Digital transformation is no longer a faraway, visionary concept; it’s happening before our very eyes. The question is: how will it affect the future of accounting? To help accounting firms, we explore the three core pillars and suggest where you can make a start.
What is digital transformation?
Before we go on, it’s a good idea to define exactly what digital transformation means on both a broad level, as well as for those in accounting. Digital transformation is the process by which businesses or organisations implement technology to drive positive change.
Some say digital transformation is the world’s fourth industrial revolution, which shows just how far reaching any potential change might be. With a rise that spans industries, it’s clear that digital transformation is more a strategic, even cultural, workplace movement than a set of new digital practices. So, when looking at it through that lens, what does it mean for accounting?
How does digital transformation aid the future of accounting?
The accounting industry is no different. In fact, the rise of accounting technology has been underway for quite some time – at both a firm and legislative level. That’s because the potential for technology and automation in accounting has always been so high. It’s part of a wider ongoing automation project in financial services, of which 42% could be fully automated.
In accounting, much of that is due to its systematic and process-driven model, which has paved the way for digital tools to help make those tasks more efficient. In essence, that’s what digital transformation in accounting is: the arrival and widespread adoption of those tools to help make the entire accounting process more seamless.
Whether it’s onboarding clients, gathering and processing data, or integrating with your core accounting software, digital accounting has streamlined otherwise time-consuming and, at times, mundane processes. For the future of accounting, that surely paints a better picture. But what is driving this transformation?
Driving forces behind the future of accounting
Legislative obligations like HMRC’s Making Tax Digital have forced firms to adopt digital means in order to stay in line with latest compliance updates. While these changes rarely happen over night, they are black and white. And a clear indication of what’s expected from accounting firms moving forward.
Client expectations and needs
There’s no denying that what clients want and expect has grown. This is likely to be part of a more universal shift where, as a society, we expect more from the services we pay for and the products we buy. Our exposure to technology and automation has led to heightened curiosity – can I get more from that? The same goes for clients and their accountants.
Sometimes, the speed at which change happens is uncontrollable. That was the case during Covid-19, which saw years of digital transformation take place in the space of a few months. Businesses pivoted on mass, and adopted new technologies to mitigate fresh challenges and remote ways of working. Of course, this meant accounting firms had to change, too.
It was also a period where clients looked to their accountants more than ever for financial support and expert advice. Now, as we work our way through a recession, it’s more than likely that same level of dependence will return.
The future of accounting – digital transformation’s three pillars
Digital transformation presents a huge opportunity for accounting firms. But we know that it can seem like a huge leap of faith into unknown territory; the word “transformation” alone suggests it’s a long-term commitment. To help ease those concerns and simplify your digital transition, we’ve broken the process down into three core areas (pillars). That means you can address each area, step by step.
Pillar 1: Digitisation
What’s the problem with paper?
While many clients have already moved to digital data collection and processing, there are still those who send shoe-boxes and files of receipts manually. The issue with this approach is receipts get lost: thrown away, stuck behind car-seats or covered in coffee. So, as well as the hours you spend chasing clients for paperwork, there’s a strong possibility that what they send is missing much of what you need to complete the work.
Once you’ve navigated the paperchase, there’s then the ordeal of manually entering that data. It’s mundane, to put it lightly. But it can also be stressful if you receive that data late, with a deadline approaching. At this stage, mistakes are costly.
The perks of paperless
These days there are a number of automation tools, designed to digitise the entire process when it comes to collecting and processing client paperwork. Data extraction tools, like Dext Prepare, allow clients to submit all the information they need at the click of a button. All they have to do is snap a photo of a receipt, and technology takes care of the rest by extracting the key data.
In this new world of digital accounting, there is little room for paper. While these types of technology were once labelled “challengers”, they are now standard practice. This is because the government has laid out a clear plan – that puts them at the very centre. For some, that makes these tools a no-brainer.
Pillar 2: Automation
Automation is rapidly transforming the accounting industry. Some might even say it’s the main needle mover for digital transformation. The big thing about automation is the impact it has on workflows. Just like its ability to remove paper-related issues, accountants can introduce automation at all stages of the workflow, creating a more fluid end-to-end process with fewer time-consuming tasks.
Another area where automation can help to improve your workflow is around quality control. After gathering your client’s data, the work doesn’t stop there. At this point, accuracy is king. If you’re working with incorrect numbers, you risk undermining the service you provide – whether that’s compliance or advisory.
Automation allows you to apply automatic checks that cross-reference client data and check it for errors. This not only adds another layer of accuracy to your review process, but it also saves you having to work through that data looking for errors yourself. The time you’d normally spend on this type of work is halved.
Pillar 3: Management
The third and final pillar for digital transformation in accounting is management. In this instance, management is two-fold: how best to manage your technology, and how you can harness it to better your management. Let’s take a look at those now.
Managing your accounting technology
The first point of call when managing accounting technology is sourcing and implementation. Before selecting any software, it’s crucial to define your requirements, such as the type of transactions you need to track, the level of automation you need, and your budget. By understanding your own needs, you can make more informed decisions about which software to choose.
It’s also essential that your technology connects with your existing systems, such as your CRM or inventory management software. This helps to streamline the overall workflows and reduces the risk of any bumps along the way.
Above all, effective tech management comes down to a regular review process. Your service will evolve as client demands change, and that means your technology should follow suit. There’s no harm in updating your tech stack to accommodate a change in approach at your firm, and the same applies when training your team. To get the most out of your accounting technology, you must remain on top of things.
Automation can also help accountants improve how they collaborate and communicate, both with clients and internally. Whether you’re looking to onboard a client, assess staff workloads or monitor your client’s bookkeeping activity, it can all be done far more efficiently with the help of technology.
Much of this type of management accounting depends on having readily-available data that gives managers the ability to see a workflow from both a macro and micro level. For such a complex workflow like accounting – and all the sub processes along the way – accounting automation is the key.
What is the future of accounting?
While the future is digital, we hope it’s clear that people, not technology, drive any form of transformation. And it’s people that digital transformation is all about. New accounting technology is here to assist accountants, not replace.
That’s sometimes hard to remember when everyone talks about technology and ‘reinventing the way you work’ – but it’s true. To help make it a little less overwhelming, we suggest breaking it down into core areas, like the three pillars above. When you get those right, that ‘big transformation’ feels less daunting and well within your reach.
If you’re looking to fine tune your firm’s digital transformation, we suggest giving one of our latest blogs a read – How to Improve Your Accounting Workflow. You’ll find out what you need to do to take your firm to that next step on its digital journey and embrace automation even further.
Still don’t have a cloud accounting specialist in your team and need help implementing accounting automation in your firm? No problem – here’s a step-by-step guide with tips from experts themselves!