The digital age is rapidly transforming how Canadian businesses operate. We’ve seen business units completely transformed by digital… We’ve also seen entire industries made completely irrelevant by it.
For small business owners, digital transformation has created a huge opportunity to compete with—and outperform—larger organizations. Gartner’s Scott Galloway put it best when he said, “the future doesn’t belong to the big—it belongs to the fast.”
One area of business that has seen the most disruption in recent times is accounting. New trends have emerged to reshape our approach to accounting entirely. Let’s examine some of these trends impacting businesses in Canada today and into the future.
1. Open banking and Fintech
The open banking initiative is an EU directive that forces leading banks to share their data securely with authorised organisations.
Open banking creates more transparency and removes friction from everyday financial activities. It also encourages more competition in the banking industry and more innovation in fintech. QuickBooks, Xero, and other accounting applications have already introduced new banking features such as open bank APIs and statement auto-import, allowing customers to manage all transactions from their accounting application. Alternatively, businesses can share access with bookkeeping service providers to manage their accounting on their behalf.
The initiative is expanding globally—in Canada an advisory committee has already been established so we can expect to see a lot more about this soon. Open Banking will help increase productivity in Canadian businesses since many workflows that are manual today can become automated—from payables and receivables processing, to reconciliations and audit preparation.
2. Cloud Accounting and Automation
Cloud accounting is probably the biggest driver of digital transformation in small business accounting. A recent report by Accounting Today predicted the global market for accounting software to reach $11.8B by 2026.
The adoption of cloud-based software applications has made it possible to integrate previously separate systems and—more importantly—the data they contain. Managers are leveraging this data in aggregate to surface insights, make better decisions, and drive higher operational efficiencies.
These new technologies are making the automation of tedious, manual tasks possible. The automation of repetitive tasks like invoice generation, reporting, payment reminders, and so on frees up time for employees to work on high-value, less mundane tasks. It’s predicted that more complex accounting tasks like tax preparation, payroll, auditing, and even sales forecasting will be fully automated by as early as 2020.
However, automation is not a magic bullet. For all the opportunities it creates, come the associated challenges—process changes, application fatigue, training, managing staff expectations, and so on. It’s wise to work with a trusted partner to get you set up—or better yet, let them manage it all for you so you can stay focused on growing your business.
3. Cash Flow Management
Over 98 percent of all Canadian businesses have fewer than 100 employees. Suffice to say, small business is driving the Canadian economy.
These businesses live or die by having enough cash in the bank. Despite this, up to 89 percent of Canadian businesses are experiencing late payment by their customers and nearly half of all invoices are paid after the due date. It’s no wonder that only half of new businesses in Canada (51 percent) survive their fifth year of operation.
The good news is when businesses work with an accounting advisor, that number jumps to 85 percent. Expert advisors can help businesses implement new cash flow management technologies and maintain accurate cash flow forecasts. This way, businesses can better plan for the long-term, make investments to develop their business, or employ staff to support growth.
4. Payroll and the Gig Economy
Canada is one of the markets where the gig economy, driven by millennials valuing better work-life balance, is growing at lightning speed. According to Randstad Canada, 20-30 percent of the Canadian workforce is made up of non-traditional workers today (i.e. contingent workers, freelancers, independent contractors, and consultants). Another survey completed by Intuit predicts that 40 percent of workers will be independent contractors by 2020. That trend is set to continue with 85 percent of companies surveyed expecting to move to an agile workforce model over the next few years.
For small businesses, this means fewer permanent employees and more contractors. This will affect how you approach payroll and introduce complexity for payroll and accounting teams.
5. Back Office Outsourcing
For Canadian businesses, outsourcing back office functions like accounting, bookkeeping, payroll, and tax preparation services help owners avoid distractions and focus on their core competency—running their business.
Outsourcing can also help cut down on costs, reduce the risk of errors, and provide immediate access to a team of experts to help work through any issues that arise.
One particular benefit to working with accounting experts is the power to unlock insights from your data. A good accounting partner can work with you to create custom analytics dashboards that are tailored to your specific business needs so you can support your strategic planning with reliable data.
At Enkel, we help small business owners to streamline their back office processes through cloud-based technology and our professional team of accountants and bookkeepers. Whether your company is located in Vancouver, Edmonton, Calgary, or Toronto, we’ve got your bookkeeping needs covered! Contact us today to learn more.
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