Accounting industry evolution and revolution

Accounting is one of the oldest professions in the world.  As we look back on our long history, we can see drastic improvements in how the role of our profession has evolved in society and in technology.

Without taking us too far back to the development of double-entry accounting, let’s focus on more recent decades. For most of the 1970s and 80s, accountants worked with paper spreadsheets and manual calculations. With limited resources, this limited the scope of their engagements and what they were able to achieve.

As new technologies began to emerge, from computers to digital analytics tools to cloud operations, methods of accounting grew more intuitive and intelligent.

In the present day, the result of this evolution is an industry where accountants are more reliant on technology and digital collaboration than face-to-face interaction and manual work. Accountants have a plethora of tools at their disposal, the question that remains is – will they use them?

Development accelerated by the pandemic

As was the case with many established sectors, the Covid pandemic had a profound impact on the way business is conducted in the accounting sector and significantly increased the pace of change in the industry.

Due to public health restrictions, the client-accountant working relationship moved strictly to digital. Historically, onsite meetings such as these were where clients would provide paper copies of supporting documents and face-to-face time to discuss the progress of the engagement.

The industry had to adapt to fit the requirements of this new reality, which led to widespread digital transformation and adoption of technology that allowed engagements to progress without the need for regular face-to-face interaction.

Simple measures, for example enabling clients to securely sign documents virtually, became essential. Firms also had to search for and identify new methods for sharing sensitive documents as the risk of data breaches grew.

Setting a precedent

This was only the tip of the iceberg in terms of technological capabilities and advancements that accounting firms would soon identify, develop, and onboard. If we fast forward to 2023, the leading firms in the industry set a precedent that technological advancement will be key in a profitable and relevant business by announcing their collective commitments to investing billions into new technologies like artificial intelligence (AI).

There will be a lull in the hype of quickly developing and utilising AI technologies as regulatory bodies set guidelines, firms better understand compliance risks associated with its usage, and development roadmaps inevitably hit roadblocks. However, the pressure to push forward in development must remain if the accounting industry intends to stay relevant and combat the issues plaguing the industry currently, such as capacity shortages and negative perceptions of accounting as a slow-moving industry. 

Incentivising transformation

It’s easy to discuss the pitfalls in an industry and how topics like labour shortages, work-life-balance, barriers to entry and the rise of similar disciplines like analytics may be incentive enough to engage in a digital transformation project. However, there are many factors at play. Accounting firms have reached record profits in recent years so many firm leaders may wonder why they need to make a change.

This is a very short-sighted firm vision. With the combination of factors previously mentioned, plus external factors like the rise of other providers creating more cost effective and similar online offerings for tax services and more software vendors verticalising into other industries that are more willing to try new technologies, firms will continue to see other industries eat their lunch and lose out on the ability to advance and develop their own tech stacks. 

Rise in Digital Transformation Offices

Accounting firms that are proactively taking steps to advance their tech stack using dedicated teams made up of chief innovation officers and digital transformation managers to name a few, will be able to improve speed to delivery and increase capacity through better application of technology. These firms will benefit from the ability to diversify their offerings into more profitable lines of business, for instance Client Accounting Services (CAS) and the expected rise of Environmental, Social and Governance (ESG) reporting, as they will have more capacity to do so. Digital transformation is the first step into maximising the potential of a firm. From that point forward there are endless possibilities into what the landscape of the modern accounting firm can look like.