The 21st Century Bookkeeper – What's Changed?
- Oct 15, 2024
- 5 min read
Written by Matilda Howard, Marketing Specialist
Matilda Howard is a seasoned marketing professional with a passion for brand storytelling and consumer engagement. Focused on driving digital innovation and brand growth for clients she enjoys sharing her knowledge with the wider community online.
What is the first thing that comes to mind when picturing a bookkeeper? Is it someone with a big ledger book, manually (and painstakingly) counting profits and losses? This could not be further from the realities of the 21st century bookkeeper! As with any other aspect of the financial industry, bookkeeping has become much more complex.
Today, companies need bookkeepers who are well-versed in the latest accounting software and are wizards in working with cloud-based accounting solutions that have revolutionized finance.
In this article, we will examine the historical role of the bookkeeper and how this has changed radically – and is still changing – due to the game-changing effects of technology.
The evolution of the bookkeeper's role
According to historical records, bookkeeping has been around since the earliest human civilizations. Indeed, Babylonian records written with styli on clay dating back to 2600 BCE were discovered.
The bookkeeping profession also existed in Mesopotamia, with archaeologists excavating clay tablets with records dating back 7,000 years. Fast forward to 1494, and we have the first modern double-entry bookkeeping system, as described by the mathematician and Leonardo da Vinci collaborator Luca Pacioli.
The iconic waste book – the book traditionally used for bookkeeping – was common in colonial America and was used to document receipts and expenditures. As the name suggests, it was only a temporary book, as the daily records were then transferred to a daybook or account book in a permanent journal.
We don't have to go that far in history when we talk about bookkeeping in the pre-computer age. Although it may be difficult to imagine, handwritten bookkeeping was still a thing before the turn of the millennium.
Bookkeepers maintained paper ledgers by hand and kept their records in filing cabinets. It's safe to say that bookkeeping was laborious, as it required each transaction to be recorded by hand on a ledger. Therefore, mistakes were very likely.
The impact of technology on the bookkeeper's role
Computers completely transformed bookkeeping, and in turn, the role of the bookkeeper. The modern bookkeeper no longer needs to rely on paper-based ledgers.
Instead, they need to be proficient in accounting software and cloud-based accounting solutions, which reduces human error. Moreover, instead of spending hundreds of hours painstakingly inputting data into ledgers, bookkeepers now use digital spreadsheets, significantly cutting down the time spent on repetitious labor. Instead, bookkeepers can now focus on more important tasks, such as communication, data analysis and forecasting.
One technological impact that cannot be underestimated is the elimination of paper records and filing cabinets. Up until a few decades ago, bookkeepers had to record everything on paper, which needed to be physically stored.
Nowadays, digital record keeping allows bookkeepers to store data on the cloud and access it from anywhere. This has undoubtedly made it easier for bookkeepers based in one country to work with customers based in a completely different country and enabled bookkeepers to work remotely. Furthermore, cloud-based data storage makes it easier for other members of the accounting team to access data and collaborate when needed.
From tallying to data interpretation
It's safe to say that today's bookkeeping goes beyond tallying. In fact, the bookkeeping profession nowadays focuses more on data interpretation and forecasting. Therefore, bookkeepers are now integral to a company's financial team, as they need to have in-depth knowledge of its financial health.
In order to handle such big data, bookkeepers need to be highly proficient in data analysis. Descriptive analysis enables bookkeepers to categorize and classify data, and report revenue flow, revenue and expenses. They monitor data changes through diagnostic analysis ("When did that happen?"), which they use to calculate historical performance.
Through predictive analysis, they can predict performance and identify patterns that could shape future events. In addition, bookkeepers prescriptively analyze data ("What should happen?") to advise CFOs and CEOs on key business decisions and future growth opportunities, including exit strategies.
The 21st century bookkeeper is likely to have a basic understanding of capital gains tax (CGT) and the impact of selling a company. However, bookkeepers are not experts in tax planning or specific strategies for avoiding or minimizing CGT. This knowledge and expertise generally fall within the remit of an accountant or tax advisor.
The growing emphasis on compliance issues
With increasingly strict and complex financial regulations, bookkeepers must be well-versed in compliance. Bookkeepers must ensure that their company meets the latest accounting and financial regulations.
Cybersecurity is another hot topic, especially as more and more sensitive data is stored and shared online. Bookkeepers must therefore be tech-savvy and up-to-date with the latest security software and protocols to prevent data leaks and cyber attacks.
The importance of communication and cooperation for the modern bookkeeper
Bookkeepers must not only work with the rest of the financial team but also work hand in hand with the IT, sales, marketing and operations departments.
Effective communication with C-suite executives is also crucial to ensure that the company's financial health is kept in check. In addition, efficient communication ensures that all executives are informed of the latest legislative changes and any performance trends and forecasts that can take the company to the next level.
Most importantly, bookkeepers need to confidently communicate with external parties, including auditors, tax authorities and potential clients, to discuss the company's financial health. Complex compliance requirements mean that bookkeepers must be able to explain the data and their analysis to these third parties and ensure that the company is on the tax authorities' good books.
What does the future of bookkeeping look like?
In the next few years, bookkeeping, like the rest of the financial industry, will almost certainly continue to be digitized. Artificial intelligence will certainly be something that continues to automate bookkeeping and shift the profession to data analysis.
AI will have a positive impact on the industry by reducing errors, processing digital payments, optimizing workflows, and helping bookkeepers visualize data in seconds. On the downside, bookkeepers need to become even more technologically proficient to adapt to the rapidly changing financial landscape.
Blockchain technology is another technology that's becoming more mainstream and will have a significant impact on the future of bookkeeping. Due to the foolproof nature of its digital ledger, this technology provides more clarity over the ownership of assets. It, therefore, has the potential to reduce the cost of maintaining and reconciling ledgers and provide absolute certainty when it comes to asset transfer and ownership. However, blockchain technology, like AI, is very complex and requires bookkeepers to equip themselves with new skills.
Final thoughts
As we usher in a new technological era, bookkeeping will undoubtedly continue to change and evolve. Although bookkeepers were originally associated with maintaining accurate financial records, today's bookkeepers focus primarily on data interpretation, forecasting, and compliance.
New technologies mean new opportunities. Undoubtedly, bookkeepers who adapt can use technology to truly focus on the areas they're passionate about and flex their entire spectrum of skills in a way they could never do before.
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Read more from Matilda Howard
Matilda Howard, Marketing Specialist
Matilda Howard is a recognized leader in marketing, a seasoned professional who is passionate about driving digital innovation and growth for global brands. Matilda leads initiatives across a range of digital marketing disciplines, content creation, and brand management. She's passionate about blending creativity with data-driven insights to achieve impactful results for clients.
