Following on from our discussion on The Future of Bookkeeping is a topic that can often be hotly contested - what does the future of accounting look like?
Accounting and bookkeeping are closely related professions with many interlacing facets. The majority of accountants do bookkeeping and the majority of bookkeepers also do some accounting work.
Is accounting dead?
Thanks to the cloud and new advances in technology, consulting, business advisory firms and even business owners are beginning to use new software and analytical tools to provide accounting services, limiting the need for traditional accountants.
These new technological advances make bookkeeping, tax preparation and similar duties simpler and a lot cheaper, reducing demand for lower-value accounting services. Many of these services, including data entry are becoming less profitable and in time are exceedingly likely to disappear due to automation, the cloud and outsourcing. Accounting practices that rely on charging substantial amounts for desktop software are also predominantly at risk.
Accounting in the cloud
Only a few years ago bookkeepers and accountants would need to spend up big to provide the best possible financial suite to service their clients. The new cloud platform, providing professional finance and accounting tools to anyone with a meagre $70 a month or so has completely wiped out that old business model. These technological advances will continue at an accelerated pace over the next decade, providing even more innovative applications, combined with better analytical tools, larger data sets and mobile computing to drastically transform the industry.
Check out our Periodic Table of Accounting elements here.
These new technologies will not only change the way the books are kept and financial information is stored but will create an entirely new business environment, allowing greater flexibility to professionals with when and where the work is done. With the development of real-time information and automation, being onsite will become significantly less important and will greatly reduce the time needed for data validation.
Due to these advances, accountants are now able to take on more clients than ever and provide services globally. According to Sarah Engle, the owner of Black River Tax Prep, “Technology has expanded the traditional boundaries associated with the profession.
Mobile devices and cloud computing, for instance, allow small and mid-size accounting firms to broaden their reach to clients worldwide.” Accountants and their clients benefit greatly from shared access to real-time information in the cloud and these advances in online computing are bringing better solutions to tired business models, reshaping the profession rather than removing it.
Accounting fraud has become an algorithm game
Further changes to the industry are coming straight from the U.S. Securities and Exchange Commission (SEC) with the new Accounting Quality Model (AQM). Cleverly dubbed RoboCop the AQM, in addition to statements made by the SEC Chairman, Mary Jo White, proved a renewed interest and intolerance for violations of financial reporting regulations.
This crackdown is making it more important than ever for corporate filers to fully understand SEC strategies, particularly the AQM in order to reduce the likelihood of their firm being the subject of an erroneous SEC audit.
“RoboCop” works by producing a score for each filing, assessing the chances of fraudulent activities and will analyse whether a company stands out in terms of accruals (non-cash entries that can be altered by management).
Other questionable activities include off-balance sheet transactions, frequent auditor changes and delays in earning announcements. Mr Lewis (naturally enough RoboCop’s crime fighting partner, also named Lewis), a former finance professor and SEC’s Chief Economist stated “When firms are choosing accounting treatments that are unusual, that’s something we would like to highlight [for SEC examiners].”
Furthermore the SEC has delivered a plan that requires U.S. companies to provide financial statements to the International Financial Reporting Standards (IFRS) by 2015, consequently requiring accountants to develop a substantially greater understanding of the Generally Accepted Accounting Principles (GAAP) and IFRS reporting standards.
As these and other changes to legal and regulatory requirements take effect, there is a great need for accountants to assist with compliance measures. Even in Australia these overseas actions change the way we handle business as accountants, bookkeepers and clients themselves expand their customer base internationally.
The future of accounting
While many believe that the cloud and other advances in technology are costing bookkeepers and accountants their jobs, a huge part of the driving force in the adoption of online finance suites has been the vast support received by accountants.
In particular, financial gurus representing small and micro businesses have taken it as an excellent opportunity to reshape and expand their service and value, offering clients a greater range of services, assisting businesses to become more competitive.
While the adaptable race ahead, the ‘dinosaurs’ of the accounting world are being left behind with the introduction of cloud-based and mobile computing and the rejection of desktop software and back room servers. Modern firms are undergoing full practice conversions, taking on major cloud activity.
While the shift towards cloud computing takes place, so too does the shift towards untraditional means of employment with freelancers and contractors, significantly altering how businesses are run, creating new and unexplored opportunities for accountants. Due to technological changes and the need for a greater understanding of legal compliance and regulatory requirements, clients will drastically favour accounting specialists over generalists.
This push towards specialisation will lead to collaboration among bookkeepers, accountants and firms worldwide. These professionals will possess new roles as advisors, consultants and compliance specialists, providing strategic advice to clients through the use of automated data capture and advanced analytical tools.
In an article written by Xero UK’s Managing Director, Gary Turner, looking at the impact of current and future advances in online accounting for business owners and chartered accountants, Turner states “There’s no turning back the clock. Rather than charging by the hour, tomorrow’s accountants must become small business advisors who charge based on the value they deliver.”
The successful accountants of the future will be strong communicators, possess greater IT skills combined with strategic vision and they will be devoted to ongoing professional development. Globalisation is the future of accounting as more and more businesses require real-time manufacturing and information, mobile marketing and online tools, including the cloud, to expand their customer base internationally. Thus accounting and finance professionals with knowledge of international standards and regulations will thrive.
As the former president of the Association of Chartered Certified Accountants (ACCA), John Brockwell said, “The professionals who will add the greatest value are those whose minds are open, who can interpret, understand and communicate the meaning of numbers, who thrive on challenges, who relish the opportunities for lifelong learning and who embrace change.”
It’s never too late or too early to change careers!
Guy Pearson says “welcome to accounting 2.0! Data is now connected from the source to the ledger via cloud-based applications. The days of the ‘shoebox’ and ‘real time advice’ being just a failed promise are now over.”
Ready to be inspired by more in Accounting career advice? For more information about Accounting, take a look at 20 Pieces of Advice from 5 Leading Accounting Recruiters.