Undoubtedly, 2020 will bring along a lot of uncertainty and changes in terms of how accounting and finance firms work. Bookkeepers and accountants will have to keep a close watch on the trends to prepare for changes in markets, policies, and regulations.
Technology has impacted every industry, from healthcare, energy, manufacturing, mobility, finance, and accounting. At a time when the technological landscape is erupting with innovative advancements, managing accounting is no easy feat. The accountants must undergo the learning process and adapt to the digital age accounting.
Don’t worry as we’re here to guide you through these changes so that you (and your clients) can make the most of them. To find out how you can stay ahead, read on.
Receipt Bank predicts that businesses will reap the rewards of adopting technology in accounting and bookkeeping to free time and drive business growth in 2020.
In this decade alone, the finance industry has changed beyond imagination, with technology and automation taking the reins. Today, the industry comprises of processes enabled by technology, and vice versa: a circuit that’s bringing more processes and individuals together.
Companies don’t have to save old receipts or spend hours arranging invoices. Bookkeepers and accountants don’t worry about data entry. Instead, they are assuming the responsibility of strategic business advisors, doing much more than just balancing the books. They are assisting business-owners throughout the financial ups and downs, filing tax returns and streamlining cash-flow.
Given the disruption in the accounting industry, professionals must understand the trends that will take the center stage and adopt them in the best possible manner for their transformation. Here are the top 4 trends that will shape the finance and accounting industry in 2020:
The continuous growth of AI and machine learning have ushered in the era of automation. The trend will continue in the year ahead as the accountants will be freed from burdensome administrative tasks and spend more time on higher-order tasks.
Using cloud-based accounting software, accountants will be able to automate tasks like data entry, invoice capture, and bank reconciliation. They will get accurate data and reclaim their time back to do valuable business with clients.
A study by Forbes indicates that the year 2020 will be focused on automating manual tasks such as banking, audits, payroll, tax preparation. This is touted to be the biggest disruption in the industry in more than 500 years.
AI will complement accountants and business owners by drastically reducing workload and accounting errors, allowing them to take up advisory roles. It doesn’t come as a surprise that many accounting firms have already integrated AI-based automation capabilities into their processes.
The latest trend in the accounting world is marked by the shift to “the cloud” to save money and improve user experience.
Cloudflare, a leading cloud service provider defines the cloud as, “The servers that can be accessed over the internet, and the databases and software that run on those servers. These servers are situated in data centers across the globe. The companies using cloud computing no longer need to manage servers on their premises or run software applications on their machines.”
The accounting software is hosted on the servers stationed far away. The accountants have to simply provide the data, it is processed there and sent back to them. By switching to the cloud, the companies will be able to cut IT costs and overhead.
For example, not having to maintain and update their servers will save costs for small businesses that couldn’t afford in-house infrastructure. They can now outsource their IT needs conveniently through the cloud.
Besides, the cloud will make allow companies to go global as the employees and clients will be able to access the same applications and files from any location.
Not just this, cloud accounting will add another layer of security, thus, keeping data safe from hacking or getting lost.
More than 50% of all businesses have already shifted to online computing. Accounting Today reports that this will become an $11.8 billion industry in the next 5 years.
Moreover, the accounting training providers are offering courses to prepare accounting professionals in cloud accounting to meet the latest accounting standards.
The accountants and bookkeepers are welcoming cloud technology with open arms. They are no longer confined to catering to local clients but can now get clients from all over the world.
As the Intuit 2020 Report summarises this up-
“Outsourcing financial tasks to lower-cost countries will grow in the coming year. Countries like India and Sri Lanka are attracting global accounting work and several other countries are entering this field. Seeing the potential, the government has specified financial outsourcing as a growing sector.”
Because of growing competition, the accounting firms will have to emphasize client relations and value-added services. Non-accountants, as well as business advisory firms, will utilize the best accounting software and analytical tools to deliver accounting services. These tools are set to make tax preparation and bookkeeping easier and cheaper that will reduce the demand for ineffective accounting services.
The world’s fifth-largest accounting and consultancy network BDO has boosted its global revenues by 10 percent in 2019 to a total of $9.6 billion.
The importance of financial outsourcing has come through loud and clear.
Convenience and profitability are two main reasons behind outsourcing work becoming an increasingly appealing option for accounting firms, especially those servicing clients from across time zones. Outsourcing to finance professionals based in India–who are 12 hours ahead of the US-will help companies effectively manage issues while they sleep.
According to recent research by Accountancy Age and Forrest Brown, 64% of accountants in the UK are expected to outsource in 2020 to stay competitive.
The cloud technology has presented a new way of working. It offers an easy way to transfer information in real-time and provide bookkeeping services at an affordable rate. Cloud accounting eliminates the need to set up and maintain accounting software on the company’s computer. Moreover, it creates accounting jobs by way of collaborative accounting.
Another trend to look out for in 2020 that will revolutionize accounting and auditing professions is block-chain. The decentralized ledger offers a substantially advanced method to manage finances and money transfers.
Till now, financial transfers were being done through a financial organization or a bank serving as the mediator. Blockchain technology removes the need for mediating entity, and thus improves security. This will allow people to make transactions or transfer funds directly.
Although this idea is still in its nascent stage, its adoption will surely begin in 2020. Until then, it is recommended to watch this concept closely.
“The blockchain is an incorruptible digital ledger of economic transactions that can be programmed to record not just financial transactions but virtually everything of value.” – Don & Alex Tapscott, authors Blockchain Revolution (2016).
Merriam-Webster defines blockchain as “A digital database containing records of financial transactions that can be simultaneously used and shared within a large decentralized, publicly accessible network.”
Besides providing the foundation for cryptocurrencies, blockchain can be potentially applied to a range of sectors including agriculture, accountancy, and finance.
Every transaction recorded on the blockchain bears a unique code that is completely unchangeable. This makes it impossible to corrupt or change the transaction, making blockchain the safest ledger in the market.
Information cannot be hidden or deleted, it is stored forever on the blockchain. Once a transaction is recorded, it will remain there. This drastically cuts the costs of maintaining ledgers. Moreover, processes like auditing can be automated using smart contracts.
According to the American Institute of Certified Public Accountants (AICPA)-
“Smart contracts allow the automation of the contracting process and facilitate enforcement and monitoring of contractual promises with minimum human involvement. Automation improves efficiency, reduces settlement times and operational errors.”
Blockchain can improve accounting tasks by cutting down the expenses of managing and reconciling accounts. It provides absolute surety over the history of assets and ownership. The technology can help accountants take cognizance of the responsibilities of their organization and available resources. Besides, it frees up personnel to focus on planning and evaluation, instead of bookkeeping.
It’s doubtful that blockchain will attain maximum utility in 2020. However, the majority of advanced firms will start leveraging it to modify their existing processes, resulting in its widespread application in the coming years.
For companies that are still contemplating the integration of blockchain into their everyday activities, it’s worth examining potential application areas and adopting it sooner.
The four largest accounting firms in the world, nicknamed as Big Four, have already implemented blockchain tech. While EY invested millions of pounds into its Blockchain Analyzer program, Deloitte is providing blockchain-assisted services. KPMG is not far behind as they have just launched their KPMG Origins system in Japan, Australia, and China. Not to mention PWC that is integrating blockchain into their daily services.
Blockchain technology is not restricted to the big players. Smaller, innovative companies are also capitalizing on the technology to offer the most advanced and accessible blockchain accounting software to maintain organization accounts and books, without risking data security.
It was the boom in cryptocurrencies that brought blockchain into the limelight. But its potential in several standardized, professional industries fueled the excitement around it. The automated cloud accounting software market is burgeoning with constant innovation. Therefore, to get ahead, companies need to think about blockchain if they want to gain a competitive advantage.
With smart devices becoming more powerful and faster, their usage has gone up radically of late. People are now used to doing their work on the go. They are accessing information online and using various applications via the internet.
Accounting firms have expected this possibility since long and have worked tirelessly to offer mobile-optimized applications and accounting services.
App integration will prove beneficial for small to medium business owners in managing bookkeeping without delay. Similarly, large businesses will be able to create invoices, maintain expenses and cash flow statements, and monitor sales directly from smart devices tucked in their pockets.
This will be an incredible shift that will add mobility in the cloud accounting.
With a new workflow solution being added every day, more online accounting and bookkeeping apps are available today than ever.
There are 700+ accounting apps, for everything from reporting to invoicing, in the Xero App Store itself. On the other hand, QuickBooks marketplace boasts of more than 500 advisory and accounting apps.
There are hundreds of third-party applications that connect to Xero. Leveraging the power of application programming interface (API), these apps allow seamless sharing of information with Xero, helping companies and their clients resolve workflow issues, from managing processes and people to stocks and much more.
Having the right apps can impact on business tremendously. A company’s tech stack is the ultimate toolkit that helps it grow client fees, strengthen relationships with clients, or grow business with more real-time data.
However, having a lot of apps can be a nuisance rather than convenience. The RingCentral study revealed these startling findings:
This isn’t the only study. Karbon found out that a regular company uses close to 130 apps, showing a 68% rise when compared to the last 4 years. Most of these apps are not even required. According to their findings, 43% of workers feel they have to move between many apps to do basic work.
Companies that work for consumer convenience will emerge as favorites. This will be made possible by app integration. Integrations have remained the focus of the industries in the past many years.
In 2019, open banking legislation unlocked several new domains for development. Indeed, a large majority of accountants and bookkeepers agreed to use specialized software if integration with existing software was easier.
App integration is surfacing as a new trend. Following its integration with VISA, Receipt Bank offers its customers a comprehensive business card which ensures them full autonomy and control over their entire expense management process.
Recently, Xero announced its integration with Pleo to provide smart business cards that will simplify bookkeeping.
It’s important to consider integrations more than simply a way to provide smart cards. For example, Quickbooks has integrated with RUN ADP to create a seamless method of paying workers and keep well-informed about all HR-related tasks.
Simplicity will be the name of the game in 2020. Simple tech stacks will take the stage, kicking out complex systems. The companies need to invest in research at the time of buying to make sure the app adds real value to the company and its clients and integrates easily with their existing systems.
The app trend is looking to do great in 2020. With so many different apps, the companies need to carefully choose which apps will benefit their clients the most and help them to stay ahead.
Using social media will also be a trend to look out for. Many companies such as those involved in e-com business are already using social networking platforms to connect with their target audience. The accounting firms will follow suit, integrating social media to reach out to their clients and meet their needs.
There’s a reasonable reason behind taking this approach. The clients are already using social media, which makes it an ideal meeting place for both parties. The clients will have the opportunity to research about the accounting firm beforehand and decide whether if it is worth hiring.
Likewise, the accounting firm or professional will attract more clients and traffic to their website with a greater online presence. Seeing its potential as a business model, social media integration with the company’s process is likely to grow very quickly in the year 2020.
The accounting industry promises a great future for anyone willing to adopt new skills and technology. This applies to both accounts professionals and finance firms.
AI and automation are set to reduce the manual workload, involving repetitive tasks. However, there won’t be much change at the planning and decision-making level.
Cloud accounting software and online accounting will step up workflow, bringing about improved customer satisfaction.
Blockchain is another budding trend that will take the shape of the most sophisticated technology once developed. There is still some time when this becomes a reality.
And lastly, the booming app and social media integration have empowered accounting firms to employ strategies to attract more business and get the work done faster and better.