It’s almost the end of the year, the perfect time to review your successes and start planning for the year ahead. Before we dive into the 2019 accounting trends to watch out for, let’s do a quick health-check...
2018 saw a significant shift in attitude towards technology and automation. Accountants and bookkeepers are embracing it more than ever before, using technology to unlock time for more enjoyable, value-adding activities.
This shift is reflected in the stats. By 2026, the global accounting software market will be worth around $11.8 billion according to Accounting Today. Subscriber growth numbers continue to climb. Xero users grew by 24% over the past 12 months, QuickBooks Online subscribers grew by 41%, MYOB is on track to pass a million users by 2020, and Sage is doubling down on Sage Business Cloud.
So, what will 2019 bring to the table? Here are 5 accounting and bookkeeping trends you need to know about in 2019.
Are you using the best practices of going paperless? Learn industry tips and tricks in this free playbook.
1. THE Power OF BANK DATA WILL BE UNLEASHED
Earlier this year, the EU introduced ‘Open Banking’, a directive targeted at leading banks to share their data securely with authorised organisations. This has since expanded globally, with QuickBooks Online, Xero, MYOB and Sage introducing new banking features.
At Xerocon Brisbane, Xero released a full-featured open bank API. This gives banks and fintechs the ability to securely and efficiently get information in and out of Xero. QuickBooks Online also announced two new features at QuickBooks Connect San Jose: ‘Statement Auto-Import’, which imports your clients’ bank statement into your bank-feed screen automatically, and ‘Smart Money’, aimed at helping users secure funding. Both features are currently only available in the United States, but both are set to roll-out in more regions in the next couple of years.
These developments sync neatly with the rise of digital-first banks. The UK has already seen entrants such as Tide and Starling Bank grow fast, while formerly consumer-focused Monzo recently announced an SME offering, then raised £20M in two days through crowd-funding. Australia’s financial authorities opened the door to alternative digital banks in May 2018, with Volt Bank being the first to win an authorised deposit-taking institution (ADI) licence.
How can you embrace open banking?
Digital banking promises to make bank data more accessible, more mobile and therefore more useful. For example, online lenders can review ledger records, bank statements and income all at the same time, and give funding proposals in minutes rather than days.
While many of these services are SME-focused, accountants and bookkeepers will be ideally placed to use these tools to spot opportunities for their clients. It’s down to you to make sure your technology systems are set up to take advantage of this.
2. STRONGER FOCUS ON CASH-FLOW CONSULTING
Small businesses drive the global economy. There were 5.6 million small businesses at the start of 2018 in the UK alone, accounting for 60% of all private sector employment. In the US, more than half of Americans own or work for a small business.
Businesses live or die by having enough cash in the bank. Without creating and maintaining an accurate cash-flow forecast, businesses are unable to plan for the long-term, make crucial investments or employ staff to support growth. Yet, with an estimated £141 billion tied up in late payments, an estimated 50,000 businesses are failing every year. And that’s just in the UK.
Thankfully, a team of cash-flow management solutions have appeared on the scene, united by their mission to help small businesses succeed. Innovation foundation, Nesta, recently announced the winners of the ‘Open Up Challenge’. Established fintechs, business finance marketplace, Funding Options, and automated lending platform, iWoca, were both named as winners. They were joined by Fluidly, a London-based Fintech specialising in helping small businesses predict and improve future cash-flow. Founded in 2016, they raised £2m in seed funding in 2017 and a further £5m ($6.5m) in November this year.
How to embrace cash-flow consulting
With the new technology on offer, you can build a modular tech stack that offers cash-flow management solutions to your clients. Just a few changes can make a huge difference. For instance, the Xero Cashflow Playbook found that clients using an electronic payment service such as PayPal or Stripe get paid between 10-20 days faster.
The first step to creating efficiency is getting the right data in. Use Receipt Bank to automate your manual data entry of bills and expenses. We pull the data you need with market-leading accuracy, so you have more time to focus on consulting.
3. COMPLIANCE IS BACK IN THE CONVERSATION
This year, we saw a revival of the importance of compliance. Advisory services have become the buzzword in recent years, as automation handled more of the manual work of keeping businesses compliant. Yet all the changes in technology are, ironically, bringing compliance back to fore as SMEs look to their advisors for help remaining on top of their affairs in the digital age.
Taxes are getting a makeover in the US and UK. The IRS are currently implementing the Tax Cuts and Jobs Act (TCJLA), which affects individuals, businesses, tax exempt and government entities. Changes range from making the Form 1040 the size of a postcard to limiting itemized deductions and overhauling tax withholding for wages.
Meanwhile in the UK, Making Tax Digital (MTD) will come into effect in April 2019. It’s a move by HMRC to transform the current system of filing tax returns, to move from once-a-year tax occurrences to quarterly digital VAT returns.
These global legislative changes signal the beginning of a new era of cloud accounting. To help small businesses become compliant in the UK, Xero have acquired Instafile to connect accountants and bookkeepers to compliance bodies including HMRC. Plus, QuickBooks US have made it easier for businesses to calculate how much tax they collect. QuickBooks Automated Sales Tax automatically updates to let businesses know when and how much tax they need to pay, in order to remain compliant.
How to embrace compliance at your firm
Worldwide, compliance is becoming less of a black-and-white must-have, and more of a powerful commercial tool. This 2018 State of Compliance report by PWC painted a positive picture of the state of compliance, putting technology at the forefront. Just over half of respondents had data analysis tools in place, while just under half were using dashboards, continuous monitoring, data warehousing and data extraction tools like Receipt Bank to manage compliance.
This brilliant read in The Financial Times shows how technology and compliance are becoming more and more intertwined, in a way that “plays to the strengths of The Big Four auditing and accountancy firms, and other new professional services businesses.”
So, look into investing in training for your staff to develop transitional skills, and integrate compliance technology into your firm. You don’t have to become a compliance factory, nor replace compliance with advisory. The two can work hand in hand.
4. CHANGING EXPECTATIONS IN THE ACCOUNTING AND BOOKKEEPING WORKPLACE
Clients are expecting more from accountants. In fact, 83% of clients are demanding more from their accountants today than 5 years ago, according to a new global study by Sage. And teams are expecting more, wanting more meaningful roles that go beyond data entry and processing. Instead of patiently wading through numbers, more and more accountants are stepping into client-facing positions.
One key trend we saw this year was the role of technology in helping firms attract and retain top tier talent. Many practices, ranging from Intuit’s UK Firm of the Future PJCO to Enkel in Canada, are using technology to attract graduates from leading universities - graduates who have grown up with technology and enjoy problem-solving. They are increasingly expecting more freedom and flexibility from the workplace.
In a recent Mckinsey discussion paper on the future of work, demand for “social and emotional skills such as leadership and managing others will rise by 24 percent” worldwide. A 2018 Salesforce report suggests, 54% SMB leaders are kept up at night by the challenge of finding their next great hire. It is therefore imperative that you can compete with other firms and adapt to the changing skill-set.
How to embrace the change
Now, basic data entry and processing can be done by machines, you need to invest in a culture where your team want to contribute, get behind your mission and can lead where necessary. So, make technology a selling point from the get-go, and invest in your team’s ongoing training to adapt to the changing skillset.
5. KNOWING YOUR VALUE IN THE AGE OF AUTOMATION
This year saw the rise of a new kind of bookkeeper: Automation reached the level of sophistication required to provide a less human, more affordable service. It raises the question, how can human accountants and bookkeepers protect their role and retain clients?
In November, venture capital firm, Defy, invested £9 million into Visor, a new startup in the US. Visor is designed to give ‘the average American’ an intuitive way to deal with taxes, without having to hire a professional tax advisor. And with upcoming tax changes in the US, it arguably couldn’t come at a better time.
Likewise, AI Bookkeeping startup Botkeeper raised $18m in a Series A funding round. It was one of the largest A rounds for a Boston tech company, led by Greycroft and Gradient Ventures, Google’s AI-focused venture fund. And its promise is to provide businesses ‘with a 24/7 AI-driven botkeeper, coupled with human bookkeepers who can jump in and help where necessary”.
In many ways, Botkeeper illustrates the continuing role of human bookkeepers in automation. While technology can do a lot of the heavy-lifting, human empathy and the ability to talk through problems is still a valuable part of the bookkeeping experience.
How to thrive and not just survive
Planning is essential. So, map out where you want to be, continue to build industry connections and deepen the value of your client relationships. These are the things that will help you stand out, continue to add value for your clients and equip businesses with the financial resources of a much larger company.
Digital transformation has been set on the agenda for every industry across the world, and it’s now being felt in even the smallest of businesses. So, embrace change. Embrace cloud technology. And, embrace people. The only constant here is change, and finding stability in its ebb and flow. With these five trends as your guides, make 2019 your best year yet.
What accounting and bookkeeping trends are you most excited about?