The rise of cloud-based applications and data analytics services is dramatically transforming the accounting industry's processes.
Like many other sectors, accounting firms experience continuous modernisation over the years, tracked by the advancement of technology. The growing availability of powerful cloud and big data solutions is encouraging firms to accommodate and explore the inevitable demands - and benefits - of industry change in greater numbers.
Accountants deal with business-critical data on a daily basis: payrolls, taxes, operational expenditure and much more. In the midst of the $1.3 trillion being spent on digital transformation this year, many firms have embraced the latest tech trends to better analyse and report on financial data - and influence the decision-making process.
We discuss the 5 biggest technology trends redefining the accounting sector in 2018, to provide clarity on how and why cloud and data analytics tools are enhancing agility and keeping accountants more competitive than ever.
1. Cloud computing
A rising number of accounting firms are engaging cloud services like Amazon Web Services and Microsoft Azure to achieve better business outcomes and leverage new revenue opportunities - which is proving to be fruitful.
A recent study published by Xero found most cloud-first accounting firms have seen a 15% increase in Year-over-Year (YoY) revenue growth, compared to traditional firms who only saw 4%. The leading online accounting platform even expected a 40% increase in their own revenue this year, attributing it to the "scalable nature of the cloud."
A 2018 report from Viga (commissioned by Sage) surveyed over 3,000 accountants globally and found over 67% of respondents believe cloud computing makes their job easier through improved collaboration with clients and better services. Around 53% of the same cohort have officially adopted a cloud-based management solution this year, which Sage declared a clear indication that the cloud revolution has finally been embraced by the industry:
“Adopting cloud technology drives a different culture in a business and unlocks new opportunities. Initially people think the ways of working, and workflow, are all separate. But it’s intrinsically tied together. And I don’t think this was what accountants anticipated.” - Jennifer Warawa, Sage EVP of Partners
Similar numbers of cloud adoption were also reported in other major accounting studies like Accounting Today 2018 “Year Ahead” Survey: The report indicated 45% of small companies, 57% of midsize businesses and 58% of large enterprises now use cloud accounting for the business value it offers over other traditional processes.
While financial services as a whole are still in the midst of transitioning to the cloud en masse, it's clear overall adoption rates and the leveraging of the cloud's many operational benefits is definitely on the rise.
2. Business intelligence
Cloud-based business intelligence (BI) is touted as the most critical component of cloud services for the financial industry in 2018, as per this year's cloud BI report by Dresner. In addition, 63% of accountants say they are now actively using analytics and data to find new opportunities to fund business growth, according to Dun & Bradstreet.
The rise of simplified yet powerful BI tools like Amazon QuickSight and Microsoft Power BI has allowed accountants to consolidate client data into centralised dashboards and create digestible visualisations that provide the most important information at a glance, which is helping their customers improve performance and make confident decisions. Some use cases include KPI dashboards or company forecasts using predictive analytics.
Firms can produce deeper insights and provide more accurate advice for customers. For example, Power BI's Q&A feature uses natural language, which can now answer specific questions like "who is the biggest debtor?" and generate useful data visualisations for clients more efficiently than using spreadsheets.
BI adoption in accounting also has a lot to do with evolving opportunities in the space. Having the expertise to better organise client data allows firms to extend their services beyond compliance (budgeting, strategy and performance monitoring) and find new value streams. For many, these tools have helped them step into advisory positions.
In summary, cloud-based BI tools are empowering accountants to provide better insight for clients, strengthen relationships with customers and keep agile in a constantly evolving digital workplace.
3. Artificial Intelligence and machine learning
Many businesses are still in the early stages of investing in data analytics solutions which use artificial intelligence (AI). However, several accounting firms have already begun to demonstrate the usefulness of AI capabilities by deploying machine learning (ML) in their Software as a Service (SaaS) tools tailored around accounting processes.
Major online accounting apps like QuickBooks Online are actively using ML algorithms to better categorise and organise financial transactions, and use predictive analytics to improve its performance over time. Using AI in these new ways have proven to significantly reduce the need for both accountants and their clients to perform repetitive tasks while managing their finances.
A recent Sage report on the accounting industry revealed 49% of 3,000 respondents strongly believe in using machine learning and AI automation to improve productivity and speed up work processes. A surprising 66% said are investing in AI this year to handle all data entry, number crunching and task management tasks.
Elsewhere in the industry, we're already seeing AI changing processes like automated report creation, while ML is being used to predict which nominal codes should be used when assigning incoming bank statement entries, examine seasonality data to help practice management, and predict client cash flows based on previous behaviours.
The accounting sector's growing use of ML and its impact on the industry this year is interesting because of past belief that AI would replace the accountant's role. Instead, increased use of AI is proving to allow accountants to focus on providing better business decisions instead of spending time on manual analysis and repetitive tasks.
4. Internet of Things (IoT)
For several years, the accounting sector has been one of the top 10 industries investing in sensors and Internet of Things (IoT) solutions. While we're not quite as close to having more than one or two present-day use cases in the industry, there's plenty of ways IoT is expected to impact accounting, including:
- Customer service: CPAs will gain new opportunities in data advisory services, as clients will need them to help set up accounting and recording systems which is expected to incorporate and consolidate big data received from IoT networks as the technology becomes more widespread in use.
- Dashboards with live data: With actuators and sensors connected to an IoT network, our data will be provided to us in real-time, consolidated into smart dashboards. Accountants are evolving alongside these automation tools to provide clients better insights and handy visualisations into their daily costs.
- Pricing: With IoT sensors monitoring devices and tracking usage in real-time and more accurately than ever before, how we consume products and services is expected to shift more towards a pay-for-what-you-use structure - which will naturally demand new accounting models.
- Real-time cost analysis: The deeper insights IoT makes possible will enable accountants to analyse client data on a more accurate level and provide better, real-time advice on profitability for better decisions.
The fastest growing influence of IoT technology in the accounting sector is through its use in SaaS applications backed by cloud computing services. Without any need for software patching or infrastructure management and with IoT networks providing information in real-time, accounting firms have lowered overall IT costs and reinvested it in improving their internal analytic capabilities.
Why following these trends is important
Technology like the cloud and BI gives you greater access to information that improve business capabilities, stay competitive and proactive with evolving customer expectations and helps you provide deeper insight to clients.
In the end, powerful technology on its own - like the many trends the accounting sector is currently embracing in larger numbers than ever before - won't automatically improve your relationship with clients or produce better business outcomes. It's up to you to examine the opportunities and values these trends offer and determine the best way to implement them in your day-to-day operations, whether in-house or with the help of outside expertise.