Accounting industry trends
Like any other industry, accounting is highly affected by megatrends. Understanding these trends and how they affect the industry is important, especially when it comes to strategic planning and future investments.
1. Digital transformation
There’s no denying that digital opportunities and new technologies are changing the way we operate. Digital transformation is happening all over the world with different legislations, guidelines, and market demands guiding us forward. The recent pandemic has also accelerated the adoption of digital transformation and made it to be a more urgent priority for many organizations – like accounting software providers and their clients.
Currently the digital change is happening perhaps faster than ever before. Adopting new technologies isn’t no longer a choice, but a necessity. To remain relevant in the competition, companies within the financial management and accounting industry have to look for technological solutions that can help them keep their business viable and efficient. This will require decisions for what technologies are needed to succeed in the future and adapting for the new procedures from the accounting teams.
2. The rise of Artificial Intelligence
As a natural part of the digital transformation, the increase of Artificial Intelligence (AI) will have a significant impact on the financial management and accounting industry.
AI and Big Data have emerged to be the most essential technologies to develop financial-tech applications. These technologies have enabled machines to learn from their own experiences, unravel hidden patterns in data, generate insights and create automated decisions. These technologies are being used to automate mundane and highly repetitive tasks such as processing invoices, capturing data from PDFs, and making payments (Jain 2022).
During this decade accounting automation is seen to be unavoidable (Talouselämä 2022).
Automation solutions are not new when it comes to accounting but incorporating more AI solutions to them helps make them more intelligent and able to create more value. Automation solutions are going to take care of many manual processes that were before considered to be the job of the accountant. This leaves the accountants with more time to focus on things that matter and create more value for the customers.
3. Accountants become a strategic partner
There have been some concerns that AI will make accountants useless and steal their jobs, but the reality is quite the opposite.
The digital change is not expected to reduce the overall demand for accountants and auditors. Instead, it will make accountants more important by giving significance to their advisory and analytical duties. (U.S. Bureau of Labor Statistics 2022). In other words AI solutions give accountants more space for creative problem-solving. (Jain 2022)
The accountant’s role has the potential to be much broader, and much more influential, than many people think, meaning that the accountant is irreplaceable, by technology or otherwise. They can add huge amounts of value to the business, thanks to their unique perspective, access to information, training, and experience.
With the freed-up time and new technology, the accountant can produce even more valuable content for clients and take the client relationship to a whole new level.
Along the change, accountants will also most likely be in more contact with their clients and will be able to increase advisory services also in relation to the day-to-day operations of companies. As technology increases, the popularity of real-time accounting information will increase, and reporting will change from quarterly to weekly or even daily. As the industry is changing customers seem to expect more from their accountants and financial management teams. To keep up, accounting professionals have to add new services to keep their clients happy. These can be for example:
- payment process support
- business management reports
- project management advice and supervision
- consulting and performance management
- strategic consulting
However, this is only possible if their work time isn’t spent on manual, repetitive tasks such as purchase invoice processing. If the majority of the accountants’ time is spent on invoice processing, they don’t have enough time to create this additional value for customers. (Forbes 2019)
4. The nature of the workforce is changing
At the same time as the nature of work is changing so is the workforce. At the moment accountants are leaving their jobs in record numbers, both from corporations and audit firms, to transfer to industries that are more appealing. In the current rush to meet filing deadlines, more work is being piled on the shoulders of fewer people, important checks may be skipped and errors might go unnoticed. Looking at the current state of the industry, the younger generation doesn’t see the accounting industry as appealing and thus decide to work elsewhere.
To keep the industry viable accounting offices need to make their offering more appealing to the new generation of accountants and also keep their experienced accountants happy. This includes incorporating new technologies and more intuitive software, remote working opportunities and creating a good work-life balance.
To help reduce an accounting professional’s workload, more and more organizations are embracing technological solutions and automating different processes, like invoice processing. The shortage of accountants pushes the industry to find ways to ease the burden of their existing employees and make it more appealing.
With automation, accountants can save time, improve accuracy and efficiency and focus on what they do best.
In addition to the evident technological push that is happening, there’s also great demand for these kinds of solutions.
The growing demand for enhanced efficiency in the financial services industry is visible and it’s constantly driving innovations in the fintech space. During the past few years, we have seen large investments in the development of smart applications that involve Big Data and AI. (Frost & Sullivan 2017a)
The overall market of Accounts Payabe (AP) processes is also growing since corporate payments or payments between businesses are expected to overtake consumer payments by volume, in less than ten years in 2030, indicating a larger market opportunity for stakeholders in this segment. (Frost & Sullivan 2016b) Additionally, The AP department, once viewed as a peripheral back-office function, is now one of the central drivers of business profitability. In an era of supplier shortages, demand fluctuations, increased operating costs, and liquidity pinches, the influence AP has on the overall health of an organization is only continuing to grow (Esker 2021)
Technological development is pushing new solutions to make accounting a more efficient, convenient, and fun field to work in. The most prominent technology seems to be AI and ML. At the same time, there is a great demand for these technologies because there is a big lack of skilled accountants in the industry. In accounting offices, these technologies are expected to free the massive workload, making their human resources sufficient, making accountants like their job more (and not run elsewhere), and simultaneously creating more value for their customers.
Market research indicates that the most crucial bottleneck of accounting is purchase invoice processing (FabricAI 2022). Processing one invoice might seem like a quick task to do, but when looking at the bigger picture, it adds up to a huge chunk of time. An estimated 20-50% of the work time of an accountant/controller is spent on processing purchase invoices.
Next we’ll take a closer look at purchase invoice processing and why it should be automated.