Top 5 Accounting Trends to Shape The Industry, According to Experts
2020 is not just a new year - it’s a new decade. Here are the top accounting trends set to shape 2020 and beyond, according to our financial fortune-tellers.
In the last decade alone, the industry has evolved beyond recognition. While we still follow Luca Pacioli’s general principles, technology and automation have increasingly started to take the reins.
Nowadays, the industry consists of people empowered by technology, and technology empowered by people: a loop that’s increasingly bringing more and more individuals together. And it’s a pleasure for us to be one of those touchpoints.
Businesses no longer need hoard crinkled receipts in shoeboxes or spend Sunday afternoons typing up invoices. Accountants and bookkeepers no longer need to fuss over data entry–instead, they’re transitioning into the coveted role of strategic business advisors.
Indeed, they remain the unsung heroes, doing far more than merely balancing the books. Time and time again, our research shows that they support business-owners through the financial ups and downs of entrepreneurship: the months of sleeping in the office, sleepless nights over tax returns and worries over cash-flow.
Dext (former Receipt Bank)’s 2020 predictions for the future of accounting and bookkeeping show businesses continuing to reap the rewards of technology to free time and drive business growth. However, getting the people part right is also essential.
1. WELLNESS IN THE WORKPLACE
You could argue that the key to leading a happy life is to be well (both physically and mentally) and to have a purpose. Unsurprisingly, these are also critical components of having a fulfilling career.
We write at a time where millennials and Generation Y make up 38% of the workforce. Numerous pieces of research suggest that people born between 1981 and 2000 strive for purpose over profit and would take a pay cut to work for a business whose values they believe in. Yet, the growing trend towards happier, more fulfilling workplaces isn’t limited to the younger generations. It’s never too late to change our approach to conventional office life.
The accounting and bookkeeping industry is notoriously stressful. According to the ICAEW, 76% accountants say that work has had a negative impact on their lives over the past year and a staggering 31% admit to being stressed on a daily basis.
Such stress is spilling out into other areas. 68% report that work has had a negative effect on a close personal relationship and just under 40% are unable to pursue personal interests due to work commitments. While stress is on the rise across the industry, the cost to businesses–let alone on a human level–totals over 15.4 million working days every year in the UK alone. In the US, an estimated million employees don’t make it into the office because of it.
So what can you do about it?
Put people first. In times of uncertainty, we must connect and care for each other. Over the last decade, the industry has undergone nothing short of a revolution, so how do we manage that change and lay the ground for a happier, more sustainable future?
To start, you can give employees the chance to work from home. According to the AAT, 38% of flexible workers report to feeling happier. 36% get to spend more time with their family, and 35% feel less stressed. Taking a leaf out of Jason Blumer’s guide on going virtual, this shift can be made all the easier with the right tech. You could even go one step further and try out six-hour working days like Will Farnell.
What’s bringing about this change?
Mental health concerns, and how work-related stress can corrode overall mental wellbeing, have substantially come to the fore in recent years. The importance of getting this right has never been higher.
If you want to hold onto your star performers and attract more great people to your business, showing you care about their mental health is one way you can enhance loyalty, improve recruitment and–if nothing else–look forward to coming into the office every day. After all, happy people are more productive.
Fortunately, companies like CABA–a charity dedicated to improving the mental wellbeing of ICAEW members across the country–are doing something to help change the narrative.
2. APP OVERWHELM
Every new day brings with it with a new piece of technology, a sleek workflow feature or solution to unwrap. Or so it might seem.
In 2019, there are more cloud accounting and bookkeeping apps than ever. The Xero marketplace lists over 700 accounting apps, from reporting to bills and expenses, while the QuickBooks App Store has over 500 accounting and advisory apps on its system.
The right apps can have a tremendous impact on your business. Whether growing client fees–as Jonathan Bareham, founder of Raedan, did–strengthening relationships with your clients, or helping them grow their businesses with more real-time data, your tech stack is your ultimate toolkit.
Yet, where do you start? The pace of growth casts a shadow. According to a study by RingCentral:
- 69% of workers waste up to an hour per day switching between apps–this makes up to 32 days per year
- 53% of employees find this incessant switching back and forth more annoying than household chores
- And 52% find it more annoying than paying bills
This study isn’t in isolation. According to Karbon, the average business uses 129 apps (a 68% increase when compared to four years ago). And not all of these apps are welcome–in fact, 43% of employees feel like they need to switch between too many apps just to get basic work done.
So what can you do about it?
Simplicity is the aim of the game.
Companies which make things as easy as possible for their consumers are those which tend to come out on top. Unsurprisingly, integrations are a key part of this.
Integrations have been at the front and centre of the industry for the last few years, with 2019’s open banking legislation unlocking many new areas for development. Indeed, in our recent study with the ICAEW, 75% of UK accountants and bookkeepers said that they would use specialised software if integrating with other pieces of software was easier.
This is something we’ve taken on board. By integrating with VISA, Dext users can have an all-in-one business card which gives them full control and autonomy over their entire expense process.
Likewise, Xero itself has recently announced that it’s integrated with Pleo to offer smart company cards that help simplify your bookkeeping.
But integrations are about so much more than just business cards. For example, QuickBooks’ integration with RUN ADP provides a seamless way of paying employees, staying on top of all your HR-related tasks, and more.
In 2020, we predict that less will be more. Simple tech stacks are in; complex systems are out. That means investing in research at the buying stage to ensure the app a) brings real value to you and your clients, and b) integrates with your existing technology.
3. GLOBALISATION
The advent of cloud technology has opened borders for accountants and bookkeepers. No longer restricted to serving businesses in your local village or town, you can now win clients from across the world.
The Intuit 2020 Report (released back in 2011) summed this up succinctly:
“Financial outsourcing to lower-cost countries will continue to grow. India, for example, already attracts global accounting work and other countries are moving into this field. In Sri Lanka, the average accountant earns $5,900 per year, well above the average wage. Seeing opportunity, the government has targeted accounting outsourcing as a growth industry.
Consulting and business advisory firms, as well as other non-accountants, will take advantage of new software and analytical tools to provide new accounting-related services. These tools will also make bookkeeping and tax preparation cheaper and easier, reducing demand for lower-value accounting services.”
And on the flipside, you can also lose them; as competition grows, we must put a higher premium on client relationships and value-adding services.
So what can you do about it?
The value of outsourcing is clear for all to see. As an example, industry big-hitter BDO has recently revealed that their ‘Business services & outsourcing’ department accounts for 15.4% of their yearly revenue–which equates to a mammoth $1,478,400,000.
Profitability and convenience are two major reasons why outsourcing work is an increasingly attractive option for many accounting firms–particularly if servicing clients across time zones. Jessica Pillow, for instance, employs a bookkeeping team in New Zealand to provide close to 24/7 service for her clients.
You can also adopt a ‘follow the sun’ approach. For instance, outsourcing to teams based in India–who are five and a half hours ahead of the UK and 12 hours ahead of the US–means your firm can effectively handle issues while you sleep.
In fact, recent research by Accountancy Age and Forrest Brown has found that 64% of UK accountants are looking to outsource in 2020 in order to stay competitive.
What’s bringing about this change?
In short, cloud technology. Just as we look to other regions for inspiration and new ways of working, technology like Dext offers an easy way to send information in close to real time and offer bookkeeping services at a competitive rate.
4. DIGITAL TRANSFORMATION V2 – BLOCKCHAIN
According to Merriam-Webster, blockchain is “a digital database containing information (such as records of financial transactions) that can be simultaneously used and shared within a large decentralised, publicly accessible network”.
Blockchain provides the infrastructure behind cryptocurrencies, as well as demonstrating a range of potential applications in other areas such as agriculture, finance, and accountancy.
The unique code that makes up any one transaction’s record on the blockchain is completely unchangeable. This makes it the most secure ledger on the market.
Data cannot be deleted or hidden. Blockchain keeps the records forever, meaning that once a transaction is on there, you can be safe in the knowledge that it’s not going anywhere.
What’s more, blockchain drastically reduces the costs associated with maintaining ledgers, whilst you can also use smart contracts to automate entire functions (like the audit process).
The ICAEW sums it up as follows:
“Blockchain has the potential to enhance the accounting profession by reducing the costs of maintaining and reconciling ledgers, and providing absolute certainty over the ownership and history of assets. Blockchain could help accountants gain clarity over the available resources and obligations of their organisations, and also free up resources to concentrate on planning and valuation, rather than recordkeeping.”
So what can you do about it?
It’s unlikely that blockchain will reach peak utility in 2020–in fact, only the most innovative of firms will be leveraging it to transform their existing processes. However, its widespread use is just around the corner.
Whilst your firm might be a fair way away from integrating blockchain into your day-to-day activities, it’s worth monitoring potential use-cases going forward and trying to be an early adopter.
The Big Four are unsurprisingly already on the case.
Earlier this year, EY announced a multimillion-pound investment into their Blockchain Analyzer product. Deloitte are also offering blockchain-enabled services, even saying that with the technology, “Anything is imaginable.'' KPMG have just rolled out their KPMG Origins product in Australia, Japan, and China, whilst PWC are integrating blockchain technology into their everyday services.
But don’t worry–it’s not exclusive to the big fish. Smaller, disruptor-like companies are also leading the charge; for instance, California-based Sara Technologies boasts of offering “the most accessible and most efficient blockchain accounting software to manage your organization accounts and ledgers, without the risk of data tampering”.
What’s bringing about this change?
The rise in cryptocurrencies initially thrust blockchain into the spotlight. Since then, however, its growing applicability in a number of regulated, professional industries has only furthered the buzz surrounding it.
The accountancy software market is becoming increasingly crowded, with constant innovation the new normal. Therefore, in order to get ahead, don’t be surprised if the biggest tech vendors–and the biggest firms–start to look to blockchain as a way of gaining a competitive advantage.
5. THE NEW DEMOCRACY–THE RISE OF SPECIALIST FIRMS
Technology is levelling the playing field. All firms–from the smallest to the largest–have access to the same tools (budget constraints permitting). This, combined with the growing economic trend of innovative, disruptor-like companies, is leading to the rise of small specialist firms.
Accountants are SMBs’ most-trusted advisors. Your clients are looking to work with a firm that understands their journey, knows the industry inside-out, matches their entrepreneurial, experimental attitude, and can speak their language.
To quote Xero, “Each business has different markets, clients, ideas and ways of doing business. They use different terminology – and they think differently.”
So what can you do about it?
Consider niche-ifying your firm. Do you have a great deal of expertise in any particular areas? What interests you? What type of businesses do you enjoy working with?
Adopting your own set niche can:
- Set you apart from the competition
- Help prospects find you
- Give you expert status, as you specialise in industries
And the proof is in the pudding. Phool Ashraf, Founder of Gains Accountants, says that finding a niche has had a truly transformative effect on her firm’s growth.
Phool built her firm’s tech stack around the unique set of demands and challenges in the restaurant industry–covering everything from the electronic point of sale (EPS) and stock management to payroll and timesheets. This made her clients’ lives drastically easier, and gave Phool a competitive advantage in the process.
What’s bringing about this change?
Smaller specialist firms no longer have to compete with the much-lauded ‘Big Four’ (or other industry behemoths, for that matter).
Instead, by being more agile, more specialised, and potentially providing greater levels of client service, there’s been a sharp rise in small firms. According to Insureon, 22.5% of all current US accounting firms have fewer than nine employees.
With the same technological tools at their disposal but armed with greater industry-specific knowledge, small firms are able to successfully compete with their larger counterparts–a trend which we predict will continue well past 2020.
The New Twenties is set to bring both challenges and opportunities in abundance, as the industry challenges what it means to be a modern accountant, bookkeeper or indeed small business owner.
With these five accounting trends, here’s to making the new decade one of promise, profit and partnership, simplicity and seamlessness.
Are you ready?
