To get a sense of the how much change the accounting profession is undergoing, look nofurther than recent changes to the CPA exam. The 100-plus year-old licensing goldstandard recently announced that its 2021 exam would push an emphasis on understandingbusiness processes, automation, data analytics and “the need for a digital anddata-driven mindset.” At the same time, it phased out other topics, such as thetesting on the difference between IFRS and GAAP standards and specialized knowledge onestate taxes and trust.
What Are Accounting Trends?
Accounting trends are developments and reactions to changing landscapes, technology and othermarket forces that shape the accounting profession as we know it today.
How is the accounting industry changing? The change is rapid and driven largely bylightning-fast advances in technology. In many ways, the pandemic has accelerated thatadoption. For example, wider adoption of cloud-based accounting software, as well as a movetoward automation and artificial intelligence.
Technology and Automation
Ever-evolving technology and a trend toward automation of repetitive accounting tasksare some of the most exciting developments in the accounting industry. Some of theprocesses that are being automated include approval workflows, bank reconciliation,journal entries, inter-company consolidation, revenue recognition, lease accountingand depreciation.
While there are many accounting functions that can be automated, there is a lack ofunderstanding of the technologies and a lack of resources to implement them. Butthose that take the leap are reaping the benefits. Some 70% of companies(opens ina newtab) that have automated more than one-fourth of their accountingfunctions report moderate or substantial ROI.
Role of Artificial Intelligence (AI)
Across industries there’s consensus that AI can and will have a significantimpact on finance and accounting. Companies are using AI and robotic processautomation (RPA) to automate mundane, highly repeatable tasks, allowing accountantsto focus their time on higher impact and higher value activities. Accounting FirmEY, for example, has applied AI to the analysis of lease contracts to make it easierto capture information quickly on commencement date, amount to be paid, terminationor renewal options and allow the finance professional to spend more time on makingdecisions with the data instead of looking for it.
Accounting Software
For RPA to be successful, transactional data needs to be standardized and merged frommultiple sources in multiple formats, also known as harmonizing. Harmonization caninvolve bringing together structured, semi-structured and unstructured data within asingle system. AI needs vast amounts of data to be effective. And above all, theoutputs of all enabling technologies need to be trusted by the accountants.That’s where accountingsoftware comes in.
Some 36% of companies plan to implement cloud-based accounting solutions in the nearfuture. Enterprise resource planning systems can integrateyour accounting software and your financial data with other important areas of yourbusiness, such as supply chain, order and production management. An integrated ERPplatform consolidates data from these different areas to give you more actionableinsight into your business.
Data Analytics and Forecasting Tools
Among the accountingtips for both small businesses and larger companies, increasing the use ofbudgeting, forecasting and planning software, as well as data analytics andvisualization tools is one of the most impactful. Finance functions are becomingsignificantly more analytical – and technology will help push the accountingandfinance department from reactionary and transactional to proactive and analytical.As evidence of the demand for the increasingly analytical and tech-savvy accountant,IMA recently launched it’s a Data Analytics & Visualization FundamentalsCertificate. The program is designed to equip accounting and finance professionalswith the strong critical thinking, problem-solving and technology skills needed toadvance business strategy.
Digital Transformation
Faster than perhaps ever before, organizations are transforming how they do businesswith the aid of digital technology — and accounting and finance teams havebeen atthe heart of it all. They’ve put processes in place to account for new revenuefrom subscription models, new channels, new physical and digital product offeringsand more. One of the most pressing accounting challenges is leveraging technology tosupport the business strategy and adapt to changing conditions.
Workplace Wellness
Workplace wellness programs continue to be a popular perk provided by employers butmanaging these programs can be complex for accountants. For example, payrollmanagers and accountants must make sure the discounts employees earn on healthinsurance through wellness programs are calculated correctly as withholdings inpaychecks. Accountants must also be mindful of changes to tax laws that impact howthe items in the wellness program count toward tax deductible business expenses. Inaddition to hopefully boosting the health of employees, wellness programs can be auseful tool for employeeengagement. Accountants continue to report high rates of burnout and stressdue to managing too many responsibilities and should take advantage of programswhenever possible.
Online Collaboration and Remote Workforce
Especially useful with the trend of remote working, cloud-based software allows teamsthat are physically dispersed to collaborate and accomplish critical financialprocesses, such as month-end close from anywhere with a computer and an internetconnection. Accounting will need collaboration tools, such as Zoom, fort andfunctional collaboration tools for e-signature and cloud-based file sharing.
Evolution of the Accountant Role
In the future for accounting, more transactional work will become automated, andaccountants will increasingly be seen as leaders and decision makers. More and more,accountants must rely on the so-called soft skills, leadership and other traitsassociated with emotional intelligence. These skills, paired with training toleverage insight from data analysis and the financial expertise, are what will makefor successful careers in the future.
Data Security
Data breaches are a bigger risk than ever, and finance departments are one of theleading targets. The breaches can lead to identity theft, or the stealing ofpersonal data and credit card information, and spoofing, which is when an email isdisguised to appear to come from a known and trustworthy source. Training inrecognizing potentially harmful emails and spotting attacks will continue to becrucial for accounting teams, who are already skilled in looking at the details andspotting anomalies. The accounting team can share the importance and becomechampions of cybersecurity for your organization.
Changes in Tax Policy
With nearly 6,000 pages in the 2022 Consolidated Appropriations Act — betterknown asthe COVID stimulus — accountants have their work cut out for them. Passedshortlybefore tax season in 2022, it’s just the latest in a string of tax policy andregulatory changes, including tax extenders, PPP expense deduction, second-draw PPPloans and simplified process for PPP loans under $150,000. Whether it’sunderstanding total tax liability or navigating shifting trade and tariff policies,understanding changes in tax policy is vital.
Statutory and Regulatory Compliance
Aside from taxes, accounting and finance teams need to be mindful of shiftingstatutory and regulatory changes. Monitor and account for regulations, includingCOVID stimulus legislation. Changes in leadership at the SEC are likely to impactfinancial reporting requirements and scrutiny.
Environmental, Social and Corporate Governance (ESG)
ESG will be in sharp focus for companies, and it’s widely expected there willbe new federal regulations pertaining to the areas within it – especially asitrelates to financial disclosures for public companies. These disclosures are likelyto include mandated disclosure of climate-related financial risks and greenhouse-gasemissions in your operations, as well as your supply chains. Additionally, majorinvestors are calling for increased diversity, which affects all areas of yourbusiness, including finance and accounting. Professional trade organizations areaiming to help accountants prepare.
Accounting Standards
Throughout the year, the Financial Accounting Standards Board (FASB) issuesaccounting standards updates about changes that could affect financial statementsand how to keep them GAAP compliant. For 2021, there are changes related to assetacquisitions, credit losses, debt securities, leases, reorganizations, variableinterest entities, and banking regulation disclosures.
Proactive Accounting
Machine learning and RPA are being used to reframe the approach to accounting.What’s become known as continuousaccounting uses automation and other technology to embed tasks that arenormally done at a period’s end into normal day-to-day activities. But thebenefit of continuous accounting isn’t just fewer late nights for youraccounting team. By automating repetitive tasks, you improve efficiency and dataintegrity, which frees up time for your accounting team because errors can be afrequent source of time-consuming work. Your team can then focus on a culture ofcontinuous improvement by monitoring for efficiencies in processes.
Outsourcing
Organizations of all sizes may find some benefit in outsourcing some or all of theirfinance and accountingfunctions. Smaller companies outsource accounting to avoid hiring additionalheadcount. Larger firms may outsource some or all of their accounts payable, this isgenerally done to save money. Additionally, outsourcing can sometimes give youaccess to skillsets, technology and expertise your company would not easily oraffordably replicate by hiring new headcount and investing in your owninfrastructure.
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2023 will continue to allow accountants to showcase their resilience and their indispensablerole in the business. They’ll adapt to and adopt trends to help guide and lead theirbusinesses into the next phase of whatever the business journey entails.
