The introduction of making tax digital has caused a broader shift towards adoption of cloud technology. This acceleration has been reflected in Xero's customer base, with 51% growth in UK subscribers*. As the UK becomes more tech literate, so must the accounting industry, comments Glen Foster, Director of Accounting Partners UK & EMEA at Xero
Accounting is undergoing one of the most rapid evolutions the industry has ever experienced, driven by new tech and business culture. As a result, the role of the accountant has been changing and it’s never been so important for them to act as key advisors to their clients.
It all starts in the cloud
There are a number of ways that technology has already transformed the industry. These changes are only going to amplify over the next decade as the latest advances transform accountants’ routines and skill sets.
Increased productivity is strongly associated with tech adoption for good reason. It has been proven time and time again that those who embrace the latest advances at their disposal will stand out from the crowd. At Xero we’ve often discussed the productivity puzzle, which is a problem we are passionate about solving. While a number of contributing factors make up this complex barrier to growth, delays to getting on board with accelerators like the cloud simply add to the problem.
Many firms have already embraced the cloud and we can expect it to spread further across the whole industry. Free from manual, repetitive tasks using paper or spreadsheets, accountants will work more collaboratively with clients in the cloud. New offerings, like Xero Tax, will provide a much needed cloud powered update to software that’s been around for twenty years, allowing accountants to collate and file clients’ company statutory accounts and corporation tax directly with Companies House and HMRC.
In fact, the accountancy firms that have already freed themselves up by embracing the cloud are seeing tangible benefits to their business. Xero’s 2018 Benchmarking Report found that practices with 6-35 online clients achieve an average revenue contribution of £65,000, while firms with between 100-299 achieved an average of£115,000.
Accountancy powered by AI
The prospect of AI and robots taking over and making accountancy jobs redundant has been a worry for probably as long as the technology has been around. But in reality, only 5% of the jobs that exist today consist of activities that are fully automatable, according to our Business Rewired report. Increased automation will actually create a range of new jobs and opportunities.
The more technology provides, the more human connection and softer skills will matter. Even when presented with the best tech, it’s the human insights that accountants provide that are going to make the biggest difference. Our Benchmarking report found that practices providing advisory services earn considerably more revenue per client than firms purely offering compliance (£6,990 vs £4,200).
Investment in 5G and the rollout of ubiquitous high speed internet access will enable a global internet population to seamlessly communicate and interact with one another. In the future, accounting firms will be able to service customers from anywhere in the world, which will force them to become even more competitive.
The changing 9-5
Working habits like the gig economy will continue to challenge the concept of a ‘job for life’, or simply having just one job at a time. 60% of small business owners already believe that the ‘job for life’ is dead according to our recent Business Rewired report. Accounting practices will have to incorporate the habit of learning new skills to retain their competitiveness and navigate this new way of doing business.
The industry will have to think of other services they can offer to clients by using their expertise and cash flow insights to provide more strategic thinking. It is worth noting how this will change the needs of clients, who will also be impacted by the gig economy and perhaps will need more advice on things like payroll budgeting.
The way that accountants communicate with clients is also set to change. According to our Business Rewired report, over the next five years our reliance on email will decrease. Over a third (37%) of small businesses already use WhatsApp as part of their business communications, and tools like Zoom, Google Hangouts and Slack are increasingly on the rise. This means that clients will likely expect the way they interact with their accountant to change.
Technology has already transformed the accounting industry, but this is just the beginning. The sooner that firms get on board with the opportunities it brings, the more opportunities they will create for themselves in the future.
*Based on customer growth between Nov 2018 and Nov 2019