The rate at which technology is evolving, along with globalisation, consolidation and the commoditisation of companies, are all factors contributing towards the constantly changing accounting industry. In many respects, each” of these points is deeply connected and it’s predicted that they will only become more so in the future.
Technology is driving the evolution of the business world faster than most could anticipate, and the accounting industry is no different. Cloud-based technology has driven many of these changes and it’s likely it will continue to do so in the years to come.
The development of technology and globalisation will mean affordable and powerful systems will be readily accessible to all. The power will be transferred to the users and the accountants that represent them, meaning platforms being used to keep books in check won’t require major capital investment, with users only having to pay for what they use.
The success of online accounting software such as Xero and Quickbooks means many traditional accounting services will become commoditised, and the pressure on the pricing for such services will be increased. This could ultimately lead to an increase in client churn rates. There are already many firms offshoring transactional type work to countries where labour and associated resources are cheaper.
It is thought that this is just a step in the process as technology advances; while machine learning and artificial intelligence (AI) will encourage deeper transactional type services, adding further pressure on the way in which more traditional accounting services are delivered.
Machine learning and AI
The opportunities machine learning and Artificial Intelligence could bring to the accounting industry are significant and will offer (and already are offering) real opportunities. Using these developments, practices will have an economic and efficient means of advising clients about present and future finances with greater speed and confidence.
Accountants may be able to advise clients of a problem or opportunity through a single aggregator, or via multiple providers using prophetic capabilities that will adapt predictions based upon wider economic conditions, the state of the local labour market or even long-range weather forecasts!
Greater access to industrial information and vertical benchmarking will also be a result of evolving machine learning and AI. This information will be used in order to transition practices to be of better value for clients, and get them more bang for their buck.
The developments will have some drawbacks, seeing the demise of more traditional practice revenues. These revenues will need to be replaced by new, better adapted offerings. It will also result in the attrition of value-added services from traditional firms to other professional service companies, such as law firms and financial advisers, which may be looking to increase on business advisory offers.
The development of technology over the next decade will not only lower the cost of transactional type processing, but will also lower the price of higher level type processing. This means that the bases of competition within accounting may change dramatically.
Social media influence
It is safe to say that, due to social media and rapidly developing tech, clients” expectations for superior customer service within the accounting industry may increase. This will likely be the case in all fields and has already started to happen. Customers will expect greater productivity from their practices and will develop a requirement to want this on-demand.
As the pressure on price increases, it will become obvious that the industry consolidation will quicken. This has already been apparent in recent years, with larger, traditional practices now moving in to target the SME market.
In most of the developed world, SMEs already make up around 80 per cent of all businesses. While until recently, technology has not necessarily been available to sustain such a push, especially when taking into account the prices SME clients may expect to pay.
Technology in the next decade will undoubtedly reduce these processing costs, thus it is expected that mergers and acquisitions will increase and some element of consolidation will occur in order to ensure economies of scale are achieved. This may then also lead to greater client churn if traditional practices do not have the technology, and therefore the competitive weapons, with which to compete against those that do.
Andrew Paton-Smith is founder of Jazoodle.com
The FD Surgery will be taking place on 1 May in London to explore the business opportunities, and challenges, that the advent of the fourth industrial revolution heralds.