Drones are taking off in the business world: tax professionals are using them to check on assets and auditors to gain a clearer view of business operations
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This article was first published in the February 2018 international edition of Accounting and Business magazine.
Drones may still sound a little like science fiction, but their use is rapidly becoming mainstream. The practical applications of drones are multiplying all the time.
While much of the reporting of drone technology has focused on how retailers may use it to deliver parcels, such applications are still at the trial stage. But for accountants, drones are relevant and usable right now. ‘In simple terms, commercial drones actually work in quite a similar way to accountants: they collect data, extract value from this data and give insight,’ explains Elaine Whyte, a drones expert at PwC. ‘The advantage of drones is that they get to hard-to-reach places, scooping up huge volumes of data, over potentially a wider area, in very short periods of time. To extract the maximum value of this data, we are seeing machine learning and artificial intelligence then being applied. The result is sharper business decisions, ranging from cost reduction in maintenance cycles, risk management with capital investments, and identification of revenue opportunities.
‘For accountants, drones can provide a more accurate and more complete picture of business operations at a point in time or over an extended period,’ says Whyte. ‘This could include stock takes over large areas or measuring the progress of an infrastructure project for investors. This insight gained can highlight areas for improvement, for example weak internal controls, or give confidence that progress is being delivered on an investment.’
Magdalena Czernicka, a manager at PwC’s drone-powered solutions global division, based in Poland, adds: ‘Data gathered by unmanned aerial vehicles (UAVs, or drones) can be applied for due diligence purposes to minimise the risk of fraud or concealment of the actual state of assets. UAVs are currently used by tax offices in countries all around the world – Spain, Indonesia, Hungary, Argentina, Nepal, China – to inspect tax returns or catch smugglers. It is worth mentioning that data capture from drones can be used as evidence in litigation, as well as to properly value assets during insurance processes.’
Those tax inspections are often looking to determine whether property owners have correctly valued their homes for the purposes of property taxation. In some jurisdictions, taxes can go up if a swimming pool is built – but owners do not always declare them. Drones are a simple way for tax inspectors to check the truth. In Buenos Aires, tax inspectors have used drones to identify 100 swimming pools and 200 luxury mansions that had not been properly declared, resulting in a significant increase in local tax collection.
A PwC study reports that UAVs have the potential to radically reshape much of modern commerce. It values the emerging global market for commercial drone applications at US$127bn. PwC predicts that the largest commercial application for drone technology will be in infrastructure, with an estimated global market value of US$45.2bn.
Research by Deloitte has found that investment rates in the drone sector are increasing exponentially, with venture capital financing of software-based drone startups exceeding US$335m in 2016, which was double the level of 2015.
Deloitte’s EMEA Maximo Centre of Excellence supports clients in 28 countries using the IBM Maximo asset management system. Its director, Nigel Sylvester, says that while drone technology itself is mature, what is new is its integration with other technologies, such as automation, cloud computing, cognitive learning and the internet of things. This technological integration has taken drone application a long way in a short period of time.
A very big driver is health and safety. Asset inspections in many environments, such as oil and gas pipelines and rooftop inspections, carry health and safety risk. ‘Drones remove the need for manual inspections to be undertaken in these environments,’ Sylvester explains.
This not only directly cuts clients’ costs, but also improves the quality of their asset management and so positively impacts their bottom line.
Deloitte points out that enhanced software is also extending the ways in which drones can be relied on. Software can interpret data provided by drones better; it can, for example, recognise cars and people, count individual plants in a field, and identify metal corrosion of infrastructure. The need for human participation in the analysis of drone-provided information is reducing.
Drones have also become commonly used for safety risk assessments at construction sites and to inspect the condition of pipelines in regions where it can be difficult or expensive to undertake a physical check. The technology can also be useful for asset valuations – eg, in due diligence exercises and in the preparation of legal proceedings.
A PwC-supported construction project achieved savings of US$2.94m in claims settlement litigation because of the quality of the drone-provided evidence.
But PwC’s Whyte believes that drones – which are essentially robots – will be assisting, not replacing, accountants in doing their jobs.
Deloitte meanwhile has warned companies deploying drones to ensure they take adequate cybersecurity steps to protect their data and systems. It is also essential to recognise that the use of drones is usually regulated by the national civil aviation authority, with pilots typically required to be trained and registered. Even with this strict regulation, though, it seems inevitable that accountants will find that drone technology is an increasingly important part of their professional life.
Paul Gosling, journalist
CPD technical article
"Software can interpret data provided by drones better; it can recognise cars and people, and count individual plants in a field"