advantages in the market. This increases the role of accountants enabling organizations to push ahead with value creation.

  • What challenges and opportunities do you think the next fifty years will bring for the accounting sector?

Accountants now more than ever need to expand their understanding of the potential of digital technologies.  They will alter their day to day work, change how they interface with others within the enterprises they serve, reform the information they provide and impact how decisions will be made.  With the advent of AI and particularly deep learning, machine-human interfaces will shift and accountants need to be party to this and be at the forefront of digitalisation rather than mere observers. 

  • Are there any other questions we should be asking you?

 How can senior accountants manage better?

In many organizations, it is accepted that senior managers have the most experience, and so they should be training the younger new recruits and establish targets and parameters of their operations.  Sometimes this is right but not always. The research for the book has made evident that when organizations begin to implement digital technologies what does tend to also happen is that there are certain sentiments that more senior individuals bring in terms of what should be done. Normative assumptions get embedded in operations and accounting control systems and they may need to be changed.  I have seen organizations open to junior persons establishing the targets by which they want to live.  Juniors make suggestions in terms of altering workflows, changing the way in which data is analysed and they set their own objectives by which to be assessed.  This becomes a success factor for certain organizations.  In such firms, it comes down to having an element of reverse mentoring where it’s not in just one direction with seniors leading the pack, but a two-way arrangement which energizes the set-up and enables faster advances.  Ultimately, plurality and open-mindedness drive innovation and accountants who understand that, can bring changes that can help organizations move forward.