With over four decades of association with the accounting profession, having witnessed phenomenal changes in the environment, expectations, opportunities and risks associated with the accountant’s role, due to the entry of computers in business organizations, I felt it appropriate to share my views here, for the benefit of young and budding Chartered Accountants.
How was the accountant functioning, in the manual environment?
His entire energy was only going into bookkeeping and compliances, with hardly any time left for analytical work relating to the organization’s business. Operating managers had no expectations on him and gave him the nickname “bean counter”. Accountants ring-fenced themselves with the “rule book” and did not venture to step out.
Through what type of applications, did computers enter business organizations, and what were the developments over the years, in perspective?
In large and medium enterprises, where computers made the entry first, applications like Payroll and Inventory were the common to start with, where saving manual efforts to handle high volumes was the primary consideration. Before we go further, let us look at the picture below. It is a symbolic representation of the user displaying his might that nothing can reduce his importance and a computer progressively coming closer to him through various innovations in Information Technology.
Batch Processing:
The high volume applications like Paytoll and Inventory Accounting, could be processed once a month, bunching up the transactions. It was because the computer, initially could read files only in a sequential mode, meaning, if we needed to access the 100th record in a file, it had to access and skip 99 records before it. This was known as sequential access method, which we can visualise, once we know that records were stored on what were called magnetic tapes. It also meant that computer applications were confined to processing historical data.
Online:
Online means up to date. The invention of a floppy drive as a medium for holding data has been one of the most significant inventions those days. Floppy is like a gramophone record. Just as one could place the cursor on the song whether 3rd or 4th on the gramophone record, without listening to all the songs in a sequence, one could access any record, using index. This was known as index sequential file access. In a general stores having 5000 items of inventory, if there are receipts for100 items in a day, it became possible to update the stock status of only those 100 records, without bothering to read the whole file. This gave birth to online applications. We cannot imagine applications like Railway or Airline Reservations without online features.
DBMS
Data Base Management Systems were based on the architecture of tables, columns, rows and cells for organizing storage, establishing relationship among the cell contents and processing of data. These tables have been mainly handled by technical teams. We can see how DBMS have enabled further developments, in the following paragraphs.
Utilities:
Programming required certain amount of training but utilities which could help in using the computers were relatively easy to pick up. The most significant among them was a spreadsheet application called Lotus 123, and subsequently Excel, which through end-user computing made computers quite popular for analytical tasks.
MRP:
Material Requirement Planning, based on DBMS technology, was used in manufacturing organizations in Production Planning & Monitoring applications which integrated functions like Requirement Planning, Inventory, Production Scheduling and so on.
ERP:
Enterprise Resource Planning, quite widely used application in medium and large enterprises, also has a DBMS, and much more in the form of functional modules, Input / Output Interfaces and helps in implementing best practices in business processes. In ERPs, functions like HR, Finance, Customer Relationship Management is also included and it provides a platform to reduce data entry efforts, strengthens controls and provides versatile reports.
From a Mainframe to a Mini to a Laptop, hardware became userfriendly while greater speeds in processing and capacity to handle higher volumes of data became easy.
All these developments were because of constant exploration of IT vendors to bring the computer closer to the user. While initial resistance to computers, by accountants who were used to working in a manual environment was quite common, progressively accountants started getting trained to handle work in the new environment. While the technical aspects could be left to the software specialists, accountants needed to be clear on their functional requirements, and streamline their processes, procedures and work methods to have effective systems in place.
Other Developments:
What I am sharing hereafter, just for information, is relevant for everyone and not for accountants alone.
Mobile Computing: Unlimited range of applications, including electronic funds transfer and video calls made mobile handset a multi-purpose tool and indispensable.
AI, standing for Artificial Intelligence, is intelligence displayed by machines in contrast to human intelligence and has lead to the invention of many devices to help us in our daily lives.
In IOT, Internet of Things, day to day objects, equipped with microcontrollers and sensors can digitally communicate with central units to help on home appliances and surveillance cameras. Technology is helping in Industrial automation, medical aids and Smart City Applications like traffic management, energy management, smart parking and so on.
Messaging: All mobile users invariably know of WhatsApp, the most popular means of messaging, used equally extensively by business groups. Telegram over the internet is another messaging service that is fast gaining popularity due to its security features like encryption.
Data Centers:
To reduce the cost of computing and to make it affordable, data centers started offering facilities on sharing basis, over the internet. Pay as you go services like IaaS: Infrastructure as a Service (storage, networking, virtualization), PaaS: Platform as a Service (Hardware & Software available over the internet), and SaaS: Software as a Service (3rd party software over the internet) are quite cost-effective solutions now.
Concluding Remarks:
1. Can the Accountant come out of the boundary of his books and take advantage of the developments in IT, to add value to his organization?
2. Can he streamline his accounting and operational processes, procedures and work methods to make implementation of business applications easy and effective? and
3. Can he explore transfer of routine activities as much as possible to the computer and focus on analytical activities?
For more articles from me, please read my book “Translating Operations into Money” a collection of my actual work experiences over four decades, narrated as business case studies. The book is available for online purchase at Amazon and at Notionpress.com. Please visit www.operationstomoney.com to know about the book.
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