A turbulent couple of years have forced accounting firms around the world to change processes, re-examine working environments, and support businesses’ economic recovery, a pattern which is set to continue in 2022. John Edwards, CEO of the Institute of Financial Accountants (IFA), looks at some of the other key accounting trends expected to shape the year ahead.
Digitalisation and technology adoption
New technology is not just changing the way people work but also altering the expectations clients have when working with accounting professionals. COVID has accelerated the shift to digital solutions, with changes towards more remote working, unlikely to revert to pre-COVID times. It’s not just our offices that are changing, digital transformation is also being driven by government mandated change, for example the completed and pending phases of Making Tax Digital, with specified technology continuing to be best practice for the future.
There is a need therefore, for the adoption of appropriate technology to support accountants and clients ensuring that services can continue to be provided at a high level. Whilst the pandemic meant that things had to change quickly, with new equipment and technology installed to ensure business continuity, every sector, not least the accounting field, has learnt hard lessons in planning for the future and protecting businesses from future catastrophes. Adoption of these new technologies is becoming ever more crucial in 2022, as those who don’t commit will undoubtedly get left behind.
Artificial intelligence (AI) is already starting to change the face of accounting operations, delivering efficiencies, reducing errors, and optimising workflows while assisting professionals with business decision making based on insights driven from accounting data.
According to a 2021 survey conducted by the IFA*, the automation of accounting tasks by AI, and the increased use of cloud-based accounting tools by clients, were the technologies that were recognised as potentially having the most significant impact on the future of accounting. However, knowledge of AI technology was also lower than that of other technologies, with 55% indicating they had at best ‘some’ knowledge and 15% indicating no knowledge at all. 47% of respondents indicated that additional areas of training incorporated into their accountancy training syllabus would better prepare them for the challenges they face as an accountant, with the specified areas mainly relating to technology, notably cloud software, data analytics and AI.
This clearly identifies a gap in training which must be addressed if the sector is to stay up to date with the latest advancements in this area, particularly as the technology is set to explode. The market for AI is forecast to reach a CAGR of 30% between 2021 and 2026, due to the increase in demand for AI-based accounting software thanks to the sharp rise in digital payments, fuelled by the pandemic.
Cryptocurrency and Blockchain
Blockchain is related to the transfer of assets and maintaining a ledger of accurate financial information. Foreseen by one major accounting firm as the future of accounting by being well placed to “drive real productivity”, blockchain technology is already making significant leaps and bounds in the sector through driving efficiencies by streamlining the tracking of digital assets.
It is predicted that massive changes will happen in Bitcoin and other cryptocurrencies in 2022. While these digital assets are currently only used for remittances, purchasing illicit goods, and transferring money from one side of the world to the other, the feeling is that mainstream adoption will very soon take hold globally, particularly with investments. This is already being seen with digital service providers including Uber and Airbnb, with the latter on the verge of becoming one of the first start-ups to begin accepting Bitcoin as a form of payment. And El Salvador became the first country to make Bitcoin a legal tender in September 2021. As well as consideration for investments and payments, it is likely that money-laundering prevention will also come to the fore with blockchain and cryptocurrency, presenting a reporting burden for your clients, and a service opportunity for your business.
Sustainability and the environment
Environmental sustainability is the buzzword, as organisations face more pressure to reduce their climate impact. It creates one of the accounting sector’s biggest opportunities. The pandemic and COP26 have served as a stark reminder that sustainability issues are fundamental to an organisation’s survival, as they become increasingly accountable not just for their finances but for the sustainability of their operations. This is not just simply to ensure compliance, but more and more, it is driving their short-term and long-term prospects. While many look to the government for legislative action, it is likely the consumer purchasing power will be the real driver for environmental change, and companies and their accountants will do well to recognise this.
This trend places accountants at a significant advantage, as managing that sustainability requires risk assessment and reporting skills, things that they are ideally placed to provide. As sustainability efforts evolve, so the sector is primed with the perfect opportunity to innovate through offering eco services to help their clients measure the degree to which they are operating sustainably. Providing assurance over climate reporting and disclosures is particularly important as it can boost reporting credibility as well as increase business resiliency and trust in the financial markets.
Environmental, social and governance (ESG) issues are also now key concerns – and a major pull – for global investors, as their sights are now fixed on sustainability and climate change. As a major part of that criteria, businesses will be required to measure and reduce their greenhouse gas emissions. While financial numbers are prepared in accordance with accounting standards, there aren’t yet any defined standards for ESG, presenting a widespread growth opportunity for auditing.
Although uncertainty remains in 2022 as we navigate our way out of a pandemic, technology and sustainability will be the main drivers in the accounting industry, creating a need for upskilling and encouraging familiarity with technologies that will help meet client demands.
*Source: Research Report: The Future of Accountancy – the Institute of Financial Accountants, 4th March 2021