Accountants dealing with small businesses are facing a once-in-a-generation challenge thanks to rapidly improving technology and changing demands from SME clients, according to industry experts. The most dramatic estimates suggest that half of small accounting firms could disappear within the next ten years as technology automates typical compliance functions such as bookkeeping and tax returns. It’s time to turn into a firm of the future.
When asked about his predictions for the future of small business accounting, Carl Reader, director of d&t chartered accountants, says the focus will shift from paperwork to genuine added value that accountants can offer through help with cost-cutting, business strategy, decision-making and maximising growth opportunities – many of which can be deduced through intelligent interpretation of accounting data.
“This is a case of reform or die,” says Reader. “Computers do the adding up and organising of numbers, which is not a skill that will be needed in a few years.”
Firm of the Future: Cutting time with software
Given that compliance type work, such as filling in tax returns and other paperwork, account for 90-95% of most accountants’ revenues, accounting software poses a serious challenge. Inevitably, many accountants will go out of business, with mass consolidation within the industry to cut costs and concentrate skills sets within a single office.
“I think that the old compliance type work will soon be offered for free because the technology will make it so easy – it will be a case of using that offering to lure clients in for more skilled services, specifically advice on decision making,” says Reader.
However, Charlie Carne, founder of Charlie Carne & Co chartered accountants, says that while some aspects of new technology have to be embraced, others should be resisted: “It is undoubtedly a great development to have software and cloud computing providing integrated services so that accountants can have instant, real time access to their clients’ books and therefore help them make real-time decisions… That sort of technological advance is fantastic – it means we can play an active role in advising the SME owners all year round.”
However, Carne says that such technology could be abused: “We are hearing that HMRC would like to possibly gain access to SMEs’ underlying books so that they can see every single entry, which seems a very dangerous proposition.
“It is not very different from them asking to have access to every email we send and listen to every phone call – it is very invasive because, at the moment, we take clients’ messy books and turn them into something that makes sense. But if HMRC has access, it can jump to incorrect conclusions based on incorrect book-keeping because SME owners are not great bookkeepers and can make incorrect entries – like classing something as entertainment rather than subsistence. It’s an easy mistake to make, but one is an allowable expense and the other isn’t.”
Carne admits such technology would make catching deliberate defrauders easier, but questions at what cost: “It will certainly make it easier to reclaim the odd £3 on coffees here and there, but it won’t necessarily be fairer because it may penalise SME owners for their bookkeeping prowess, before giving accountants time to make sense of it all. It would be terribly cumbersome and intrusive.”
Firm of the Future: Accountant as educator
Another possibility is that accountants become experts at compiling software packages and teaching SME clients how to use them, recommending add-ons and showing clients how to use the systems and read the data in a way that helps them develop their business, says Reader.
More likely, however, is a shift from being a “number cruncher”, who in previous years spent their time focusing on figures, to a genuine forward-looking business advisor who can boost the client’s bottom line.
“Many SME owners are often so buried in their businesses that they can’t see the wood for the trees,” says Reader. “A fresh pair of eyes, a different perspective and help making the tough decisions may well be exactly what the SME client needs. That is a much more interpersonal role than accountants currently play, so those who adapt best will be those that thrive.”
Carne agrees: “I had a client join just the other day and looking at his accounts, he could have been saved a small fortune with some proactive advice by his old accountant,” he says. “The focus is going to need to shift to more value-added and involved services rather than simply paperwork.”
This change may mean a wholesale shift in the staffing structure of accountancy firms. Where senior practitioners don’t have the time, experience or desire to re-skill to this advisory role, they may need to employ somebody who can. Or, if they explore the IT model where they help advise on accountancy software, it may be that they need IT specialists in the office.
“We are going to end up with numerous models and it’s for each firm to decide which strategy will suit them best,” Reader explains.
“One thing is for sure, however. The way accountants do business today will be regarded as archaic within five to ten years, maybe sooner. So the quicker practitioners see the writing on the wall and adapt, the better.”
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