Is Thriday the first 4th Generation Accounting Software?
Accounting – often pigeonholed by the stigma of being 'boring' – has a fascinating and storied history that can be traced back to ancient civilisations. Over the centuries, accounting has evolved to become more complex and sophisticated with the development of new technologies and methods. In this article, we'll explore the history of accounting from its origins to the modern era, focusing on the development of modern accounting practices and the launch of Thriday, a 4th generation accounting software that has transformed the way small businesses manage their finances.
Early History of Accounting (1st Generation)
The origins of accounting can be found in ancient Egypt, Babylon, and Greece, where these great civilisations used accounting to keep track of transactions such as taxes, trade, and labour. In fact, the first written accounting records came from Mesopotamia, where accountants used cuneiform writing to record transactions on clay tablets.
The Roman Empire also had a sophisticated accounting system, with accountants known as tabularii responsible for keeping track of financial transactions. Tabularii were employed in various government offices, such as the treasury, tax offices, and courts, to keep records of financial transactions, legal cases, and other important information. They were responsible for creating and maintaining written records on papyrus or wax tablets used as legal evidence or for administrative purposes.
The double-entry accounting system, still in use today, was developed in Italy during the Renaissance period. Luca Pacioli is often credited as the "father of modern accounting" for his contributions to the development of double-entry bookkeeping in the 15th century.
"Luca Pacioli is often credited as the "father of modern accounting" for his contributions to the development of double-entry bookkeeping in the 15th century"
Pacioli was an Italian mathematician and Franciscan friar who wrote the first book on double-entry bookkeeping, titled "Summa de Arithmetica, Geometria, Proportioni et Proportionalita". In this book, published in 1494, Pacioli explained the principles of double-entry bookkeeping, which revolutionised how financial records were kept.
Double-entry bookkeeping is a system of recording financial transactions that involves recording each transaction in two accounts, a debit and a credit. This system ensures that the total debits always equal the total credits, which provides a system of checks and balances that helps to prevent errors and fraud.
While Pacioli is credited with the development of double-entry bookkeeping, it is essential to note that the system was based on earlier accounting practices used in Italy and other parts of Europe for centuries. Additionally, modern accounting has continued to evolve and develop since Pacioli's time, incorporating new technologies and practices as they emerge.
The Industrial Revolution of the 18th and 19th centuries brought about significant changes in accounting practices, with the development of new technologies and the growth of trade and commerce. With the growth of business enterprises, there was a corresponding increase in the complexity of business transactions, which required more advanced accounting methods and procedures.
The emergence of joint-stock companies and the need for accurate financial reporting led to the development of auditing practices, cost accounting and the introduction of accounting standards:
- Auditing practices: The growth of business enterprises and the emergence of cost accounting led to a need for standardised accounting practices. This led to the development of accounting standards and principles that are still used today.
- Cost accounting: Cost accounting emerged as a popular tool for businesses to analyse and control their costs. This involved the development of techniques for measuring the cost of producing goods and services, which enabled companies to make better decisions about pricing and profitability.
- Accounting standards: In the early 20th century, the accounting profession became more formalised by establishing professional organisations such as the American Institute of Certified Public Accountants (AICPA) and the Institute of Chartered Accountants in England and Wales (ICAEW).
This first phase of accounting was all analog and paper-based. Small business owners would have to go to their accountant for a meeting to go through the 'books', a physical book each client had that the accountant used to record journals, ledgers, assets and transactions for the business.
Modern Era of Accounting (2nd Generation)
In the 1960s, 1970s, and 1980s, computers revolutionised accounting practices by introducing electronic data processing and the development of accounting software. Computers led to greater efficiency and accuracy in accounting and the ability to process and analyse large amounts of data more quickly and accurately than ever before.
"In the 1960s, 1970s, and 1980s, computers revolutionised accounting practices by introducing electronic data processing and the development of accounting software"
The growth of multinational corporations over this period also created new challenges for accountants, who had to deal with the complexities of international accounting standards and foreign currency transactions. This resulted in the emergence of management accounting as a distinct field focused on providing decision-makers with the information they needed to manage organisations more effectively.
Over this three-decade period, there were also many high-profile financial scandals, such as the collapse of the Penn Central railroad in 1970 and the savings and loan crisis in the 1980s. These scandals led to increased regulation and oversight of the accounting profession, including a move towards more standardised accounting practices, with the development of new standards such as the Generally Accepted Accounting Principles (GAAP) and the International Financial Reporting Standards (IFRS).
During this period, while accounting transitioned to being completed on computers, it was still prevalent for accountants to be analog and use accounting books. The existing accounting software was only sold to accountants and distributed on CD-ROMs. Most small business owners would meet with the accountant weekly or monthly at their office to look over the books on a computer screen. MYOB, launched in 1991, became a popular go-to for Australian accountants.
Cloud-Based Accounting (3rd Generation)
The advent of cloud computing in the 21st century saw the next significant technological change the accounting industry undertook, with the introduction of cloud-based accounting software such as Xero and Quickbooks. Xero was launched in 2006 in New Zealand and has since grown to become a global leader in cloud-based accounting software, with over 2 million subscribers worldwide.
Xero provides small businesses with various tools to manage their finances, including invoicing, bank reconciliation, payroll, and inventory management. The software is accessible from any device with an internet connection, and data is stored securely in the cloud.
Cloud-based accounting software such as Xero became popular because there were no upfront costs for hardware or software. Instead, businesses could pay a monthly subscription fee based on their usage.
Cloud-based accounting software can be accessed from any device with an internet connection, making it easy for business owners and accountants to work from anywhere. The launch of cloud-based accounting significantly reduced and, in many cases, removed the need for accountants and their clients to meet in person. With data stored in the cloud, the client and accountant could jump on a call to look at the same information.
"Cloud-based accounting software can be accessed from any device with an internet connection, making it easy for business owners and accountants to work from anywhere"
Cloud-based accounting software can be integrated with other business tools, such as point-of-sale systems, inventory management software, and customer relationship management (CRM) software, providing businesses with a complete view of their operations. Xero, for example, has a large app store where you can plug in various tools and services to help you run your business more efficiently.
While cloud accounting came with the promise of making financial admin faster and easier, it has had the opposite effect in many cases. According to a survey conducted by Thriday in 2020, small business owners spend an average of 6 hours per week on financial administration tasks. This includes tasks such as invoicing, bookkeeping, and financial reporting.
The main reason is that new software pushed more of the work from the accountant to the business owner. The need to reconcile expenses, track income, monitor cash flow and generate business reports is often done self-service and with little support from the accountant. In the same Thriday survey, there was no discernable difference in time spent on financial admin between businesses that had accountants and those that didn't.
In addition to the shift towards self-service, cloud accounting software can be powerful and flexible; it can also be complex and challenging to use, especially for business owners unfamiliar with accounting principles. Accounting software such as Xero is designed for bookkeepers and accountants to use, and many of the productivity improvements are felt by this group rather than the business owner. This can lead to frustration and errors in financial management. Some small business owners may find the subscription fees and add-on costs burdensome, especially if they are starting.
Some small business owners often need help integrating cloud accounting software like Xero with other business tools and applications, such as payroll systems or inventory management software. The sheer number of apps on the Xero app store makes it hard to find the right product for your needs, but the integration is also hard to set up and use.
Automated Accounting (4th Generation)
Thriday, an Australian company specialising in automation using AI, is quickly gaining recognition as the first 4th generation accounting platform. Founded in 2018, Thriday has developed cutting-edge software that automates routine tasks and processes, enabling businesses to improve operational efficiency and reduce costs.
Thriday is considered a next-generation accounting platform because it offers a range of advanced features and capabilities that go beyond traditional accounting software. These features include real-time transaction categorisation, financial reporting and analysis, automation of routine tasks such as invoicing and bill payments, and customisable dashboards and reporting tools. In essence, on Thriday, you just need to earn money and spend money, and Thriday takes care of the rest.
"Thriday is considered a next-generation accounting platform because it offers a range of advanced features and capabilities that go beyond traditional accounting software"
Thriday's innovative technology has caught the attention of investors, and the company has successfully raised capital through the equity crowdfunding platform Birchal and NAB Ventures. One of Thriday's key advantages is its ability to provide customised automation solutions to businesses of all sizes and across multiple industries. Thriday's automation tools can be tailored to meet the specific needs of each business, whether they are a tradie, creative or consultant.
Thriday's success in the industry can be attributed to its innovative approach to automation, which significantly reduces the time business owners spend on doing the books. Compared to 2nd and 3rd-generation software, Thriday's solution automates tasks that a human previously had to do – which was both time-consuming and expensive. Thriday customers have reported a drop in time spent on financial admin by over 90 per cent.
In addition, Thriday's next-generation accounting platform uses artificial intelligence and machine learning technologies to provide more accurate and insightful financial insights and recommendations and automate repetitive tasks, freeing time for business owners and accountants to focus on more strategic tasks.
Accounting Is Not Boring
So now that you know more about accounting, I'm sure you'll admit it's not boring. Accounting has a long and rich history, dating back thousands of years. From the abacus to modern-day accounting software, the field has undergone significant technological advancements that have revolutionised how businesses manage their finances. Accounting is essential to any business, providing critical information for decision-making and ensuring compliance with legal and regulatory requirements.
Thriday, with its innovative automation tools, has delivered a new way for small businesses to reduce the time they waste on financial admin. By automating routine tasks, such as bookkeeping, invoicing, and tax, Thriday enables businesses to focus on growth and innovation rather than being bogged down by administrative tasks. This increases efficiency, reduces costs, and empowers small businesses to compete with larger companies by offering faster and more reliable services. In short, Thriday is helping to shape the future of accounting by providing businesses with a powerful tool for success in the digital age. To learn how much time you could save by switching to Thriday, take our time saver quiz today.