It is a brave new world for accounting firms. New technology, pent-up client demand for advisory services, and ever-increasing compliance and regulatory oversight have created a new “business” mindset among accounting organizations — identifying clients’ needs and building the infrastructure to meet those needs.
- What are the 5 trends driving the modern accounting practice
- What is the modern accounting “mindset” and why is it essential to success
- How to overcome the 8 biggest hurdles in accounting operations
- How to build an actionable strategy to increase efficiency in 5 simple steps
- Why technology will support — not replace — accountants
Modern accounting organizations are asking how can we:
- Add value to the client relationship?
- Help the client become more competitive?
- Help the client become more profitable?
- Current state of operations for accounting firms
- What roles automation/technology play
How operational needs have changed over time
Trends driving the modern accounting practice
Demand for non-traditional advisory accounting services:
Advisory services include recommendations on how a business can use new technologies for increased efficiency.
Value-based pricing provides both business owners and clients certainty on prices and prevents surprises. Value-based pricing is not only a way to improve a firm’s bottom line—it can be a crucial tool in enhancing customer service and improving client satisfaction. A recent PCPS/CPA.com National Management of an Accounting Practice (MAP) Survey found that use of value-based pricing approaches has soared while hourly billing continues to decline.
Cloud-based accounting systems allow you to access your data from any device with an internet connection, making it easy to share files and collaborate with others.
Artificial intelligence (AI), data analytics, machine learning, blockchain, and remote audit techniques will continue to transform accounting practices in ways not yet imagined.
The 2020 Rosenberg Survey, an annual study of the CPA industry in the U.S., list attributes that contribute to the profitability and success of larger firms:
- Provide more advisory services
- Engage in strategic planning, marketing, and practice development
- Establish a strong technology infrastructure
The modern accounting mindset
Technological innovation — and with it, change, disruption, and new challenges — shows no signs of slowing down, leaving businesses in its wake wondering how can they navigate toward a more profitable, sustainable future.
The successful modern accounting firm will have a:
With increased automation and integrated systems, outside accountants can offer their clients:
- Deeper analysis and more accurate forecasts
- Strategies for growing the business and adding to the bottom line
- Recommendations for creating efficiencies across the company
Advisory services mindset
To grow revenue and retain clients, modern accounting firms will offer more client accounting services, including:
- Business planning services
- Cost optimization advisory and working capital management services
- Multi-tax planning and advisory services
- In-depth core client services
- Payroll processing and compliance services
- Technology advisory services
By understanding the client’s ecosystem, the accounting firm will play a more prominent role in adding value across all aspects of the client’s business, including outside issues:
- ESG (environmental, social, and governance)
In short, the modern accounting firm’s role is to understand the client’s business at a micro- and macro-level, optimize its assets, and prepare it for the future.
Modern accounting firms have a client management strategy
The accountant’s role is changing. Clients today want to see their accountant as a trusted adviser, an informed partner who can help guide their business. It requires the firm to adopt a client management strategy. Client management requires a holistic understanding of the client’s business, strategic goals, and journey to achieve those goals. Failing to engage more deeply and often with the client will cause the firm to deliver a lower level of service, miss revenue opportunities, and potentially lose the client.
Current state of operations for accounting firms
Accountants today play a more prominent role in advising small businesses. Technology and automation have enhanced the accountant’s ability to collect, manage, and analyze data, contributing to more significant insights and informed decision-making.
The internet and new digital tools have given small firms and businesses access to worldwide customer and talent pools that were once the exclusive domain of multinational corporations.
What roles automation/technology play
Technology enables accountants to replace time-consuming data entry and number-crunching activities with roles that require a more strategic outlook: data analysis, financial planning, and business consulting.
Technology also allows customization across every aspect of accounting, including data entry, reconciliation, and reporting. Customers want their individual needs to be met instead of getting cookie-cutter solutions.
Finally, technology supports accounting solutions that help provide companies with real insights — rather than just an overall financial position — so they can make informed, strategic decisions.
The value of cloud computing, accounting software, and automation
- Cloud computing enables access to your accounting anytime and anywhere, making it dramatically easier and faster to have accurate, up-to-date books.
- Cloud computing allows accountants to create fully integrated systems where different digital tools can talk to one another.
- The once laborious and error-prone work of accumulating and computing data can now be done with a single click.
- Task-oriented projects no longer burden today’s account. Instead, accounting software programs are becoming more automated, and the accountant’s role is changing to that of a business advisor.
- Accountants are embracing social media to connect with new and current clients.
According to Finances Online’s report, 57 Critical Accounting Software Statistics: 2022 Data Analysis & Market Share:
- Cloud-hosted accounting software reduced operating expenses by up to 50%.
- Businesses that switched to cloud accounting have experienced a 15% boost in revenue.
- Accounting automation returns the investment in up to 18 months and saves up to $16 per invoice.
Solving today’s efficiency gaps
To overcome inefficiencies within your organization, you need to optimize your internal workflows supported by digital technology. Appropriately implemented, digitalization can:
- Ensure steady cash flow by regularly generating and tracking metrics like expenses, past-due invoices, and operating cash flow. Trending changes will inform current decision-making and help you plan for the future.
- Streamline accounting processes, freeing up time for you to focus on more strategic activities, such as offering new services or adding new clients.
- Digitize repetitive manual work like data entry to allow more time for forecasting, problem-solving, and planning with clients.
- Enable electronic sign-off of checks so that authorized individuals can approve invoices online 24/7.
- Elevate security using built-in cybersecurity via cloud technology and data storage protocols.
Building a strategy for efficiency
A strategy for efficiency starts with having clearly defined steps.
- List your firm’s essential tasks, including primary services and supporting systems.
- Identify, prioritize, and improve the processes that have the most significant business impact.
- Create a workflow diagram to help you visualize the process and spot inefficiencies.
- Include training to ensure your team understands their roles and deliverables under the new program.
- Actively seek feedback from team members and relevant staff across the firm.
The biggest hurdles in accounting firm operations
From managing cash flow to producing accurate forecasts, from hiring talent to dealing with artificial intelligence, from mastering cybersecurity to conducting business without borders, accounting and financial professionals have a wide and diverse range of challenges.
Cash flow is simply the movement of money in and out of a company. Cash flow suffers when an accounting practice bills only after completing the project, which could delay payment for several months. Charging a monthly fee ensures predictable income and healthy cash flow.
Accurate financial forecasts
Financial forecasting is used to predict a company’s future financial performance. It involves evaluating a company’s past performance and the market’s current trends. Forecasting helps you predict potential issues, make better decisions, and measure the impact of those decisions.
The major components of financial forecasting consist of projected income statement, cash flow, balance sheet, and funding sources.
Financial forecasting is a challenge when finance teams deal with data silos. To make accurate forecasts, finance professionals must understand other departments’ performance and goals. Digitalization that promotes the integration of data across multiple sources facilitates getting accurate financial forecasts.
For example, Plooto offers a single integrated AP/AR platform to manage payments and reporting. Businesses can easily track cash inflows and outflows and have greater cash flow visibility. With Plooto, you can see every detail of your payment’s status – when it was made, where it is, and when it will arrive in your account.
Hiring and retaining talent
Challenged to hire and keep finance and accounting roles? You’re not alone:
- The AICPA’s most recent trends report found total hiring of new accounting graduates in 2020 had decreased by 10%.
- The National Association of State Boards of Accountancy saw an 18% decrease in the number of exam sections processed in fiscal year 2020.
- According to the American Institute of CPAs’ Trends report, 2018 saw the lowest number of CPA candidates in 10 years.
Fortune reported that it’s simply not a decrease in interest in finance and accounting. The broader challenge is finding talent that combines a deep accounting and finance background with the right technological capabilities. This has given rise at many universities today where accounting majors are taking courses in machine learning, robotic process automation, analytics and statistics courses.
According to Finances Online’s report, 57 Critical Accounting Software Statistics: 2022 Data Analysis & Market Share, 57% accountants who believed that technology literacy is the most critical skill for future accountants.
Automation and artificial intelligence
Artificial intelligence (AI) is playing a crucial role in accounting and finance by automating routine tasks. AI technologies — including Machine learning (ML) and deep learning — help accounting and finance professionals perform their work more efficiently.
AI will transform the productivity of accounting firms and their ability to scale. According to a study by the Institute of Management Accounts (IMA):
- One-third of accounting firms spend anywhere from 51 percent to 75 percent of their time on repetitive, low-value tasks.
- Of the accounting professionals surveyed, 56 percent said they require automation just to keep up with their growing workloads.
Adopting AI and ML platforms will help accounting firms streamline their processes and speed up the work.
Upskilling to leverage the outputs of technology
Upskilling is gaining new knowledge, tools, and abilities. Employers may upskill staff through training programs to achieve a more proficient workforce. Workers may upskill themselves via continuing education, certification, and private training.
According to PwC’s 23rd Annual Global CEO Survey, 74% of CEOs are concerned about the availability of critical skills in the workplace. Upskilling is especially crucial for accountants and finance professionals. They must be open to change and adaptable to technological advancements in today’s digital work environment.
Regulatory changes and new accounting standards
New regulatory changes and new accounting standards have been a challenge for accounting teams over the past few years. KMPG Advisory sites 10 key regulatory challenges of 2022. Technology will be a major area of focus:
- Fairness and Inclusion
- Climate and sustainability
- Crypto and digital assets
- Platforms and conduct
- Cyber & Data
- Fraud & Financial Crimes
- Valuation vulnerabilities
- Third party & cloud
- Tech & resiliency
- Risk "complacency"
How does cybersecurity affect accounting? Accounting cybersecurity practices ensure that your firm protects sensitive data, not only for your firm's compliance but for the safety of your clients who've entrusted you with their financial, personal, and professional information.
As accounting firms manage and store valuable financial data and sensitive business information — credit card credentials, bank account details, and other e-wallet passwords — cybersecurity is becoming ever-increasingly important.
Critical steps to protecting your client's accounting information include:
- Keeping your accounting and security software updated
- Limiting access to authorized employees only
- Removing data that you no longer require
- Using cloud storage servers to back up all your vital accounting data
Globalization is the increasing flow of goods, services, capital, people, and ideas across international boundaries. We see and experience the core benefits of globalization daily:
- Access to new markets
- Access to new talent
- Lower costs for products
- The spread of technology and innovation
- Access to new cultures
But globalization comes with problems. When conducting business worldwide, businesses must overcome the following challenges:
Different local regulations for every country
Generally Accepted Accounting Principles (GAAP) vary from one country to another.
Consolidation of entities in a group
Accounts of each individual entity need to be maintained per the rules and accounting standards of the country of operations.
Calculation of impairment of investment in subsidiaries
This is especially critical in the entities which are making losses or are in inaccessible locations or countries with a challenging political scenario.
Transfer pricing and intercompany cost allocations
Transfer Pricing (TP) is fixing the price of goods and services sold between the related entities within a group of entities.
How Plooto can help firms reduce operating costs, drive greater efficiency and gain more control over financial data
Strategic cash flow data
Access to good data drives successful strategic planning and execution. Plooto is a cash flow company, and when you make payments through our platform, we collect data that enables you to see:
- Pending payables
- Payments in motion
- Payments completed
Plooto records this data in your accounting software automatically as well.
You can then filter the raw data. For example, you can look at specific suppliers. For further analysis and reporting, you can easily export this data into an Excel/ csv file, which can then be imported into third-party data tools for study. Plooto provides the data you need to make more informed and better decisions.
Saving time through automation
Plooto dramatically reduces accounts payable processing costs and manual touches through smart automation and robust integration with your accounting software.
Digitally collect and collate all the data you need just once:
- Upload your invoice into Plooto using Plooto Capture — AI-powered optical character recognition technology. Plooto Capture seamlessly extracts and collates all the information on the invoice to publish from Plooto into your accounting software. The accounting software then records it as a bill.
- Plooto then automatically pulls the data from your accounting software showing you have an outstanding bill and that it appears on your payables.
- Plooto automates the manual processes associated with inputting a bill. You don’t have to create a bill manually. You don’t need to record every single field in your account manually. And you’re saved the extra step of logging in to your accounting software.
Confirm approvals, data, and pay bills in a few clicks:
- Plooto’s dashboard enables you to identify and review the bills you want to pay.
- Money is pulled from your bank account electronically and deposited into your vendor’s bank account, confirming that the payment is complete.
- Plooto will then take that confirmation, sync it back into your accounting software, and mark that outstanding bill as paid.
- Payments are reconciled at the end of the month, and you can track the entire process entirely through Plooto.
Plooto helps companies gain greater efficiencies by automating all the processes around data entry:
- Through Plooto Capture, AI-based optical character recognition technology, data is collected, collated, and made available for review.
- The entire process becomes one of point, click, and confirm.
Workflow efficiencies enable your AP team to focus on high-value tasks
- Less effort devoted to repetitive manual tasks allows the AP team to concentrate more on activities that will contribute to the growth and success of the company.
- This could mean AP has more time to analyze data, identify trends, and develop strategies to generate insights that will help the business run smarter and more efficiently.
Advantages of cloud technology
Plooto is a cloud-based, end-to-end payments automation company that helps accounting firms and small to mid-size businesses (SMBs) automate, streamline, and improve the efficiency of their domestic and international payment operations.
Cloud technology allows you to avoid the bother and worry of:
- Storing your files locally
- Keeping your records up to date
- Lacking 24/7 access across multiple devices
Additionally, cloud technology with data storage protocols, in conjunction with Plooto’s security practices, ensures that your documents are secure.
Seamless integration ensures accuracy
- Seamless data integration between Plooto and your accounting software ensures accurate recording of information, correct payments, and a more manageable, faster end-of-month reconciliation.
- Plooto ensures there are fewer errors because of bad manual processes.
Complete audit trail data recovery
Plooto securely stores your records — including contact lists — and audit trails, including
- Payment history
- Files, documents via Plooto Capture, AI-based optical character recognition
You also have the ability to export the audit trail of some records in Plooto.
The bottom line: Plooto enables you to track payment from start to finish. And with your data stored in the cloud, you can access it anywhere.
Technology will support, not replace, accountants
News about technology — and how it will change how we live, work, and think about the future — drowns the mediasphere daily. A reoccurring refrain comes from this cacophony: “Will a machine replace me?”
While plenty of books, movies, and articles paint a bleak picture of technology’s impact on society, the latest studies today reveal a different view. According to the Gartner research firm, artificial intelligence (AI), a technology that figures prominently in the news, will create more jobs than it will replace and generate several other substantial benefits.
Artificial intelligence is based on the principle that human intelligence can be defined in a way that a machine can mimic human cognitive activity. AI automates manual, repetitive tasks with greater accuracy and less time than humans.
Initially, accounting used AI to handle tax preparation, payroll, and audits. Today, accounting software uses AI to automate account payables and accounts receivables workflows. But the accounting field is more than just entering data and totaling numbers. It requires someone to analyze and interpret the data.
AI frees accountants to focus on strategic tasks requiring analysis, creativity, and collaboration. AI’s ability to organize vast amounts of data will help accountants drill down on the “hows” and “whys” of issues and play a more creative and strategic role.
Becoming a modern, automated accounting firm requires change. Accounting firms that focus on the past or ignore current developments will certainly miss the future. There is plenty of evidence today that leveraging the latest technology, adopting a business mindset, and automating operations will help firms grow their client base, create new revenue streams, and become more efficient and responsive to changing market conditions. In the end, the modern, automated accounting firm is the fusion of present and future possibilities.
Frequently Asked Questions
What is accounting automation software?
Accounting software technology helps businesses record and manage their financial transactions. An accounting platform can include accounts receivable, accounts payable, general ledger, payroll, journal, and trial balance features.
Why is accounting automation important?
Accounting automation software enables accountants to replace time-consuming data entry and number-crunching activities with roles that require a more strategic outlook: data analysis, financial planning, and business consulting.
What is accounting software used for?
Accounting software manages and records the day-to-day financial transactions of an organization, including fixed asset management, expense management, revenue management, accounts receivable, accounts payable, reporting and analytics.