A technological revolution has been happening in the accountancy industry over the last few years, with the mantra being cloud accounting. Recent research by practice consultancy Foulger Underwood Kato - and as reported in the AccountancyAge - found that more and more accountancy practices are looking to set up a single platform to collaborate with their clients, instead of running a range of platforms and systems based on their clients’ legacy accounting systems.
The research, of 300 managing partners, found that cloud accounting is accelerating the commoditisation of basic accountancy services and pushing accountants to move toward an on-going advisory business model.
In many ways technology such as the cloud and smart devices have forced this change. Foulger Underwood Kato consultant, Phil Shohet acknowledges that as the use of technology increases, businesses will seek more than compliance support from their accountants.
Cloud accounting - threat or opportunity for accountants?
It seems difficult to believe but according to surveys undertaken by IT Faculty and International Data Corporation (IDC) in 2011, between 3%-11% accounting practices used cloud accounting. According to the same reports this market is expected to grow to 50% by 2016.
We have been unable to find accurate figures which indicate whether this is on track or not but if information from AVN’s Cloud Conference from 2014 is to be believed more and more accountants were intending to use the cloud in the next 12 months.
So is it a threat or an opportunity?
We believe cloud accounting represents both a threat and opportunity as our profession depends on information. A threat because accountants and bookkeepers will need to adapt to the change in order for their role to survive. And an opportunity because it enhances the efficiency of administrative processes and allows accountants to move from being an accountant to becoming a business advisor. For small practices that cater to SME clients this means exploiting the new possibility created by automation to focus on business advice, thereby achieving a longer, closer relationship with clients.
According to Jonathan Muller, co-owner of GMR accountants in Southport – as quoted in AccountingWeb, online access to a client’s accounts has not only made it easier for him to keep track of their finances in real-time, but also allowed him to collaborate more closely with them and play more of an advisory role.
The key here is to focus on differentiating services from competitors and on adding more value.
With technology making basic accounts preparation and bookkeeping easier for businesses, ICAEW President, Arthur Baily - in ICAEW’s Tomorrow’s Practice initiative launched earlier this year and excerpts from which were published in our blog on “How outsourcing has become a strategic partnership for accountancy firms” - has called for smaller practices to react to changes in the marketplace and provide the added value clients are demanding.
The Do-it-yourself (DIY) era
DIY accounting systems and proprietary tax software programs can trace their ancestry to products of the PC era of the mid-1990’s. These systems took control of accounting away from accountants and also took a big bite of tax preparation business. Many practices that did not believe they needed computers found themselves with a dwindling client list.
If accountants don’t adapt to the technological changes happening in the post-PC era the prospects for a brighter future will keep getting dimmer. Fortunately, cloud technologies like Xero, QBO, Freeagent and Clearbooks – to name a few – have created billions of pounds worth of new opportunities for accountants. There is already a more business strategic role for accountancy professionals who are taking a broader technology remit. Many accountants are already educating businesses on the costs and risks of technology-driven trends, data and process controls, and identifying which processes work better on the cloud.
Cloud accounting has become a revolution of sorts as it has the potential to transform the accountancy industry like never before. There are challenges but also big opportunities for practices that exploit it correctly. But unless accountants act fast, adapt and change they will not only miss the opportunity that awaits them, they might see the growth potential of their practice shrink even further.
It’s time to introduce a better business model, a model which once again puts the accountant right at the centre of client accounting.