Due to the rapid development of new applications and technologies, the accounting industry is at the forefront of digital disruption. Here are 8 technology trends that will shape the accounting industry as it integrates these new models into its systems.
The summer of 2016/17 will be when the accounting industry makes its move across to the cloud en mass. Now is an opportune time for the modern accountant to update their practice and lead by example, look at utilising the cloud, and it’s capabilities to streamline their activities and create value for clients. There is a strong need to focus on the combination of new platforms and the expectations of clients to create the professional practice of the future.
Small to medium enterprises (SMEs) have great faith in their accountant’s capability in the cloud, according to the 2014 Wolters Kluwer study Can the accounting profession ‘keep up’ with clients and the cloud? SMEs gave a resounding answer: Yes, accountants remain role models.
Many SMEs were found to be collaborating with their accountant, moving taxation compliance and reporting into the cloud. At the same time, they were also taking advantage of new cloud-based business solutions and the automation benefits, that both would bring.
According to Capterra, nearly four out of ten accounting software users are already in the cloud. Having real-time information in the cloud allows access from anywhere for staff, and this significantly increases the ease of access on the road as well as making it possible for accountants to make more timely and accurate decisions. With information accessible off-site it also allows practices to consider better sourcing options for their accountants and bookkeepers.
Cloud can be used to transform service delivery in everyday operations, which means many firms can now meet some of the key challenges they have encountered with cloud computing. It allows accounting practices to react faster and with more flexibility to deliver results to their clients.
A study by CCH showed that 62% of accountants believe the biggest benefit of using a Cloud-based system is that it can be accessed from multiple locations. Other key benefits include that they don’t need to worry about maintenance (32%) or purchasing hardware or accounting software (32%).
The study also showed that 60% of accountants who are not currently using a Cloud-based system consider it likely they will adopt one in the next 2-3 years. Additionally, half (51%) of accountants who are now using a Cloud-based system believe that they are likely to increase their use of Cloud-based accounting software in the next 2-3 years.
Due to their function and design purpose, Cloud-based solutions are capable of supporting the growth of practices end-users as well as transaction volume and flexibility. Practice managers with some cloud programs can also benefit by paying only for the functions they use and when they need it through more flexible vendors.
Interestingly, more than half (53%) of SME owners / managers would consider looking for a new accountant if their current accountant was reluctant to investigate and embrace a Cloud-based accounting software. This is higher amongst SME owners / managers aged 18 to 34 (72%), showing that those SME owners who had begun their professional career utilising online solutions expected the same of their accountants.
The Cloud clears a lot of borders when it comes to working with third-parties, working with banks and clients in a smoother fashion as well as allowing access for clients on the go. Connectedness and transparency are important to allow accountants to engage better with their clients.
A lot of data that can be used to inform future business decisions is already there in a firm’s database, in the form of the many tax returns. With the development of cloud accounting, there is predictive intelligence software that can analyse this information, building the way for accounting companies of all sizes to deliver high-quality advisory advice.
Wolters Kluwer advertises the advantages of new technologies such as using a predictive intelligence tool to recognise actionable information from hundreds of macroeconomic and legislative events that take place every year – such as changes to tax laws – using ‘client match’ technology to search an accounting firm’s database to match the event with impacted customers.
As cyber security threats continue to become more commonplace, it’s important to ensure that vital data will remain safe from attacks. According to a recent CPA Trendlines Research, 22 percent of firms said they delivered client tax returns by email, despite the broadly known risks to client privacy. Industry analysts have also identified some security risks tied to the unauthorised or unregulated use of third-party file-sharing tools, such as Dropbox, Google Drive and OneDrive.
For SME owners (64%) and accountants (69%) alike, the most important security factor when considering making the transition to Cloud computing is the high level of online security of their data. To defend against this, some cloud providers are offering their own file-sharing solutions that meet compliance standards continuously updating their security measures and developing solutions to meet the rapidly evolving cybersecurity threats.
Financial data is subject to strict controls by larger banking institutions, in the same way, accounting practices need to implement the same barriers to restrict access to sensitive data or information. Online administration and security controls allow for staff and clients alike to be allowed or restricted from data on the same platform, giving managers an important method of control. Cloud technology also provides backup functionality to prevent the possibility of data loss.
Winning new business
Finding new clients isn’t an easy process, according to Morten Brogger CEO of Huddle, a typical bid now consumes more than $25,000 of otherwise billable time. Finding efficiencies in the process has become essential as the more bids can be pursued and the more clients can be serviced. The research showed that the single fastest way to improving efficiency in the bid process would be enhanced document management and information sharing. This means the bidding process to an online platform to streamline its processes are therefore vital to winning more work.
The days of formal business meetings are gradually giving way to making connections through social media and online platforms such as LinkedIn. Professional relationships can be started and nurtured through these online platforms to take advantage of yours and other’s online presence. Without taking the benefits of these technology platforms through which businesses can grow their business they may install a self-imposed ceiling, limiting their opportunities.
Through online platforms professional accounting firms can identify and target new opportunities, sharing their knowledge and value proposition with potential clients. It will empower accountants to be able to call prospects and have appreciable conversations that shift the paradigm from compliance based on historical decisions to proactive business advice.
An important part of integrating technology into the workplace is sharing knowledge across the business. Industry insight, experience, and understanding of clients are all things that can’t be easily replicated by the competition.
In the context of an increasingly global economy, even small companies need to operate across multiple locations, and this can lead to the isolation of knowledge. Having the ability to share this knowledge across a firm for problem-solving and efficiency purposes is a significant advantage. Having a computer system that supports a firm and their sharing of all communications is vital to its health.
The continued development of artificial intelligence means that computer systems are going to be able to automate a lot of business processes already in place. This will be able to make processes more transparent to uncover inefficiencies and create measurable ROIs. More complicated work which requires a lot of ‘number crunching’ to inform a final business decision will be able to be processed by a computer to produce an accurate report.
The underlying role of cloud-based accounting is to enable an easier, streamlined process while maintaining the human aspect. The aim is to automate entries and bank reconciliation resulting in increased productivity and more cost-effective work.
All the data that is generated through accounting processes are undergoing automation which will eliminate human error to a degree, in particular, double-entry issues. Manually entering data is soon to be an antiquated process. A recent report by McKinsey & Company finds that up to 45 percent of activities individuals are paid to do can now be automated, just by adapting technology that already exists.
In the industry, firms are going to spend less time capturing and inputting this data manually. It’s all going to happen through computer systems that will optimise the process. Streamlined processes will also allow access to real-time data which in turn complements an accountant’s’ ability to make quicker quality assessments with greater accuracy.
Optical character recognition (OCR)
OCR is the electronic conversion of images of typed, handwritten or printed text into machine-encoded text, whether from a scanned document or a photo of a document. It will be the technology that finally stops the hand-entered receipt.
Handwritten receipts will be processed by OCR technology whose primary function is a cost-saving solution. A simple example of human-augmenting technology that will upload the receipts right into an online accounting software reading all of the relevant text and data as it does so.
According to Data Capture for Accounts Payable, as it applies to OCR-based automation, respondents to the survey cited “lower processing costs” (58%), “quicker approval of invoices” (55%), “increased employee productivity” (50%), “fewer lost invoices” (35%) and “improved visibility over liabilities” (27%) as key benefits of adoption.
Eliminating data-paper cycles
The payment processes industry is gigantic, the number of people moving money online through personal computers or their mobile phones has increased exponentially since the introduction of mobile banking. For a long time, transactions went through a data-paper-data-paper cycle e.g. invoice entered into system – printed and mailed to client – client entered in their system – check printed and mailed – check data entered into the system, etc.
The advances in accounting software mean tracking and sharing financial data is simpler and easier than before. This will help to eliminate the data-paper cycle, not only to reduce the amount of paper waste but also optimising the process. Eventually, the system will become automated so that the software itself will do the entire process.
Microsoft Windows 7 is and will continue to be the dominant desktop system for this year with many firms expected to adopt Windows 10 once industry early adopters have confirmed that it is compatible with accounting software used by firms. Practice productivity is optimised when all personnel are using the same system applications.
The 2016 CPAFMA Survey found that 75% of respondents were currently standardised on Windows 7, but roughly 35% said they planned on transitioning to Windows 10 by the end of 2016 (or had already done so for the majority of their computers before tax season started). 23% stated they would wait until 2017 or 2018, and 41% were waiting to confirm compatibility or had no plans to do so.
With these technological advances, overall productivity will certainly improve in organisations. In an increasingly digital world there are opportunities to spend more time focusing on revenue-generating activities, and according to the AICPA, anyone who wants to become a CPA must keep up with emerging technologies.
These reasons among others are why businesses are switching to cloud-based technologies. Not only does it offer a great user experience, but it will also enable accountants to evolve with the changing nature of the industry and take their services far beyond compliance for their increasingly tech-savvy client base.