Pricing
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
Drawbacks
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
SME market
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.comThe 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.
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