The accounting industry has been heavily impacted by technology over the last decade. The future of this sector will continue to be shaped by new technologies that continue to evolve. Although accounting software solutions are already mainstream, there are imminent technologies such as artificial intelligence and machine learning that will continue to shape the future of accounting in magnificent ways. So, what is the future of accounting software, and how can business owners prepare themselves for the disruption?
The Future of Accounting Software
The accounting profession has moved far beyond simple bookkeeping and payroll to data insights and report generation. Just like procurement, accounting is taking an increasingly strategic role for any forward-thinking business. Technologies such as cloud-based data management, advanced data analytics, and process automation are actually poised to further elevate accounting professionals in new and empowering ways. So, here is what you should expect with future accounting software:
1. Full Automation as the New Norm
Automation has proven to be highly beneficial in improving processes and efficiencies in many industries. In the coming years, accounting software will become more automated regarding many financial functions, including payroll and accounting. Automation and artificial intelligence (AI) will enable accounting professionals to access a greater variety of data from a larger number of sources to improve their services and identify growth opportunities. Currently, there is no substitute for the human mind to be able to understand complex data and make meaningful business decisions based on that data.
Fortunately, many of the routine financial processes can be automated. In fact, 77% of general accounting tasks can be fully automated, 11% are fully automated, and 12% are somewhat automated. Some of the financial accounting processes that can be fully automated include:
- Complex data entries
- Reconciliations of multiple accounts and accounts that are not linked to one another
- Calculating and applying allocations.
In the financial and business services industry, almost half of finance and accounting professionals feel that their processes are partly automated. Experts observed that organizations with many transactions and that serve lots of clients like banks and utilities tend to automate their processes.
Business leaders and finance professionals are also looking at incorporating automation into their activities. Statistics indicate that 71% of CIOs anticipate that their service delivery models will improve because of automation activities. Similarly, 21% of finance professionals are exploring automation to allow them to spend more time being strategic partners and value managers.
Some organizations are already investing in core functional tools, such as cloud-based accounting solutions and automation tools. Around a third of finance and accounting professionals have predicted that automation will impact them at least in the next three to five years. Some people think that the impact of automation will be felt in three to five years; another third (27.9%) think that it will be felt immediately.
2. Quick Growth of Cloud Accounting Software
Globally, accounting software is expected to be worth $11.8 billion by 2026. Cloud-based software-as-a-service applications are exploding in popularity and providing significant benefits that are difficult to match. It’s likely that within a few years, cloud accounting software, and the market for accounting applications based on it, will become the norm in the accounting world.
Centralizing data management can dramatically reduce waste and lower costs, thanks to better technology that can help organizations communicate and collaborate. Standardization and a well-defined data environment allow easier access to and analysis of data. As big data is gathered and analyzed, data transparency improves as silos are eliminated. Moreover, data quality will increase rather than fall with growing data volumes.
Automating repetitive tasks such as data entry and arranging records helps reduce costs and improves efficiency by eliminating human error. It allows human accountants to perform direct reporting on their clients’ financial statements and frees them to work on tasks that require them to be creative, collaborative, and ingenious — something that AI cannot, as yet, reliably provide.
Embracing cloud technology will mean that accountants and other financial advisors will better handle repetitive manual processes through automation. Because of the abundance of data available to businesses, they will be able to identify the potential for growth in those areas. For many, the industry’s future will depend on turning big data into actionable insights that differentiate a business from the rest of the market.
3. Leveraging Accounting Data for Insights
Investing in a robust data infrastructure increases the ability of companies to implement advanced technologies. Some businesses are already implementing some of these technologies in their facilities. Data visualization and analytics are important for making sound decisions. The good news is that organizations are increasingly using these technologies in the workplace. In fact, 39.7% of finance professionals plan to implement data analytics as well as visualization solutions. Meanwhile, 10.1% say that they are already implementing these technologies.
There is already a huge shift in the way accountants provide clients services because of the advanced technology they use. 53.4% of finance and accounting professionals said that their work in finance has changed from being largely transactional to being largely analytical over the last 18 months. They felt that this shift would continue to grow in the coming years.
With the shift from transactional to analytical processing in finance, accountants will need to learn new skills. When asked which of their team members they should improve, 61.7% of finance and accounting professionals cited being able to think critically and solve problems. Those with strong technology skills came in second at 40.4%, while those who use data analytics came in fourth at 27.3%.
4. Relevant, Strategic, and Creative Accounting Professionals
The skill set and the job description for future accountants will greatly expand while still adhering to the core competencies that certify accountants of the profession. With the help of advanced technology and an environment that encourages teams to work collaboratively, accounting teams will soon include both dedicated accounting professionals and subject matter experts from other business units.
Accountants of the future may also act as advisors to business intelligence and purchasing leaders and work with them to create a strategic sourcing plan. They will be able to utilize data management tools, including augmented reality, to help C-suite executives make better decisions based on value — not just return on investment.
With more advanced skills and technical knowledge, accountants can work with teams in other business units, providing key insights, helping refine budgets, or ensuring that compliance is maintained. It’s possible that organizations will use strategic outsourcing to fill gaps in their team’s tech capabilities or to secure the training and tools necessary to enable them to build new capabilities within their own team.
As an industry, accounting will become less about becoming a certified professional by earning a series of certifications; it will become more about acquiring skills that grow over time to be able to adapt to a complex, ever-changing business environment.
The rise of automation and other data-driven technologies is poised to free accountants, not constrain them. Organizations that recognize the potential and importance of these technologies — and invest in the tools and training necessary to help their accountants benefit from them — will be ahead of the curve. Tomorrow’s accountants will also be more creative and strategic in their roles within their companies. They will have more efficiency in their accounting processes and get more useful insights — helping them to be more resilient, agile, and competitive.
5. Decline in Accounting Software Costs
The pandemic has increased client expectations beyond traditional services to include a more diverse service menu. Today, businesses are looking for more than basic accounting and bookkeeping advice. They are seeking assistance with tax, government, and payroll issues. They seek guidance on how to comply with emergency laws, get government assistance, and calculate sick leave and employee benefits.
But to meet these needs, some accountants have decided to move away from traditional service models and embrace technology. Many accountants believe that prioritizing technology will help them provide better service to their clients because they can do their work more efficiently. In addition, new technology will enable accountants to provide better customer service to clients.
But regardless, the pandemic has affected the buying decisions of businesses for accounting software. Almost half of the technology buyers say that they would spend the same amount on accounting software as they did for technology purchases in previous years. Only about 18% expect to spend more money on technology, while 15% expect to spend less money. Recent accounting software trends reveal that 21% of companies plan to reduce spending on finance and accounting software over the next few years. In the next fiscal year, finance and accounting will be among the top 10 areas where technology buyers plan to reduce spending.
6. Accounting Software Integration with ERP
Using accounting software is not a new trend for many businesses. In fact, using accounting software is already common in many industries. In 2020, the market for accounting software was estimated to be worth $12.01 billion. It is also predicted that the market will reach $19.59 billion by 2026, while the market for ERP systems will reach $19.59 billion by 2026.
But there are some emerging accounting software trends, such as switching to an ERP system. ERP systems allow companies to integrate their accounting and financial data with other critical aspects of their business, such as order processing and production management. When companies use an ERP, all important information is stored in one central application and accessible across various channels.
Companies can benefit immensely by combining all their accounting and financial information into an ERP system. It also saves companies money from having to train their employees on different systems, and by not having to search through various applications to find information, employees will not have to waste time searching for information.
ERP integration with accounting software also improves the ability of teams to work together because they know that all information is true. Information that can be used to analyze and report on various business areas is available to leaders to help them make smart decisions. While ERP accounting software provides numerous benefits, it also has its flaws. It is also important to understand the hidden costs that come with using accounting software alongside ERP.
7. AI for Accounting
Accounting and IT leaders believe that artificial intelligence is shaping the industry’s future. Currently, 20% of CFOs are investing in and adopting AI technology, while another 20% said they plan to adopt AI technology within the next 12 months. Many CIOs believe that the recent pandemics have accelerated the digital transformation process and adoption of emerging technologies such as artificial intelligence, machine learning, blockchain, and automation.
There are already some AI implementations that demonstrate that this technology is not limited to the distant future. In fact, 24% of the technological innovations that will be implemented in the coming years are related to artificial intelligence or machine learning. In comparison, 5% of these projects will be done on a large scale. The COVID-19 pandemic helped accelerate the adoption of AI, with data showing an increase of 11% in AI and machine learning technologies between the year before and the year that the pandemic occurred.
Because AI relies heavily on data, organizations must have high-quality data to have accurate business intelligence that will enable them to compete effectively. Organizations must also have the correct applications, analytics, business processes, and cloud solutions in place. Leaders in the digital economy are more likely than others to know how to use data effectively.
8. Emphasis on Data Security
Accountants often handle sensitive customer information related to their finances, taxes, and payroll. In such a case, the information can be targeted by cybercriminals. Being the target of a huge data breach can damage a company’s reputation and cause it to have a hard time doing its work. It can even lead to a lawsuit being filed against them. It is worth noting that the global virus epidemic heightened the cyber-attacking efforts of malicious actors. We are seeing an increase in the frequency of malware and spear phishing attacks (83%) and distributed denial of service attacks (21%) due to the pandemic.
These incidents have led software consumers to become more concerned about security issues, and senior leaders must be aware of these concerns. In a recent survey, 47% of CIOs said that security and privacy are among the top three most important things their companies do.
Today’s accountants and accounting firms must be effective data collectors and handlers. To accomplish this, they must adhere to security best practices, such as using the correct types of accounts and access codes and having a system that automatically backups and encrypts all data. These efforts should be complemented by employee data breach awareness training and a contingency plan if a data breach happens.
9. Increased Demand for Transparent Reporting
Financial reporting is the most common way for the public and investors to know how well a company is performing. It also allows them to make critical decisions about managing their investments. Financial statements that are well-informed and provide investors with a sense of certainty in the financial statements they are presenting also help investors better assess the risk that a company is exposed to.
The onset of the pandemic highlighted how crucial it is for companies to provide reliable financial information to their stakeholders. By having companies that provide transparent financial reporting, firms can communicate where they are in terms of their ability to meet their liquidity needs and how the pandemic has affected their business.
There is growing pressure from stakeholders to provide information beyond traditional financial numbers. It is crucial for companies to provide meaningful reporting that clearly shows what their financial position is and what their financial performance has been in the past. Investors are increasingly interested in investing in companies that are more sustainable and are more inclusive. In fact, 91% of investors expect their firm to prioritize ESG as an investment criterion as it recovers from a pandemic. Investors in the US are taking into account ESG when making their investment decisions.
In order to create more transparent financial reporting, it is important to have board members committed to creating value. It is also important to strategize and choose reliable reporting standards. This includes establishing systems that allow companies to gather financial and non-financial information easily. Investing in the right financial reporting software is also important.
10. New Accounting Standards and Regulatory Changes
After a year of government shutdowns and other COVID-related restrictions, companies are working on opening up or running at full capacity. The US government has come to their aid by offering them money to help them grow. Many businesses were forced to rethink the way they manage their finances. They also had to rethink their accounting practices in light of these changes. As a result, accountants are working twice as hard to keep up with payroll and tax law changes.
In 2020, the Coronavirus Aid, Relief, and Economic Security Act (CARES) was enacted, giving economic aid to small businesses and industries in the United States. In 2021, the Tax Cuts and Jobs Act (TCJA) was signed into law, which provided some tax relief to small businesses and industries. The Americans for a Stronger Economy (CARES) Act was also signed into law, which provided some additional financial support to small businesses in America. Among the programs that small businesses receive is a tax credit to help them retain employees and cover their payroll tax liabilities.
The Financial Accounting Standards Board has proposed changes to the US GAAP financial reporting taxonomy for 2021. These include new information on asset sales, restructurings, asset purchases, and other transactions. This includes changes to the GAAP financial reporting taxonomy that will affect leases, asset acquisitions, debt securities, variable interest entities, and banking regulation disclosures. Remote workers may have bigger tax consequences that accountants should take note of. When an employee’s home office is located outside his or her employer’s place of business, tax compliance becomes more difficult. Future accounting software solutions must cater to all these regulatory changes and more that could crop up from time to time.
11. No End to Human Interaction!
It is certain that humans will be involved in the development of accounting software in the future and that there will be some role for people in that area. Innovation means constantly looking for more efficient ways to manage accounting processes and outcomes, but there is no substitute for human input and interaction once you reach a certain point in your accounting processes. Whatever the future of the accounting profession looks like, people will continue to play a role in it.
As early as 2015, many in the accounting industry said that the end of traditional accounts would be the end of the world as we know it. Accountants worry that their jobs will soon be replaced, that they will no longer be able to solve complex problems creatively, or that they will become over-dependent on automation to complete their tasks.
But the events since 2015, including the deadly disease that killed nearly 400,000 people, have shown that accountants, like other professionals, need to think about adaptation more than replacement.
Digital transformation has changed everything — it’s really changed the world. Big data has become a rich resource that businesses need to tap to be competitive. But for companies ready to embrace digital tools fully, the shift to the cloud may create opportunities for them.
Embracing Accounting in a New Era!
Accounting firms will have to deal with a new set of opportunities and challenges over the next couple of years. Growing expectations from clients and changes in laws and accounting standards will require accounting professionals to be more aware and develop new skill sets. Many promising technologies like automation, artificial intelligence, and ERP integration can allow accountants to focus on delivering value to their clients rather than executing repetitive and transactional processes. It is not expected that accounting software solutions will be smooth sailing for everyone involved. But embracing the change can help you stay ahead of the curve!