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Accounting Technology Through The Ages

By January 10, 2019 February 25th, 2019 No Comments

From tablet record keeping in ancient Mesopotamia to the 21st century blockchain trend — accounting technology has been a key component to addressing accounting challenges — especially for small businesses.

Despite its importance however, a recent study by Fit Small Business indicates that only less than half of the 300 small businesses surveyed are using accounting software.

Small business owners and accountants are slow to adopt new accounting tools and technology, with factors including:

  • Misconceptions: accounting tools are too expensive to implement and require a highly tech-savvy individual(s)
  • Lack of Information: case studies that show the benefits of accounting tools such as improved cash flow and revenue are lacking in availability

But accounting has come a long way since it’s ancestral tools and techniques. To highlight how far accounting technology has come, below is a breakdown of the history and evolution of accounting technology for small businesses (between 10,000 BC to AD 2025).

1. Age of Inscription-based Accounting — 10,000 B.C. – 2000 B.C.

At this time, markings on cave walls were used to keep count of livestock and food. Emergence of Hindu-Arabic numerals, decimals, and arithmetic marked the stage for “counting” transactions and slowly becomes the precursor to “accounting”.

Interesting facts / takeaways:

  • Ancient Mesopotamia, Babylonian, and Egyptian civilizations develop early accounting technologies, including:
    • Barter system: Tokens and clay balls are used to create inventory and  transaction records.
    • Cuneiform tablets: First known trilingual writing script “cuneiform” appears in accounting transactions on clay tablets in Uruk, Mesopotamia.
    • Abacus: Sumerians create a primitive calculator with beads that slide on a frame to compute complex numerical accounting calculations.
    • Papyrus: Egyptians create pamphlets of thin sheets made of a plant-based material to record accounting transactions.

2. Age of Merchant-based Accounting — 2000 B.C. – A.D. 1900

As shipping and trade increases, the development of single-entry bookkeeping was born. This type of currency replaces bartering.

Interesting facts / takeaways:

  • In 600 B.C: King Alyattes in Lydia (Turkey) created the first currency. Following this, a new ledger system emerges with rudimentary bookkeeping techniques.
  • In A.D. 1661: bank notes are introduced to reduce the need for coin-based currencies.
  • Thanks to the Gutenberg printing press, the first account of bookkeeping is published in “Summa de Arithmetica, Geometria, Proportioni et Proportionalita,” by Luca Pacioli (1494).

3. Age of Digital Transformation — A.D. 1900 – A.D. 2010

Interesting facts / takeaways:

  • In 1946: for better or for worse, the credit card was created, hence leading to the first digital financial transactions.
  • In 1953: General Electric creates the first automated payroll system, marking the first use of computerized accounts.
  • In the early 1990s: enterprise resource planning (ERPP) software was created, which integrates back-office financial functions like accounting and payroll management.
  • Cloud computing and SaaS accounting platforms introduce automation and scalability across multiple platforms.

4. Age of Intelligent Accounting — A.D. 2010 – A.D. 2025

In the age of intelligent accounting, we see business intelligence and predictive analytics come together to analyze financial data from multiple sources (i.e. accounting ledger or bank accounts) and to forecast cash flow.

Interesting highlights / takeaways:

  • Improved processes: machine learning tools and artificial intelligence (AI) can learn business’ financial policies, analyze audits, and identify patterns to improve systems and processes.
  • Accounting robots: robotic process automation, robo-advisors, and “chatbots” automate data entry and are used to provide personal financial advice.
  • Internet of things (IoT): a new ecosystem for accounting transactions (i.e. near field communications (NFC) for mobile payments).
  • Blockchain: accounting will increasingly become blockchain-based and blockchain accounting will become the central repository of financial data transactions, secured through advanced cryptography.

5. Age of Quantum Accounting — A.D. 2025 and beyond

Interesting facts / takeaways:

  • Quantum-mechanical phenomenon called “qubits” combine binary values of 0 or 1 based on the rotation or state of subatomic particles to store information.
  • The immense power of quantum computers will manage high volumes of financial transactions impermeable to fraud and further enhance cryptography of digital transactions.

Avoid Becoming an Artifact in this Age of Intelligent Accounting!

With the direction that accounting is going in terms of its timeline over the years, it’s no surprise that accounting technology is integral for small businesses, especially when maintaining growth and a competitive edge. If your small business isn’t currently using an accounting tool, it’s time to rethink your financial strategy. Here are some steps to take right now:

  • Search through your accounting process to look for data entry or manual, redundant tasks that can be performed through automation with accounting tools.
  • If you’re already having challenges or limitations, try out Kashoo’s 14-day free trial to see how accounting technology and tools can address your current bookkeeping challenges.
  • If you’re happy with the outcome, deploy Kashoo to see how you can increase the volume and efficiency of processing financial transactions (including income and expenses), ensure compliance, and even reduce fraud!