Since well before Abraham Lincoln was a boy, the most advanced accounting software was likely an abacus. How times have changed, for most accountants, computer software has become an essential part of the way they operate. Asking some accountants to go without their favorite program or software may be akin to asking them to forgo the use of their right arm—in that it isn’t very likely to happen.
This is because accounting software has inarguably changed the landscape of the industry. But how did this come to be? Read on below for the full story on how computing has upended the accounting world.
The B.C. (Before Computers) Era
The history of the accounting field is one long ledger that has been written almost entirely in handwritten, paper-filled books. Accountants were the ones tasked with filling, maintaining, and keeping these books up to date. Hence, the genesis for another common name for the accounting profession was born, bookkeepers.
Bookkeeping before computers was a very labor-intensive job that required advanced mathematical skills, many qualified laborers, and tolerance for inevitable human error. Many accounting firms thus marketed themselves on their accuracy and speed as a differentiator of their work. These skills required larger workforces to succeed.
This in turn led to growth and consolidation into larger and larger firms until the industry was left with the “Big Four” that still exist today.
How Computers Changed Accounting
With the advent of the first supercomputer in 1964 (HP’s CDC 6600) the writing was on the wall for more traditional methods of accounting. And it wasn’t long before the abacus was replaced by IBM. Computers would soon be able to undertake more complex calculations in shorter periods of time than any human accountant would ever be able to figure.
For the accounting world, the technological changes would be astounding. At first, a room full of accountants would simply be replaced by a computer that itself took up the size of a large room. Yet, as time progressed, computers grew more advanced until a simple scientific calculator would soon be able to spit out calculations in seconds that would have taken a genius like Einstein weeks!
This sudden technological shift impacted accounting firms in the following ways:
Faster and More Accurate Computations
When you think of doing a task as fast as humanly possible, the meaning is to be quite quick. However, comparing the computational abilities of man and machine is a surefire way to make even the fastest mental mathematician shirk from the thought of competition. This is because, as mentioned above, computers will always be able to undertake more complex calculations, faster, and with fewer errors.
The last aspect, a reduction of errors, would revolutionize an industry that was always susceptible to human error in calculations. Computer software, while not infallible, would prove to be much more robust at producing error-free calculations.
Less Labor Needed
If computers had the greatest impact on any aspect of the accounting business, it was to lessen the amount of labor required. This evened the playing field, as the largest firms no longer were guaranteed to have the best resources.
Not only did this mean that smaller accounting firms could compete on more of a level of parity, but also less capital was required in general as the workforce could be smaller. In short, if the largest cost for an accounting firm used to be the labor required to make efficient computations, computer software was able to provide substantial cost savings.
More Efficient Accounting Firms
One underrated development in accounting computing is the rise of productivity technology such as accounting practice management software to increase the efficiency of a firm’s practices. The ability to utilize quality management software is paradigm-shifting for any accounting practice looking to boost its efficiency.
Such benefits can be realized by using software that handles tasks such as work tracking and deadline management with its features. This illustrates just another example of how the use of the right software can help an accounting firm streamline operations while also cutting costs.
Computers Are Still Changing the Accounting World Today
To say that computers revolutionized the accounting world is at once an amazing understatement and a gross oversimplification. To realize this, one just needs to look at the continued importance that software plays in the success of accounting firms today. Accounting software has in many ways democratized the industry, allowing larger firms and little guys to compete on a more level playing field.
And to see what impact they will have on the industry next; one only needs to keep watching.
We hope you’ve enjoyed finding out more about the history of software in accounting and that you’ve learned something new along the way. Please don’t hesitate to reach out with any questions or comments you may have, and, as always, thanks for reading!