5 Top Emerging Trends in Accounting and How to Prepare for the Change?
We are in the middle of a sustained boom in the growth of the accounting industry.
As disruption is becoming the norm, the emergence of new technologies provides not only challenges, but also opportunities for the accounting industry.
Some common drivers of disruption are the emergence of new innovative businesses, higher expectations of customers and escalating business costs due to inefficiency and manual processes in accounting.
With the emphasis on innovation, it is important for accountants to understand emerging trends in the accounting industry to prepare well for the potential disruption that lies ahead.
What are the 5 top emerging trends in the accounting industry today?
Accounting Trend #1: The Quantum Jump in Cloud Accounting
It is estimated that 90% of small and medium enterprises will be using cloud accounting software by the end of 2017.
Cloud technology has been growing rapidly in the recent past, and has been widely adopted by many industries, including accounting.
Why the adoption of cloud technology?
In cloud technology, applications run on servers.
So, using cloud accounting will enable businesses to access their accounting (or any other) data online, whenever and wherever the info is required.
Apart from convenience, businesses find cloud computing software cheap and extremely user-friendly.
As the demand for connectivity and strong customer service increases, more businesses of different sizes are starting to switch to cloud accounting software like Quickbooks and Xero.
Accounting Trend #2: Increase in Automation and Processes
Another major trend in the disruption of accounting is the rapid adoption of automation and the disappearance of manual processes.
With the advent of automation, electronic documents and state of the art software solutions, many companies are now able to eliminate manual data entry processes.
Ultimately, this will translate into a faster processing time, more timely data, less human error and significant cost reductions for the company.
Accounting Trend #3: Rapid Rise of Data Analytics
The development of data analytics means that more valuable insights can be derived from existing data in businesses.
Traditionally, we rely on accounting data from balance sheets and financial statements to understand the financial health and performance of companies.
With an intelligent application of data analytics, management now can potentially have even deeper and greater insights about the businesses.
For example, analytical tools now can help identify and analyse underlying risks, understand business trends, perform scenario testing, etc.
And with the advancement of machine learning and artificial intelligence, we can be certain that the quality and value of insights will only improve over time.
So, will machines and technology make the role of an accountant obsolete in future?
Yes and no.
In future, technology will probably take away the manual data-entry processes done by accounting clerks.
And in place, accountants will be expected to deliver more for their clients by collaborating with machines and technology to provide more fruitful insights about the business through data analytics.
Accounting Trend #4: The Unbundling of Accounting Software and Rise of Apps
Many cloud accounting software today allows accountants to build tailor-made packages to suit the needs of the clients.
For instance, Xero offers the option of more than 500 add-ons to the suite of its products, meaning that there is a solution for virtually every problem.
No longer will you need to depend on accounting packages which offer complete solutions to financial management. Instead, if you only need some features, you can create personalised solutions by adding on different applications to generate custom made solutions to suit your requirements.
Moreover, the shift to the cloud has resulted in an increase in emphasis on the automation of workflow and the improvement in software automatically turns your numbers into data, handles your bookkeeping and provides you with the kind of data that you need in real-time.
Accounting Trend #5: Transforming Accountants into Consultants
Other than changes in software and technology, we are also seeing changes in traditional practices like billing.
Traditionally, you might be used to billing on a fixed hourly basis. But today, we are seeing more practitioners switching to a new model – ‘value-pricing model’ to charge their clients.
In value pricing, the maximum amount that a client has to pay for a project is agreed up-front between the client and consultant.
What this means is that clients get price-certainty up-front. At the same time, it rewards the accountant if he is efficient in his work.
This change also means that accountants are rewarded not just for the number of hours they clock, but also the productivity and real value that they can bring to their clients.
The Biggest Challenge of Accounting in Future
There is little doubt that these emerging trends point towards an increase trend of outsourcing of accounting work, as businesses would like to devote more time and attention to their core business processes.
I foresee the biggest challenge for accountants is can accountants move on from performing current manual processes to providing more value-added services for their clients.
Only accountants who are able to step up to the role of a consultant will be the ones who will succeed and not be made obsolete by disruption in the accounting industry.