The history of accounting technology: From clay counters to cloud software

Accounting has been part of human civilization for millennia, and the evolution of accounting tools tells the story of human innovation.  

It's not just about numbers and ledgers; it's a story of how humans have kept track of possessions and wealth throughout the ages. Understanding this evolution sheds light on the discipline itself and on the development of commerce.

This evolution is moving faster than ever—the practice of accounting looks different today than it did even a few decades ago. That’s because we’re entering a new era of automation and machine learning that’s propelling the industry forward.  

But let’s start at the beginning, tracing the history of accounting tools from the birth of the practice to the technological innovations of the present.  

The dawn of record-keeping: Clay counters and early writing systems

Writing and accounting developed side by side in ancient Mesopotamia, where civilizations around 7500 B.C.E. began to use small clay objects to keep count of expenditures and goods like food and clothing. This system was refined over the following centuries, and the clay counters were eventually replaced by markings on clay tablets and ultimately parchment.  

The invention of writing wasn't just a leap towards literacy; it was a practical solution for an emerging need—to keep track of transactions. These early forms of record-keeping were revolutionary, enabling ancient societies to manage trade, track goods, and lay the foundations for modern accounting practices.

Ancient Egypt and the Pharaohs' granaries

Accounting practices continued to evolve in ancient Egypt. At the heart of this civilization’s administrative prowess was the meticulous record-keeping of grain in state granaries. The Egyptians used hieroglyphics to inscribe detailed accounts on papyrus and the walls of granaries to track inventory levels and distributions.

These records weren't merely about inventory management; they were a testament to the Egyptians' advanced understanding of governmental accounting.  

A revolutionary turning point: Double-entry bookkeeping

The growing importance of accounting in society spurred further innovation, and the Renaissance saw the next leap forward in accounting technology.  

Luca Pacioli, an Italian mathematician and Franciscan friar, is renowned for his influential work in accounting, particularly through his book Summa de Arithmetica, published in 1494.  

In this comprehensive textbook, Pacioli introduced the concept of double-entry bookkeeping, a groundbreaking method of recording financial transactions that involves debiting and crediting the same amount in two different accounts. This innovation significantly enhanced the accuracy and reliability of financial records, establishing a foundational principle in modern accounting.  

Pacioli's systematic presentation and dissemination of accounting principles within Summa de Arithmetica played a pivotal role in shaping the field and left an enduring legacy in the history of accounting.

Commerce and the rise of the Venetian merchants

Double-entry bookkeeping revolutionized trade and commerce, paving the way for the expansion of Venetian merchants. The adoption of double-entry bookkeeping in Venice, a major trade hub, was instrumental in the city's economic success and the expansion of commerce throughout Europe.

By recording credits and debits for each transaction, merchants could ensure their books were balanced, reducing errors and fraud. This system provided a clear financial picture, fostering trust among trading partners and facilitating the growth of trade networks. It also laid the groundwork for the modern financial accounting practices we see today, playing a crucial role in the development of capitalism.  

From manual to mechanical: Typewriters and adding machines

The evolution from manual to mechanical bookkeeping marks the next significant milestone in the history of financial management. As the industrial revolution unfolded, there was a pivotal shift from manual recording to mechanization.  

This era saw the introduction of mechanical devices such as the adding machine and the typewriter, designed to streamline the bookkeeping process and increase efficiency and accuracy.

As we moved into the electronic age, these mechanical devices evolved into sophisticated electronic systems, including computers and software specifically designed for accounting purposes.  

The digital age: Early accounting software and mainframe computers

The advent of accounting software can be traced to the 1950s and 1960s, when businesses began transitioning to electronic data processing. This era witnessed the development of the first rudimentary accounting software systems, often designed for mainframe computers.

Mainframe computers introduced automation, scalability for growing data volumes, and efficient batch processing. These enhanced the speed and accuracy of financial operations and the ability to consolidate financial data easily.

In the 1970s, accounting software started to become more accessible and user-friendly with the advent of minicomputers and the introduction of systems like the General Ledger (GL) and the financial reporting system, which allowed for more efficient and accurate financial management.

The rise of PC-based accounting software

The 1980s saw the rise of personal computers (PCs), leading to the democratization of accounting software. Companies like Peachtree and QuickBooks emerged during this period, offering user-friendly interfaces and features tailored for small and medium-sized businesses.  

This era marked a departure from mainframes and paved the way for a more decentralized approach to financial management. The introduction of spreadsheet software, notably Microsoft Excel, also played a crucial role in empowering businesses to perform complex financial analyses and reporting.

Up in the clouds: Cloud-based accounting and modern solutions

In the 21st century, accounting software underwent another transformative phase with the advent of cloud computing. Cloud-based accounting and enterprise resource planning (ERP) solutions—such as NetSuite and QuickBooks Online—emerged, offering real-time collaboration, remote accessibility, and enhanced data security.  

However, while accounting technology has evolved, many accountants still work in disparate systems and do many processes manually. Plus, many of the solutions accountants use in their day to day weren’t built with accounting in mind, and they don’t offer the functionality accountants need to streamline processes.

But with the era of cloud computing also comes an opportunity for third parties to provide software integrations for ERP systems like NetSuite or QuickBooks. These integrations fill gaps for a vastly underserved accounting profession by streamlining workflows and automating mundane tasks.  

This is where Netgain comes in.  

The next step in accounting innovation: Netgain helps accountants become strategic advisors to their businesses

Accounting has always evolved alongside major technological advances, and the current era of automation and machine learning is no exception.  

At Netgain, we understand accounting software could do more to streamline processes. We know this because we were founded by Big 4 accountants. We’ve experienced the inefficiencies of today’s processes ourselves, which is why we developed solutions to help usher in the next era of accounting technology.  

Netgain empowers accounting teams to eliminate broken and inefficient operations and regain valuable time with modern technology and automation. The solutions we build are also designed to help businesses of all shapes and sizes become more confident, agile, and capable of rapidly coming to clear financial decisions—fueled by accurate, precise data. Our solutions help bridge the gaps caused by the ongoing accountant shortage.  

And it’s not just the technology that is changing. This is an exciting time for accountants, as our roles are also undergoing a transformation. With Netgain, accounting teams can evolve into strategic economic advisors, thanks to:  

• Increased speed and efficiency achieved by automating manual tasks  
• Robust and reliable reporting that can help drive strategic decisions  
• A single source of truth within NetSuite  
• Ongoing support from a team of accounting experts  
• Accuracy that bolsters confidence in financial outcomes and eliminates second-guessing and errors caused by manual processes

The right accounting software can help your business get the most out of your tech stack. Download our free accounting software evaluation checklist to find out if you’re maximizing the return on investment of your software. Then, learn more about how Netgain can help you streamline accounting processes.