As the FinTech dynamic diversifies, we’re seeing major improvements in how accounting tasks are done. Accounting Technology (AccountingTech) is the sector of FinTech that specializes in the assistance of recording, summarizing, and classifying transactions to bookkeeping standards, methods, and procedures. The improvements made to AccountingTech have made it easier for real-time accountants to give more accurate forecast of costs to clients, and better track numbers of transactions. When implemented correctly, accounting FinTech tools dramatically effect efficiency – transforming both the profession and service.
Accounting services have enhanced a significant portion bookkeeping processes – which is certainly evident in product adoption statistics. As of 2022, 29% of automated technology is currently being used in accounting, incorporating 50% of all accounting tasks in these new processes. With these growing numbers in the AccountingTech sector, technology literacy is a growing skill that is necessary for accountants. 79% of all accountant firms are providing bookkeeping services with payroll, tax, and compliance also being desired services for consumers. Although many of the big companies are diversifying their services through AccountingTech, 92% of accountants today do not feel ready for the future of FinTech.
What is AccountingTech?
AccountingTech has allowed professionals to record, summarize, and classify financial transactions accordingly. Real time data reports and accurate forecasts and analysis of cashflow are just some of the ways businesses have been able to get the upper hand in AccountingTech.
Through new innovations, accounting firms have been able to become proactive in planning, budgeting, and putting contingencies in place as a result. FinTech has given many businesses the ability to clearly plan, which results in better informed financial decisions.
The adoption of accounting technologies have become the norm in the FinTech world, with one third of UK firms servicing over 80% of clients in cloud accounting software. Accountants have historically been tasked with strenuous admin work however this is no longer the case . Because of the rapid changes in the AccountingTech sector, many accountants are being required to have client-facing skills and comprehensive commercial knowledge.
Different types of AccountingTech
Ready-made or ready to use software is a computerized accounting system that helps record and process accounting data, automatically generating accounting reports. This type of software usually has standard features that has since made it easy for small businesses.
This is because ready-made software is:
- Easily available
- Not as expensive due to lack of advanced features
- An easy software to learn
- Low barriers of entry from high adaptability
Adaptation to this software has helped small businesses to stay competitive in this ever-changing market. This however results in the lack of a wide variety of services as more sophisticated software’s may have.
Customized accounting software provides businesses with accounting needs in sectors general ledger, payable and receivable management, invoices, payroll and tax managements, etc. This system is more complicated than readymade software but can reach companies up to a 290% ROI.
Some of the benefits of using customized software include:
- Simplified tax compliance through automated tax calculations and filings
- Over 80% improvements in accountant productivity
- Financial closes happening twice as quickly
- Completely meeting business-specific accounting needs through functionality
This software is best for providing a solution to cases such as hedge accounting, accounting assets for cryptocurrency, custom accounting needs, or GL balance forecasting.
Main players changing AccountingTech
Although there are many firms that provide accounting services, the four largest firms (nicknamed the “Big Four”) in the United States are:
- Ernst & Young
- Klynveld Peat Marwick Goerdeler
These companies are constantly looking for new ways to evolve and push boundaries to what’s capable in the AccountingTech world. As a result, three of the firms have collectively taken a $9 billion pledge to enhance what services are available to consumers.
What’s each company doing to provide consumers with better experiences?
Although Deloitte is the only company of the big four to not have announced any investments towards expansion, the company is still differentiating themselves. They plan on becoming the leading provider of automations services for law firms and legal offices. The company is also looking to further develop their AI software to streamline daily workflow and operations.
According to an article in Accounting Today, EY is working to automate the auditing process in order to reduce administrative time spent on reviewing audit documents, giving employees more time to participate in the judgment and analytical part of the process.
According to EY, drones will refine the auditing process, allowing auditors to focus on risk areas rather than taking stock of inventory manually.
PwC committed to spend $3 billion on their technology and training throughout the next four years. Chairman Bob Moritz says they’re looking to train their 276,000 person staff for technology exploitation and close the skills gap that will help them to make a measurable impact.
KPMG has made a $5 billion five-year investment for improvements to their automation and artificial intelligence. The company has also partnered with Microsoft for cloud technology development for their specialist products.
Benefits of AccountingTech
There are many advantages that comes with advances being made in the AccountingTech industry. The rising of usage in cloud accounting has consequently eliminated the reason for many compliance services, continuing the decrease in audit firms.
Some benefits of AccountingTech include:
- Easy to forecast the cost of servicing clients
- Advantage of payment software add-ons to set up and manage fixed and variable recurring payments from clients
- Assistance in the fundraising plans of their clients, by providing advice around the different facilities available and assisting in creating financial models.
- Accountancy Cloud offer regular decision support and forecasting to maximize chances of survival for early-stage clients
This has subsequently brought a new set of skills to accountants in their day-to-day lives. Historic skills such as bookkeeping, and data entry are less in demand because of this.
Disadvantages of AccountingTech
Although there are numerous benefits to incorporating AccountingTech into a business’ services, all cloud services are prone to error.
Here are some of the disadvantages to AccountingTech:
- Program errors
- Training of specialists on software
- System failures result in lost time
- Prone to virus attacks
The Future of AccountingTech
Technological progress in AccountingTech is continuing to evolve, here are some of the trends expected in the next 10 years!
AI driving massive value creation
Artificial Intelligence has the potential to generate up to $1 trillion in additional value for the global banking industry. AI applications are expected to help customer-facing applications to include tailored products and a personalized user experience. AccountingTech firms will be able to offer a better user experience.
SaaS lowering barrier entry
Software as a service (SaaS) is becoming a must-have for all technology players and traditional financial institutions. SaaS helps companies to maintain their own servers and attain their own resources for customers and operations. This is also crucial for AccountingTech companies to incorporate to give customers a better user experience.
Recruiting in AccountingTech
In short, the FinTech Accounting space is never stagnant as companies constantly compete for the most secure form of accounting. As many of the Accounting Technologies evolve to improve the life of the consumer, many accounting professionals are looking to diversify their skillsets to accommodate these changes. As the market continues to grow, we expect to see colossal change in what accountants are capable of as a result.
Identifying the right FinTech talent is the number one challenge for startups and the accounting sector is no different. At Storm2 our team of specialist consultants are experts in matching high-quality talent to the best AccountingTech institutions worldwide. Do you have a vacancy you would like to discuss? Please get in touch.