5 Trends Driving Disruption in the Accounting Industry
Double-entry accounting was invented at least a 1,000 years ago. Big changes are long overdue.
Over the past few years, new technologies and tools have emerged and transformed just about every aspect of business, including marketing, management, web design and HR. It’s easy to feel like accounting and bookkeeping have been forgotten. Until recently, the industry was stuck in the dark ages. But with the emergence of powerful new technologies over the years, it’s finally beginning to look like an industry that’s ripe for disruption.
Before delving into the specifics of the accounting industry and the impending disruption, let’s take a moment to review some of the common drivers behind general disruption.
Complacency: This is the biggest sign that disruption is on the way. When businesses get complacent and decide to coast on past accomplishments, outsiders take notice and see an opportunity to come in, and stake a claim.
Frustration: Couple complacency from vendors with frustrations from customers, and some friction starts to develop. Customers want better offerings, but the vendors realize they have nowhere else to turn. Again, outsiders take notice, and see an opportunity.
Lack of automation: Everything is about automation in business. If there’s a task that’s still being performed manually, it’s costing companies time. Someone else will try to come in, and disrupt the industry by offering an automated solution to satisfy the frustrations of existing customers.
Emphasis on innovation: Finally, disruption starts to boil over when you see startups enter the marketplace, and prioritize innovation. This leads to larger companies taking notice and either purchasing these startups or revamping their own approach to innovation.
When two or more of these drivers are present in an industry, then you can accurately predict disruption is right around the corner. Looking at the accounting industry, it’s easy to see how all four of these drivers are in play. In other words, disruption is imminent.
While it’s easy to see how those four factors are present in the accounting industry, let’s dig a little deeper and actually analyze some of the trends that are driving disruption at this very moment.
1. Clients want better connectivity.
Take a look at any service-based industry, and you can identify ways in which processes have become more customer-centric. Well, with the Internet, cloud technology and remote tools, accountants have the ability to connect with clients in meaningful ways. And it looks like they may be finally taking advantage of these capabilities.
“Online technology is giving us real connectivity with our clients and their team,” Brett Bennett said. “It means we’re having completely different levels of discussions regarding their farms. We can collectively discuss scenarios and business plans, and our clients recognize that value.”
2. Automated data entry.
Automation is the key driving factor in accounting and bookkeeping disruption.
Specifically, we’re seeing this lead to the disappearance of manual data entry. Thanks to things like automatic imports, electronic documents and robust software solutions, some businesses are even able to eliminate data entry completely.
This leads to more efficiency and allows businesses to better utilize human capital.
“The greatest disruption will result from automation of data entry and workflows. This alone leads to three major changes. One, faster processing which translates into real-time reporting and more timely financials. Two, increased accuracy with less human error. And three, significant reductions in cost on an order of magnitude of 50 to 75 percent”, accounting technologist Louie Balasny said.
3. Growth of the DIY approach.
One trend that we’ve been keeping any eye on for years is the growth of accounting software. And now that cloud solutions - such as QuickBooks -- have entered the marketplace, we’re seeing a lot of small businesses trying the DIY approach.
On a related noted, things like web tutorials, YouTube videos, webinars and search engines, now allow businesses to access just about anything necessary to handle their own accounting and bookkeeping needs.
“This act of moving accounting online doesn't precipitate the end of accountants,” accounting expert Jonathan Poston said. “However, what does push accountants to the margins is how inexpensive and user-friendly the new online accounting software is.”
4. Machine learning and powerful insights.
Accountants are generally able to sort through data, and deliver predictive insights based on past information. However, as technology advances, things like machine learning and artificial intelligence (AI) are making it possible for accountants to access real-time insights that can be used in the moment to add value to businesses and clients.
“An accountant will be able to look at [the insights], and hopefully the big data systems will be intelligent enough to be able to say: Here are the key things happening in this business which are different to other businesses in that category,” one expert says. “This business is not performing in these areas, so go out and have a discussion with your client about those things.”
5. Demand for specialization.
We’re seeing it everywhere. People and businesses are getting a taste of specialization, and they’ve now come to expect it in every product or service they use.
If you think about it, specialization is one of the driving factors of disruption in every industry. Cable customers are cutting the cord and choosing à la carte alternatives. Social media users can tweak filters to see only the content they want to consume. Smartphone users can pick which apps they want. The list goes on and on.
In terms of accounting, this is boiling over and creating a demand for specialization over bundled packages. Businesses only want to pay for the accounting and bookkeeping services they need. This is ultimately putting added pressure on the marketplace. As a result, accounting software providers are adjusting their product offerings and pricing structures accordingly. In the future, look for accounting solutions to become à la carte.
There’s no doubt that disruption is right around the corner. The accounting industry is still in the dark ages, when compared to other industries, but there’s currently a major emphasis on modernizing through automation.
It will take a few months, but don’t be surprised to see an entirely new accounting industry in 2017 and beyond.