To get a sense of the how much change the accounting profession is undergoing, look no further than recent changes to the CPA exam. The 100-plus year-old licensing gold standard recently announced that its 2021 exam would push an emphasis on understanding business processes, automation, data analytics and “the need for a digital and data-driven mindset.” At the same time, it phased out other topics, such as the testing on the difference between IFRS and GAAP standards and specialized knowledge on estate taxes and trust.
What Are Accounting Trends?
Accounting trends are developments and reactions to changing landscapes, technology and other market forces that shape the accounting profession as we know it today.
How is the accounting industry changing? The change is rapid and driven largely by lightning-fast advances in technology. In many ways, the pandemic has accelerated that adoption. For example, wider adoption of cloud-based accounting software, as well as a move toward automation and artificial intelligence.
Technology and Automation
What is new in the accounting world? Ever-evolving technology and a trend toward automation of repetitive accounting tasks are some of the most exciting developments in the accounting industry. Some of the processes that are being automated include approval workflows, bank reconciliation, journal entries, inter-company consolidation, revenue recognition, lease accounting and depreciation.
While there are many accounting functions that can be automated, there is a lack of understanding of the technologies and a lack of resources to implement them. But those that take the leap are reaping the benefits. Some 70% of companies that have automated more than one-fourth of their accounting functions report moderate or substantial ROI.
Role of Artificial Intelligence (AI)
Across industries there’s consensus that AI can and will have a significant impact on finance and accounting. Companies are using AI and robotic process automation (RPA) to automate mundane, highly repeatable tasks, allowing accountants to focus their time on higher impact and higher value activities. Accounting Firm EY, for example, has applied AI to the analysis of lease contracts to make it easier to capture information quickly on commencement date, amount to be paid, termination or renewal options and allow the finance professional to spend more time on making decisions with the data instead of looking for it.
For RPA to be successful, transactional data needs to be standardized and merged from multiple sources in multiple formats, also known as harmonizing. Harmonization can involve bringing together structured, semi-structured and unstructured data within a single system. AI needs vast amounts of data to be effective. And above all, the outputs of all enabling technologies need to be trusted by the accountants. That’s where accounting software comes in.
Some 36% of companies plan to implement cloud-based accounting solutions in the near future. Enterprise resource planning systems can integrate your accounting software and your financial data with other important areas of your business, such as supply chain, order and production management. An integrated ERP platform consolidates data from these different areas to give you more actionable insight into your business.
Data Analytics and Forecasting Tools
Among the accounting tips for both small businesses and larger companies, increasing the use of budgeting, forecasting and planning software, as well as data analytics and visualization tools is one of the most impactful. Finance functions are becoming significantly more analytical – and technology will help push the accounting and finance 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 Fundamentals Certificate. The program is designed to equip accounting and finance professionals with the strong critical thinking, problem-solving and technology skills needed to advance business strategy.
Faster than perhaps ever before, organizations are transforming how they do business with the aid of digital technology — and accounting and finance teams have been at the heart of it all. They’ve put processes in place to account for new revenue from subscription models, new channels, new physical and digital product offerings and more. One of the most pressing accounting challenges is leveraging technology to support the business strategy and adapt to changing conditions.
Workplace wellness programs continue to be a popular perk provided by employers but managing these programs can be complex for accountants. For example, payroll managers and accountants must make sure the discounts employees earn on health insurance through wellness programs are calculated correctly as withholdings in paychecks. Accountants must also be mindful of changes to tax laws that impact how the items in the wellness program count toward tax deductible business expenses. In addition to hopefully boosting the health of employees, wellness programs can be a useful tool for employee engagement. Accountants continue to report high rates of burnout and stress due to managing too many responsibilities and should take advantage of programs whenever possible.
Online Collaboration and Remote Workforce
Especially useful with the trend of remote working, cloud-based software allows teams that are physically dispersed to collaborate and accomplish critical financial processes, such as month-end close from anywhere with a computer and an internet connection. Accounting will need collaboration tools, such as Zoom, fort and functional 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, and accountants will increasingly be seen as leaders and decision makers. More and more, accountants must rely on the so-called soft skills, leadership and other traits associated with emotional intelligence. These skills, paired with training to leverage insight from data analysis and the financial expertise, are what will make for successful careers in the future.
Data breaches are a bigger risk than ever, and finance departments are one of the leading targets. The breaches can lead to identity theft, or the stealing of personal data and credit card information, and spoofing, which is when an email is disguised to appear to come from a known and trustworthy source. Training in recognizing potentially harmful emails and spotting attacks will continue to be crucial for accounting teams, who are already skilled in looking at the details and spotting anomalies. The accounting team can share the importance and become champions of cybersecurity for your organization.
Changes in Tax Policy
With nearly 6,000 pages in the latest Consolidated Appropriations Act — better known as the COVID stimulus — accountants have their work cut out for them. Passed shortly before tax season, it’s just the latest in a string of tax policy and regulatory changes, including tax extenders, PPP expense deduction, second-draw PPP loans and simplified process for PPP loans under $150,000. Whether it’s understanding 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 shifting statutory and regulatory changes. Monitor and account for regulations, including COVID stimulus legislation. Changes in leadership at the SEC are likely to impact financial reporting requirements and scrutiny.
Environmental, Social and Corporate Governance (ESG)
ESG will be in sharp focus for companies, and it’s widely expected there will be new federal regulations pertaining to the areas within it – especially as it relates to financial disclosures for public companies. These disclosures are likely to include mandated disclosure of climate-related financial risks and greenhouse-gas emissions in your operations, as well as your supply chains. Additionally, major investors are calling for increased diversity, which affects all areas of your business, including finance and accounting. Professional trade organizations are aiming to help accountants prepare.
Throughout the year, the Financial Accounting Standards Board (FASB) issues accounting standards updates about changes that could affect financial statements and how to keep them GAAP compliant. For 2021, there are changes related to asset acquisitions, credit losses, debt securities, leases, reorganizations, variable interest entities, and banking regulation disclosures. Tax and finance consulting firm BDO provides a summary of all the new changes for 2021.
Machine learning and RPA are being used to reframe the approach to accounting. What’s become known as continuous accounting uses automation and other technology to embed tasks that are normally done at a period’s end into normal day-to-day activities. But the benefit of continuous accounting isn’t just fewer late nights for your accounting team. By automating repetitive tasks, you improve efficiency and data integrity, which frees up time for your accounting team because errors can be a frequent source of time-consuming work. Your team can then focus on a culture of continuous improvement by monitoring for efficiencies in processes.
Organizations of all sizes may find some benefit in outsourcing some or all of their finance and accounting functions. Smaller companies outsource accounting to avoid hiring additional headcount. Larger firms may outsource some or all of their accounts payable, this is generally done to save money. Additionally, outsourcing can sometimes give you access to skillsets, technology and expertise your company would not easily or affordably replicate by hiring new headcount and investing in your own infrastructure.
2022 will continue to allow accountants to showcase their resilience and their indispensable role in the business. They’ll adapt to and adopt trends to help guide and lead their businesses into the next phase of whatever the business journey entails.