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There are changes aplenty occurring in the accounting industry as we bid 2023 adieu and look to the future. Evolving tech integration and regulation are two major topics set to shake up the accounting industry over the next 12 months. Jonathan Barber, Executive Director – UK, of the Institute of Financial Accountants (IFA), looks at what knowledge and insight has been gained to take the sector forward into 2024.
Outsourced accounting services
The demand for outsourced accounting services is rising significantly on a global scale, with the market forecast to grow at a compound annual growth rate (CAGR) of 9.1% from 2023 to 2030. The surge is being fuelled by the need for affordable solutions and the growing complexity of financial operations. Companies, particularly SMEs, are turning to outsourcing accounting services in order to save operating costs and obtain access to specialised knowledge. The accounting industry’s digital transformation, which makes it possible to integrate outsourced services seamlessly, is another factor driving this trend. Outsourcing accounting services give companies scalable options for everything from basic bookkeeping to sophisticated financial analysis, enabling them to effectively adjust to shifting market conditions.
AI, digitisation and technology
Accounting has changed dramatically with the introduction of automation and AI. Nearly 40% of accounting tasks are now automated, improving accuracy and efficiency, according to recent research. Traditional accounting methods are being revolutionised by this trend because AI algorithms are now able to swiftly analyse huge datasets, spot patterns, and even forecast future trends. This implies that companies using outsourced accounting services will have access to more advanced data analysis tools.
This streamlined administration enables accounting professionals to focus on more strategic aspects of finance by using automation, which also lowers the possibility of human error. As automation and AI technologies develop further, the accounting industry will continue to evolve. As it does, the sector must ensure it is ready for the changes.
Sustainability
ESG (environment, social, and governance) considerations are becoming more and more important to accounting procedures, reflected in the rapidly rising number of UK businesses achieving BCorp certification in 2023, which tripled from 500 to over 1,500. This marks a profound shift towards more ethical and environmentally conscious operations, underlining a company’s commitment to creating a positive impact on the world while generating sustainable profits.
Over 75% of large companies currently report on sustainability, according to the Global Reporting Initiative (GRI). This change goes beyond just compliance; it is also about risk management and value creation. Accounting firms are incorporating ESG considerations into their reporting and advisory services in response to investors’ perceptions that companies that implement ESG practices are more appealing. In order to assist businesses in complying with international sustainability standards, outsourced accounting services are also adapting and now provide ESG reporting. It is anticipated that as stakeholders demand greater accountability and transparency from businesses, this trend will pick up steam.
Legislative changes
A number of legislation changes are coming in 2024, which accountants need to be prepared for.
Among these are the Economic Crime Bill reforms to tackle money laundering and reform Companies House. The flagship legislation will bring in stronger AML powers to tackle illicit activity such as the seizure and recovery of suspected criminal crypto assets, to prevent the abuse of limited partnerships, and to give businesses more confidence to share information to fight economic crime.
There will be huge sweeping changes made to accounts and filing requirements for smaller companies, as part of new powers given to Companies House, said to form the biggest shakeup to the service in its 180-year history.
Basis Period Reforms will be another big change in 2024 for self-employed individuals and partnerships which do not use an accounting period end date between 31 March to 5 April. Accountants will need to get ahead of the curve by staying informed in anticipation of these changes.
Big data and analytics
Finance teams are under increased pressure to deliver current reporting more frequently. There is now increasing demand by leaders and stakeholders to receive a real-time update on a company’s financial health when the future is uncertain. Big data is enabling better informed decision-making, which is in turn revolutionising the sector. In 2024, it will become more important for accountants to have access to current financial data and business analytics for clients to draw in investors.
A recent report stated that 53% of businesses use big data analytics. With the help of this trend, accountants are now becoming strategic business advisers in addition to maintaining records and complying with regulations. Predictive modelling, risk assessment, and financial forecasting are made possible by big data analytics, which offers insightful data that can encourage company growth. Accounting outsourcing services are using big data to provide more complex and sophisticated financial analysis, giving their clients a competitive edge.
Blockchain technology
The accounting industry is quickly adopting blockchain technology due to its potential to improve financial transaction security and transparency. It is revolutionising the way transactions are reported, verified, and recorded, including traditional, time-consuming methods like auditing. It is providing a safe method of keeping financial records, therefore lowering the risk of fraud and errors. Blockchain’s incorporation into accounting procedures marks a dramatic change towards financial reporting that is safer, clearer, and more effective.
Every transaction on a blockchain is traceable and time-stamped, enabling auditors to efficiently verify data. This feature improves accuracy while drastically cutting down on the time and resources needed for audits.
Moreover, blockchain technology can simplify compliance processes. Automation of compliance tasks is possible with smart contracts which are self-executing for blockchain-stored contracts with predetermined conditions. These agreements minimise the possibility of mistakes or fraud by guaranteeing that all concerned parties abide by specified rules and regulations.
Accountants will need to be able to offer advice on blockchain adoption and take into account how blockchain will affect their clients’ and companies’ operations. Though it will not require them to become programming experts they will need to recognise the value in the system and to identify software solutions that facilitate their use. They can also serve as advisers to businesses thinking about integrating blockchain technology by offering guidance on balancing the benefits and drawbacks of the new system. Due to their combination of financial and business acumen, accountants will be in a unique position to assist businesses exploring new opportunities with these emerging technologies.
