Some analysts call it Industry 4.0, claiming that this is the fourth Industrial Revolution and will change every aspect of society. Others worry about the potential downsides such as security or how workers will be impacted by new changes.
But no matter the name, the last few years has witnessed an explosion of new technology. The Internet of Things (IoT), Big Data, and automation will affect how businesses work, and how CPAs do their jobs. It is consequently critical that accountants look at these technological trends, understand the resulting changes, and figure out what role they can play in the new economy which will be created.
The Power of the Internet of Things
People have been talking of the Internet of Things for years, and ZDNet reported in June that IoT spending will reach over $800 billion in 2017 and $1.4 trillion by 2021. Furthermore, ZDNet also states that “manufacturing, freight monitoring and production asset management will attract the largest investments.”
On a basic level, the Internet of Things revolves around different devices, devices which never before have been connected to the Internet, communicating with one another. Manufacturing equipment can be connected and transmit data, which allows businesses to respond faster to developing situations.
For example, a piece of industrial machinery can now transmit a warning of when it is about to fail or is nearing the end of its lifespan. Before, a factory would either have to spend hundreds of man hours checking machinery, including your signal booster, to make sure everything is in order, waste space and money storing spares in case a piece happened to fail, or even shut down should that piece suddenly fail without warning. Now, a factory can order parts only when they need it, eliminating downtime, saving money, and making machine failures far less frequent.
A key thing to note in the above example is the role which data plays. The Internet of Things and Big Data are linked together, as devices connected to the Internet will be constantly transmitting data to interested parties. More businesses with more data means more analysis and prediction. A 2016 survey of industrial participants reported by Forbes showed that “83% expect data to have a significant impact on their decision-making in five years” while only half are using data now. Manufacturers could even sell data received from customers using their products to other customers, establishing a data market and a new revenue stream.
The transition to manufacturers wholeheartedly embracing the Internet of Things will take time, as manufacturers slowly upgrade their equipment and learn how to use data to make smart decisions. But whether it comes slowly or quickly, Industry 4.0 is coming.
The Role of the CPA
The Internet of Things, Big Data, and Industry 4.0 will have major effects for CPAs both directly and indirectly.
Directly, accountants will now have to prepare to face an incoming stream of real-time financial data instead of periodically checking in with a bookkeeper. Auditing in particular will become much easier. Accountants can catch financial fraud faster, minimizing the damage, and can also notice financial trends and offer more real time advice.
But only CPAs who learn how to manage these large real time data flows will be able to take advantage. They will thus have to learn the language of IT and IoT concepts in order to construct new accounting and reporting structures. Once that is complete, accountants can then help their clients as well, providing advice on how to build a business structure which takes full advantage of the IoT.
Providing advice will be the main way through which Industry 4.0 will indirectly change the accounting profession. Automation and artificial intelligence are already changing the industry so that as Firm of the Future states, the accountant’s role will evolve from reporting and compliance work to becoming “forward-thinking small business advisors.”
Industry 4.0 will amplify that trend, especially because many businesses are unsure of how exactly to embrace the IoT. The IoT does have potential risks, such as hackers using less protected devices to commit data breaches or other criminal activities. Accountants will need to help their clients analyze the upsides and risks of using the IoT with any particular device, get the maximum value out of data they collect, and play a crucial advisory role.
The first Industrial Revolution was all about size in who could build the biggest factories, have the most machinery, and get the most workers into a single space. Industry 4.0 will be about speed. Who can get data the fastest and use it to reach good decisions?
As financial advisors with knowledge of technology, CPAs have a crucial role to play in helping businesses and must ensure that their own firms are not swallowed in the new technological storm. There is still time to prepare for the IoT, but it will not be for much longer.