Future of Accountancy Practices

Can You Future Proof?

Fundamentally I don’t think you can future proof your practice in any great detail, what you can do is make sure you have processes and talent in place to be responsive to regulatory and digital changes in the market place and manage the changing tension between fees and service levels. We have heard lots of scare stories about AI and the threat to jobs in Accounting and Financial Services and AI can take away a lot of low skilled, repetitive work. Technology and machines have always done this, ever since the invention of the abacus- double entry bookkeeping has not changed in 600 years, what has changed are the expectations around measures of service and compliance. In Accountancy Practices, technology will always save significant time in processing but in future should create more opportunities to get to know the client and their requirements and perhaps create further revenue by cross selling.                                                               Using Information gleaned by your AI bookkeeper who can help you develop profiles of your client and take their spending habits and business models into new territories. With the advent of blockchains, quantum technology we have still to make our minds up whether this empowers the Accounting Practice to be more open and transparent when it comes to knowledge of the client or whether it is just another way of communicating and completing a transaction. Accountancy practices have to decide whether to adapt their own business models or continue to offer a compliance service Certainly new technologies have a dark side and there may be opportunities for its (mis) use which will worry Banks, Governments and regulators. The good side is that Future Fintech technologies will ease client pain points and replace outdated processes and length of time it takes to transact. There will be other professions and transactions like Estate Agents and Property purchases that will also be affected. The threat of disintermediation and disruption of linkages within a transaction chain can only be good news for client. Or can it ?             History Proofing In the 1990s we grew up with a move towards ‘consultancy fee-based billing’ and Accountants began using a tick box approach to audit and accounting services replacing more traditional judgement calls in the face of more and more compliance led events. This particular generation of Accountants were the forerunners of a methodical approach which eventually manifested itself into a plethora of accounting packages and cloud-based computing meaning real time access to information for both the client and the accountant. This trend will continue but the return of judgement and human interaction will still be important for those clients and Accountancy Practices who are entrepreneurial and innovative. For example, Accountants may have a role to play in providing a speed(ier) dating agency service between types of business model and more appropriate terms of funding, especially where working capital lock ins of debtors and stock can be turned into cash more quickly. Fast forward to the future and the news that Accounting software is looking to create Algorithms and use AI to assist funding in more relevant ways and still maintaining strong rules-based compliance checks and balances       New News What is equally good news for the client is the effect on minimising transaction costs because business now will have a much easier way of transmitting contracts and money, so in that respect jobs are being ‘stolen’ by AI. This has a knock-on effect of making transactions quicker and simpler, therefore more competitive and cheaper. Even if we come away from the latest developments in Fintech, the fact that AI is involved in basic accounting, compliance, credit, marketing and sales information gathering could be further good news for clients. However, in a target driven financial service organisation this may not allow time to actually ‘understand your customer’ ( even though we have claims that digitisation will enhance the ‘know your customer’ landscape), so are we may be in danger of seeing a cyclical re occurrence of digital tick boxes ( performed by Algorithms )and losing the human touch..                                                      AI may be enhancing the transactional nature of Accounting/Client engagement by creating more room for a relations based initiative and time to really understand the consumer and co- worker, provided we have humans as the ultimate arbiter and equally provided that the Accountant does make a comeback , get interested in client behaviour and sift through the data sets and analyse what the algorithms are actually providing. Applying common sense and judgement is something learned from experience and I question whether AI can do this. My own experience would be that Accountants in Practice have their work cut out because the Regulatory authorities ( companies House, PRA, FCA, HMRC )assume that AI can be used as an excuse to go back to tick box driven data transfer when in fact instead of tick boxes we now have algorithms to contend with and Accountants have to adopt to a one size fits all approach because of what the algorithm is measuring/ assessing In addition, this differentiation and meta-analysis can only be sensibly applied by a human accountant ( Tautology? who has the time to understand the relationship and the changes in their client over time Trying to contact a client in the tech environment is fraught with difficulties, simple request for updates or variations on a transaction making it nonstandard and not fitting the ‘process’ or ‘workflow’ inevitably means interaction with a human being at some point, many phone calls from accountants with new clients follow a set pattern of identification, algorithm led questions and relentless clicking of the key board as the representative is busy filling in answers to their standard questions.                                                                                                    The Human Touch ( and limiting factor) The issue is the Accountancy Practice will still have a mass of cases or projects on the go and cannot possibly keep up with the processing speed of tech. Hence when the client calls for attention, invariably the response will be, can I ring you back, or can you wait until I pull up your case details? It is not that Accountants are unable to answer your query, it is more that they have information overload in their brain because tech has speeded up the number of cases an accountant needs to keep in their heads at one time, inevitably it means going into a system, looking at the details and re familiarising with the case and what correspondence or items are still open. You can’t flick through a digital file, you have to go at the speed of the screen pagination and the relevant records and the up and down screen management to find what you want. Internal data and accounting systems are still too clunky For all notions that humans can multi task, the research has shown we can only do one thing well at a time, so if you want excellent customer service you really do have to concentrate on the job in hand and not be distracted by other (equally) pressing issues. Herein lies why there is still hope for the Accountancy Practice.                                                                                     Algorithms are not designed for non- standard transactions, or indeed anything out of the ordinary but humans are. Also, Accountants are mentally and physically still scarred (and scared) from the liquidity crisis which                                                                                                                            a) means they are still coming to terms with their own portfolios and the nurturing required to get their clients through that experience.                     b) their resources are therefore directed towards compliance and the ever changing rules rather than innovation and do the rule makers know the unintended consequences of what they are trying to enforce.                         c) Accountancy Practices have effectively sub contracted innovation and fintech to the outside world and don’t have the resources to generate bespoke systems themselves that fit their client simply because one size will not fit all. The trouble with this thought which will trouble the Accountancy Practice is that the software providers are becoming bigger and dictate the relationship he Accounting Practice of the future may wish to bypass this agency issue and develop their own software packages that fit their particular client portfolio and become more niche rather than trying to make sense of all the different packages out there . Certainly at the smaller end of the market where clients don’t have their own accounting function, that market seriously needs better knowledge and preparation by the client when submitting data to their Accountant We at Wincham offer a bespoke accounting package for free because we can service the client more cost effectively if they follow our system .                                                                     d)What Accounting Practices and clients don’t like is dealing with regulations, especially those based on principles and not algorithms which is why we have tensions between two important ways of working, one with an eye on compliance and regulation and another with a more client friendly way of working and adding value to the client’s business. We have seen the frustration around driverless cars because the motor industry struggle with regulations and bureaucracy which slows ideas down, so this idea of disruption is diluted because of rules put in place for a reason. It also means we have to split intelligence and IT with Ethics and Principles, all tensions that get in the way of Accounting and profit.                                  If we are going to future proof Practices through the use of IT we need to go back to first principles and understand the Ethical framework of how we operate with this new technology which brings in ideas around data management, behaviour and philosophy. Fundamentally we need to be principles driven rather than AI induced rules driven. In theory it should make the market more competitive as accounting practices allow third parties ( software houses) to explore alternative products and costings. However, the involvement of third parties adds another layer to the relationship with the client and the issue around legal, governance, data privacy and security raises its head again. Although the idea of a third-party intermediary may be helpful, the necessary safeguards and KYC rules need to reflect the role of the third party and whether there would be a conflict in recommending other products. If the objective is to open the market then this should drive down costs, the reality is that this commoditisation comes at a cost of losing the relationship with one particular client because you may not be comfortable dealing with their software and spend most of your client time correcting accounting errors and bank reconciliations                The Future Accounting Practices may become conduits or ‘dumb pipes’ for these multi channel communication platforms or they may grasp the opportunity to become orchestrators of additional services The Jury is permanently out , especially when conflicts of interest and independence spring into the client relationship Accountants have to acknowledge their broader role in Society and Tech should be tantamount to a ‘commons’ approach to client service. Accountants will have to significantly invest in their existing IT systems to enable them to be a market leader in service. I have personal doubts whether we can keep up with the pace of technological change necessary to provide real time information across several platforms when we have already seen retail disasters with IT initiatives and simple access to money denied. The biggest obstacle to Accounting innovation is the trade off between the cost of legacy systems upgrade, the pace of change brought on by Fintech and client demands of different generations Strategies for change The larger established Accounting Practices are still reeling from the effect of various corporate scandals so any change required will inevitably mean more risk assessment and management. I don’t see much evidence of any of these larger Practices setting out a clear IT/client communication strategy and trying to change their behaviour, the latest scandal invariably involves investigation by the regulatory authorities, some form of rebuke or fine but no fundamental shift in behaviour. So too at the lower end of the market with risks of non-compliance with a wealth of data means Practices are becoming more risk averse when it comes to innovation. Purely and simply because regulation and oversight shift quickly in response to market demands. It is almost built in to Accountancy Practice business models that fines are a way of life. . Such a reactive approach inevitably means that innovation is toned down and it will mean that new entrants and challenger Accountancy Practices that are riding the new wave of innovation would be in a better position to take advantage of these changes. We may see a segmentation and break up of the Big 4 cartel and at the lower end more niche or boutique accounting practices. This will have a profound impact on the way Practices market themselves and differentiate amongst each other so future proofing is not a one size fits all approach Are we moving towards a future where Accountants will market all their USP via APPs, marking the end of the traditional, face-to-face/General Practice client relationship? Yes because we have opted for a digital economy. Future proofing assumes you know you have identified your target market needs rather than promote what you can supply, I am not sure with many Practices that they understand the difference., nor do they understand that the only way is Ethics. If you want to be an all singing all dancing multi-disciplinary practice then the future just got more expensive .

that fit their client simply because one size will not fit all. The trouble with this thought which will trouble the Accountancy Practice is that the software providers are becoming bigger and dictate the relationship he Accounting Practice of the future may wish to bypass this agency issue and develop their own software packages that fit their particular client portfolio and become more niche rather than trying to make sense of all the different packages out there . Certainly at the smaller end of the market where clients don’t have their own accounting function, that market seriously needs better knowledge and preparation by the client when submitting data to their Accountant We at Wincham offer a bespoke accounting package for free because we can service the client more cost effectively if they follow our system . d)What Accounting Practices and clients don’t like is dealing with regulations, especially those based on principles and not algorithms which is why we have tensions between two important ways of working, one with an eye on compliance and regulation and another with a more client friendly way of working and adding value to the client’s business. We have seen the frustration around driverless cars because the motor industry struggle with regulations and bureaucracy which slows ideas down, so this idea of disruption is diluted because of rules put in place for a reason. It also means we have to split intelligence and IT with Ethics and Principles, all tensions that get in the way of Accounting and profit. If we are going to future proof Practices through the use of IT we need to go back to first principles and understand the Ethical framework of how we operate with this new technology which brings in ideas around data management, behaviour and philosophy. Fundamentally we need to be principles driven rather than AI induced rules driven. In theory it should make the market more competitive as accounting practices allow third parties ( software houses) to explore alternative products and costings. However, the involvement of third parties adds another layer to the relationship with the client and the issue around legal, governance, data privacy and security raises its head again. Although the idea of a third-party intermediary may be helpful, the necessary safeguards and KYC rules need to reflect the role of the third party and whether there would be a conflict in recommending other products. If the objective is to open the market then this should drive down costs, the reality is that this commoditisation comes at a cost of losing the relationship with one particular client because you may not be comfortable dealing with their software and spend most of your client time correcting accounting errors and bank reconcilaitions The Future Accounting Practices may become conduits or ‘dumb pipes’ for these multi channel communication platforms or they may grasp the opportunity to become orchestrators of additional services The Jury is permanently out , especially when conflicts of interest and independence spring into the client relationship Accountants have to acknowledge their broader role in Society and Tech should be tantamount to a ‘commons’ approach to client service. Accountants will have to significantly invest in their existing IT systems to enable them to be a market leader in service. I have personal doubts whether we can keep up with the pace of technological change necessary to provide real time information across several platforms when we have already seen retail disasters with IT initiatives and simple access to money denied. The biggest obstacle to Accounting innovation is the trade off between the cost of legacy systems upgrade, the pace of change brought on by Fintech and client demands of different generations Strategies for change The larger established Accounting Practices are still reeling from the effect of various corporate scandals so any change required will inevitably mean more risk assessment and management. I don’t see much evidence of any of these larger Practices setting out a clear IT/client communication strategy and trying to change their behaviour, the latest scandal invariably involves investigation by the regulatory authorities, some form of rebuke or fine but no fundamental shift in behaviour. So too at the lower end of the market with risks of non-compliance with a wealth of data means Practices are becoming more risk averse when it comes to innovation. Purely and simply because regulation and oversight shift quickly in response to market demands. It is almost built in to Accountancy Practice business models that fines are a way of life. . Such a reactive approach inevitably means that innovation is toned down and it will mean that new entrants and challenger Accountancy Practices that are riding the new wave of innovation would be in a better position to take advantage of these changes. We may see a segmentation and break up of the Big 4 cartel and at the lower end more niche or boutique accounting practices. This will have a profound impact on the way Practices market themselves and differentiate amongst each other so future proofing is not a one size fits all approach Are we moving towards a future where Accountants will market all their USP via APPs, marking the end of the traditional, face-to-face/General Practice client relationship? Yes because we have opted for a digital economy. Future proofing assumes you know you have identified your target market needs rather than promote what you can supply, I am not sure with many Practices that they understand the difference., nor do they understand that the only way is Ethics. If you want to be an all singing all dancing multi-disciplinary practice then the future just got more expensive .