Automation. Artificial Intelligence. Advanced analytics and cloud-based software.
Is this the future of accounting?
These concepts are the future of accounting. Indeed, these fields are touching countless industries, including accounting and payroll services. The future of accounting can only be discussed by addressing these broad trends. As a business or non-profit leader who cares deeply about your organization's finances and fiscal well-being, your charge is not just to be aware of these trends. You must also know how to position your business best to get the most out of changing technological tools, improve your business, and better fulfill your mission.
Increasing Automation - Transforming Traditional Accounting Roles
Automation is familiar to the accounting field, and the role of an accountant has changed every year. Indeed, tools like calculators, computers, and other technological advances have influenced it for centuries. However, what has changed is the speed at which automation is occurring. Automation can now take on more roles than ever, including:
- A full takeover of manually entering and categorizing data and other transactions.
- Increased use of this data to perform analytics and generate reports.
- Ensuring that a business or non-profit performs within necessary legal and regulatory compliance.
However, that is not to say there is no longer a human role in accounting. Indeed, quite the opposite is true: Accountants now need to better understand and interpret data, particularly when drawing high-level conclusions about data generated. Furthermore, accountants need access to the latest cloud-based technology that will allow them to use the data available to make insights, record transactions, manage tax payments, and ensure that the business in question is performing at maximum financial efficiency.
Continued Rise of Data Analytics & Artificial Intelligence
The startling advances in Artificial Intelligence have created technological tools that are more accessible and customizable than ever before. Businesses no longer need to take their accounting needs and figure out how to jam them into pre-existing programs. Instead, increased access to world-class technology has ensured that all businesses - regardless of size - can access highly impactful Artificial Intelligence and data analytics.
The rise in Artificial Intelligence means that businesses can:
- Automatically handle repetitive or manual tasks, allowing your accounting team members to stick to data interpretation rather than data entry.
- Generate customized reports based on text queries, allowing for more accurate and customizable information displays.
- Automatically handle invoice processing and accounts receivable, then alert humans if and when problems (like late payments) occur.
Using AI and data analytics ensures you get the most out of modern technology to give you the most up-to-date and effective information. All this means you can get even more out of available technology.
Cloud-based Accounting Software
Paper-based accounting died years ago, but the days of computer-based accounting continue to evolve. Siloed information is long gone - cloud-based accounting is here to stay.
When used properly, cloud-based accounting software can provide secure online access to any member of your team, thus guaranteeing that your employees always have access to the transactions and reports they need. At the same time, it allows for more customizable outsourcing options: Your business no longer needs to rely on purchasing a one-size-fits-all model but only needs to purchase the functions it needs to operate. You can also easily control and customize who has access to what data, protecting confidentiality and ensuring employees can access any financial record or report they need.
Better Trained Accountants Are Necessary
In the words of Mark Twain, "The reports of my death are greatly exaggerated." The accounting field isn't dying, and the accountant's role remains needed. However, the role of an accountant is changing.
These technological trends mean that traditional accounting is taking a very different role. Accountants no longer only need to know math skills and how to ensure that their clients are operating their finances within the bounds of the law. After all, computer programs and AI can now handle that. Instead, accountants need to learn how to:
- Interpret data generated by reports.
- Make recommendations based on this data that show where improvements can be made.
- How to manage any ethical, sustainability, or ESG considerations from data they generate.
- Where to use advanced data analytics and Artificial Intelligence to improve an organization.
Five Emerging Trends in the World of Accounting
Outsourced Accounting
I hear from businesses every day that they want to focus on what they do best and outsource the rest. If you are not an accountant, or accounting is not core to your business, why would you want to manage this function? Business owners increasingly realize that their time is better spent focusing on building a better product or service than dealing with accounting. Keeping focused on your core business should allow you to simplify your business and reduce your office overhead. SMB owners should realize that the opportunity cost of their own time is too great to invest in accounting when someone can do it more efficiently and produce more useful and timely output.
Improved Technology
Huge strides are being made on the technology front that enables accountants to minimize their time on data entry. In addition, sending a shoebox full of receipts to your accountant, which would create hours of painful work (believe me), is being mitigated by the availability of tools like receipt management software and online invoicing that can be sent directly to your accountant or bookkeeper from your vendors. Today's accountant should be helping you figure out how to streamline the process to minimize your involvement in gathering information.
Value-based Pricing
Value-based pricing provides business owners with certainty on fees and prevents surprises. In addition, value-based pricing forces accountants to be efficient and focused on the issues that matter to customers. Technology has made accounting work more efficient and easier to predict, making value-based pricing possible. When launching Enkel, we tried to keep our pricing entirely value-based. While some clients initially experience a bit of a shock at a recurring monthly fee, once they consider the benefits of knowing what they will pay, they quickly see the benefit.
Demographic Shifts
Millennials are shaking up the accounting industry, questioning historical hierarchical firm models. Increasingly, niche firms are popping up. We saw this in the SRED (Scientific Research and Experimental Development) space and practices focusing on specific industries. We also see accountants trying to stick to their core, and increasingly, accountants are getting away from offering bookkeeping services. All of this occurs while large firms continue to expand their footprint by acquiring smaller firms (remember MNP LLP’s acquisition of KNV Chartered Accountants LLP?). It is unclear what the industry will look like in 10 years, but there is a good chance that your current firm will get acquired, and you might be working with multiple service providers instead of a one-stop shop.
Valuable, Real-Time Data
Business owners can now get more timely financial reporting as long as their books are kept current. In addition, cloud-based accounting systems offer better quality reporting than their non-cloud-based counterparts. In a time when small businesses are feeling intense competitive pressure, the need for more robust, up-to-date reporting is greater than ever. Realizing this, accountants focus more closely on providing clients with useful and timely reporting so that SMB owners can improve their businesses. If there is financial information that you have always wanted from your business, there is a good chance that your accountant can now pull it for you, and it will be even more valuable if your bookkeeping is up to date.
Though the accounting industry is changing, this should benefit SMBs through simplified, transparent pricing and better-quality information. There are more alternatives than ever before, so if you want to make a change, you will have more options.
Trends Impacting Canadian Businesses
1. Open banking and Fintech
The open banking initiative is an EU directive that forces leading banks to share their data securely with authorized organizations.
Open banking creates more transparency and removes friction from everyday financial activities. It also encourages more competition in the banking industry and 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 more about open banking soon. Open banking will help increase productivity in Canadian businesses since many manual workflows 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. Automating repetitive tasks like invoice generation, reporting, payment reminders, and so on frees up time for employees to work on high-value, less mundane tasks. More complex accounting tasks like tax preparation, payroll, auditing, and even sales forecasting will be fully automated by the mid 2020's.
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, etc. 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 it to say that 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 payments 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 comprises 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 will 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 costs, reduce the risk of errors, and provide immediate access to a team of experts to help work through any issues that arise.
One 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 tailored to your specific business needs so you can support your strategic planning with reliable data.
Cloud-based accounting systems
Several cloud-based accounting systems have emerged in recent years. To name a few, QuickBooks Online, Xero, and Freshbooks are all cloud-based accounting systems.
Cloud-based accounting systems allow many parties access to the same file, each using a unique login. The client, the bookkeeper, and the CPA can all access the same information in real-time, which streamlines the accounting process considerably. Since they are web-based applications, these systems can be accessed from anywhere.
Cloud-based accounting systems also offer superior security to their desktop counterparts. Desktop accounting will create problems if a computer hosting the system is damaged or stolen.
Cloud-based accounting systems offer the level of sophistication needed for a variety of different users. While simple and easy for the smallest businesses, they allow users to enter complex accounting entries as required.
Functionality
Many cloud-based accounting systems allow bank statements to be pulled in as transactions occur and make recommended account classifications based on historical transactions. The process is highly efficient and can save significant time.
In addition, other functionality can be obtained through apps compatible with the accounting system.
If you have cash collection issues, you can plug Invoice Sherpa into your cloud-based system to automate the customer follow-up process. Invoice Sherpa will send automated reminder emails to your customers before the invoice due date and will follow up if payment is not received for an outstanding invoice by the due date. Messages can be customized to suit your business needs.
If you need a robust tool for expense reimbursements, Expensify also integrates seamlessly with many cloud-based systems. In their words, Expensify has created “expense reports that don’t suck!”
With Expensify, reporting expenses for employees is simplified through optical character recognition that reads receipt images and extracts text from the image to reduce the amount of information to be entered manually. The expense reports are imported into the accounting system and posted with a simple click.
The list goes on and on. There is now great technology available to address a variety of business needs that had to be addressed through laborious processes. It all fits together very well through a cloud-based accounting system.
Adoption
Cloud-based accounting is here to stay. Its adoption has been widespread around the globe. Seven-year-old New Zealand-based Xero, for instance, has an estimated 600,000 active users and a market capitalization of $USD 2.2 billion.
Xero is an entirely cloud-based accounting platform designed for small businesses. Having used Xero, it is clear that the system was designed to provide a far superior user experience to traditional desktop accounting systems.
QuickBooks Online is another platform that is growing very quickly and gaining widespread adoption in the United States.
In the next five years, cloud-based accounting systems will likely dominate. Intuit focuses much of its development efforts on QuickBooks online, rather than QuickBooks desktop.
Should you switch?
The benefits of cloud-based accounting systems are obvious. In most cases, converting from a desktop platform to a cloud-based system is quite simple. Why not get ahead of the curve and start gaining efficiency today?
Let Us Help!
Working with Enkel gives you access to our team of bookkeeping experts who will help you implement a refreshed, more efficient bookkeeping system to help streamline the process. We even have a full-time technology solutions analyst on staff to further support the implementation process. Contact us today to learn more about our partial and full-cycle bookkeeping services for small businesses in Vancouver, Calgary, Edmonton and Toronto!
How We Select and Evaluate Our Recommended Software
We thoroughly research and test the apps we include in our regular workflow for Client bookkeeping services. After deciding on criteria for evaluating the software and then researching the app itself, we tested the app, noting its strengths and weaknesses. We then work with the app for at least a few weeks before deciding whether to recommend it to our readers. We use the software as it was designed for its intended tasks. For a detailed walk-through of how we select and evaluate software, please see the details of our process.
Enkel receives no consideration or compensation from software publishers for featuring their software in our blog articles.
Partner with Enkel
The accounting field is rapidly changing, but some commonalities remain. Chief among them: All businesses - regardless of size or mission - need the latest technology to stay on top of these rapidly changing fields. Small and medium-sized businesses and non-profits may benefit by outsourcing these functions, allowing accounting experts to handle these challenges. At Enkel, our mission is simple: We're here to disrupt accounting by ensuring all businesses have access to world-class technology, cloud-based account services, and all the financial tools they need to succeed. Want to learn more? Contact us today, and let's work together to improve your finances and make your business more effective.
