The Internet of Things (IoT) is steadily taking over every aspect of our lives. It has introduced the world to a whole new dimension of interconnectivity. It has the potential to modernize all kinds of industries and business functions, and billing and accounting are no exception. In this article, we discuss IoT and its impact on modern accounting and billing practices.
However, before any further proceeding, let us first learn more about IoT:
What is IoT?
Let’s break it down: A result of the advancement of wireless technology, IoT is essentially a system of interconnected devices, appliances, or machines connected by the internet. IoT enables the following:
- Devices, appliances, or machines can communicate with each other and exchange data.
- They minimize human effort and intervention.
- IoT creates an ecosystem where multiple devices work together and enhance each other’s performance. IoT makes it possible to derive the maximum value from such devices.
We are all familiar with ‘smart’ devices such as smartphones, tablets, computers, etc. that are based on these principles. However, IoT is no longer restricted to such ‘smart’ devices. Sensors and other IoT-enabled devices have now made it possible for any device or appliance, even mechanical ones, to be included in the IoT ecosystem. Therefore, we are gradually moving towards a world where almost all devices and appliances will be armed with sensors and internet connectivity.
Such devices and appliances can provide their users and manufacture with all sorts of vital information, data, and updates. For example, manufacturers and users are able to take stock of how many times the device or appliance is used.
Manufacturers are also able to know how many devices an individual has in his or her home. These are just a few basic examples. The possibilities are immense.
When businesses receive real-time updates and relevant information from IoT-enabled devices, it automatically gives them more opportunities to plan their business activities and allocate resources more efficiently. It also becomes possible to optimize operations and processes, minimize cost, and resolve issues quickly.
Think of how all the consumer behavior data can inform business decisions and strategies and improve operations. Once you do that, it becomes easier to understand how all of this could apply to bill and accounting functions and processes.
Applications of IoT in Accounting and Billing:
IoT has the potential to improve accounting and billing in many ways. IoT connects devices on a global scale. IoT can connect devices to create an ecosystem for accounting, payroll, human resource management, inventory management, and other such functions.
When the data derived from each of these processes is pooled together, it creates ample opportunities to take the automation and productivity of the accounting and billing processes to the next level.
– Inventory and Asset Management:
Inventory management is an important but tedious process. For any business to remain profitable, it must prevent unnecessary wastage and manage to deplete stocks well. However, tracking every single piece of inventory and shipments, especially when you operate on a global scale, can be very complicated.
IoT makes it possible to integrate products with RFID chips to track inventory. This makes it possible to obtain data about the real-time location of these products, status updates, information about their condition, usage details, and also details about the people who handle these products at various stages.
IoT also facilitates inventory management. Think smart shelves fitted with sensors that can give you the details of your inventory at any time. You can utilize these details to decide whether you need to order a particular item when you want to order it and even how much of it.
– Business Quotations:
It is important not to get carried away and submit low quotations just to win more business. For businesses, especially new ones, arriving at an accurate costing is not easy. More often than not, businesses quote a certain price only to realize later on that is not viable for them. However, if businesses rely on data to arrive at a cost, this situation can be avoided entirely.
With the help of IoT, businesses can obtain vast amounts of data and valuable insights that can help them submit suitable quotations. The data and insights may include details regarding the cost of the raw material, the amount of manpower, the time, and other resources that must be factored in when a final cost is determined.
Nobody looks forward to audits, but IoT can make it a lot less unpleasant. IoT makes it possible to collect, manage, and organize scores of transactional data from billing, ERP, and accounting systems. Real-time data can be obtained in just a few clicks in standard formats.
– Bundled Services
As IoT makes it possible for various devices and services to work together, it allows you to partner with different IoT products, services, applications, and devices to create bundled services. There are many examples that are in practical use nowadays. An electronics store may offer you a great deal if you buy a smart TV and also a wireless sound system because they work great together.
– Pricing Models and Product Tiers:
There are all kinds of consumers in the market- right from individuals, to SMBs to even enterprises. Naturally, the needs of one may differ from the other. The data obtained from IoT can help you develop product tiers targeted at various consumer types allowing you maximum market penetration.
You can also use the data obtained from IoT to develop and manage pricing models that best work for you and your consumers. You can create various payment options for your customers, such as pay-per-use, devised-based pricing, user-based pricing, subscription billing, or even a flat rate.
IoT also makes it possible for various devices and systems to work together so that the terms and conditions of these products and payment plans are monitored and enforced automatically with little to no human intervention.
Benefits of IoT in Accounting and Billing:
As discussed above the practical applications of IoT in accounting and billing, let us understand how businesses stand to benefit from it:
– Simplified Accounting:
Most accountants dread the pain, stress, and chaos leading up to an audit. We have discussed how IoT makes it possible to connect ledgers, record and verify transactions, and track their status in real-time. It automates the process of gathering financial data and compiling it properly to a large extent. This saves much time, effort, and paperwork. In other words, it takes much of the hassle out of the audit process.
Needless to say, while IoT simplifies the audit process to a great degree, its ability to connect tools and analyze, consolidate, store and process data in real-time simplifies other billing and accounting functions as well.
– Cost, Time, Process Optimization:
IoT can automate mundane, repetitive billing and accounting tasks and save much time and cost. Manual billing and accounting processes require more human resources, while you can work with a considerably smaller workforce with an automated one.
When repetitive tasks are automated, it also shifts the focus back to important business activities such as developing sound billing and accounting strategies for business growth.
Billing and accounting are sensitive processes. The slightest error can cost you clientele. Manual processes require a high amount of human effort, which makes them highly vulnerable to errors. IoT can take away much of the human effort involved in billing and accounting, thereby greatly reducing the chances of error.
IoT connects devices and thereby people and processes, which in turn allows more collaboration between accountants and various other stakeholders such as clients and third parties in real-time. For example, a supplier generates a bill, and it automatically reflects in your accounting system. Collaborative business processes can go a long way in creating a robust billing and accounting process.
– Customer Experience:
When you use IoT to power your billing and accounting process, it also improves the end-user experience. Invoices are generated quickly and correctly. Easy access to data makes it possible to resolve any billing and accounting discrepancies effectively and resolve customer concerns without delay. Automated reminders, notifications, and updates also go a long way in enhancing the customer experience.
We have discussed how IoT can make it possible to develop various product tiers and pricing plans to suit different customers. In other words, IoT makes you agile enough to experiment with various products and price points and cater to your market more effectively. This entitles you to improve your market share and create new possibilities.
– Cash Flow Management:
A business is only as healthy as its cash flow. IoT enables various devices and systems to work together so that you have the most current and accurate information about your cash flow. When real-time data regarding all the phases of service delivery, payments, financial documents, invoices, etc. is available automatically, it becomes easier for accountants and business owners to control and manage the cash flow.
Challenges of IoT in Accounting and Billing:
While IoT continues to transform various aspects of the way we do business, as is generally the case with technology, it is moving faster than many businesses can evolve. Businesses that do not remain mindful of the potential challenges and take appropriate measures could risk heavy setbacks. Businesses must rework their processes in order to adapt to this new ecosystem. You should also follow the accounting trends.
Here are some challenges of IoT in accounting and billing and also some proposed solutions to contain them:
– Legacy Systems:
There is no doubt that the incredible amount of data captured by IoT devices can drive revenue to unending limits. However, to collect data and analyze it properly, businesses may have to consider replacing legacy systems that are not compatible with IoT devices.
If you continue to try to work with incompatible legacy systems, you automatically increase the scope of manual intervention which leads to errors in billing and accounting which do not just lead to wastage of resources but also ruin customer relationships.
– Multiple Vendors:
The market is flooded with manufacturers, vendors, and resellers offering various kinds of IoT products and services. The whole point of using IoT in billing and accounting is to simplify the related processes.
Implementing systems and solutions from multiple vendors may not just prove to be more expensive, but it is bound to create an overlap. It’s optimal to work with a single vendor that can offer consolidated IoT solutions for your billing and accounting requirements.
The Road Ahead:
IoT is all set to transform the way do business, including the billing and accounting function, as we know it. IoT can foster an environment of exceeding business growth and profit while creating business value in possibly more ways than we know. It is now a bonafide global sensation.
Smart appliances, automobiles, and wearable technology are just beginning to enlighten us on the various possibilities. Here are some facts and figures to put things into perspective:
- Cisco researcher David Evans found that every second, there are more than 127 devices that are connected to the internet.
- Gartner predicts that there will be 20.4 billion IoT-powered devices by 2020.
The idea behind IoT in business is quite simple. It is meant to connect devices and things to capture real-time and relevant information for business planning and resource allocation. It will help businesses to improve their processes, reduce costs, and manage risks.
IoT will change the sources of transactional data that flow into billing, accounting, and ERP systems. It will alter the way the audits of these transactions are done. The role of the accountant may gradually evolve into a service-oriented one as opposed to the task-focused nature of it at the moment.
IoT in billing and the best accounting software can create much convenience and efficiency in billing and accounting functions. IoT can make these functions more intelligent and help businesses gain a competitive edge. Leveraging the opportunities that are being created by IoT is vital to securing the long-term survival of your business.
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