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Leverage is New to Accountants

Miguel recommended a book to me, Hackers and Painters. I highly recommend it. https://www.amazon.com/Hackers-Painters-Big-Ideas-Computer/dp/1449389554

The book discussed something and explained it very clearly. This is something that (a) accountants don’t currently have, (b) this will change for accountants, and (c) will be part of the new “reality” for accountants.

One of the incredibly interesting dynamics about software is that it can be created ONCE and then used MANY, MANY times. In particular this is true for cloud-based software because it is so easy to deploy. As such, software developers have LEVERAGE.

Today, accountants have ZERO leverage. Literally, ZERO; they “bill by the hour” and there is a finite number of hours in the day.

BUT ALL THAT CHANGES with the new “digital” paradigm of financial reporting. Why?

The reason is RULES. Machine readable rules are like software, and, in fact, I see characteristics that make them better than software.

What good is Pacioli without machine-readable rules? Without all the rules that I provide, Pacioli is only as good as an XBRL processor. Pacioli CAN ONLY provide input into whether the XBRL-based report is proper XBRL technical syntax (green below). And heck, Pacioli relies on Arelle, an XBRL processor for that. BUT, WITH the proper machine-readable rules, then Pacioli can do the GREEN plus the YELLOW tasks. Because of this, there is an entirely new technique for creating financial reports, “streaming” of information.

  • Improper XBRL technical syntax used to represent logic
  • Improper mathematical associations between reported facts
  • Improper XBRL presentation relations associations (i.e. improper report model)
  • Improper use of a type of line item as if were some different type of line item
  • Inconsistent or contradictory high-level reported information
  • Improper mechanical structure of disclosures
  • Improper or incomplete set of disclosures provided within report

So, accountants will now HAVE THE SAME LEVERAGE AS SOFTWARE DEVELOPERS! You still need the leverage provided by software developers, to create tools like Pacioli. But now accountants can participate in the leverage of digital BECAUSE (a) Pacioli, an XBRL knowledge engine and (b) rules that engine can process.

The book Hackers and Painters explains this all in four or five pages that are very, very much worth reading.

accountants
Charles Hoffman

Charles Hoffman

Product Manager at Auditchain Labs AG; Certified Public Accountant