To Embrace or not to Embrace Technological Developments
From discussions with members of the accountancy profession we are often told that technological change and development is a key theme that keeps them awake at night. We can see the basis for such comments but we also believe there are many advantages and opportunities that come with technological developments. In this blog we intend to examine not only the threats and how one might combat and prepare for these, but also to consider the opportunities that present from such advances.
Few would deny that technological changes are happening and that they are coming thick and fast. Much of the bread and butter accountancy work is already automated and even more will move this way over the next 5-10 years. Tasks such as data entry, creating documents, book-keeping, and tax returns can now be automated and the launch of Making Tax Digital (MTD) on the 1 April 2019 will serve to drive the pace of these processing efficiencies further.
From a glass half empty perspective these changes might seem overwhelming and used as a means for clients to attempt to drive down fees. Likewise, client businesses can also conduct much of the routine work in-house without needing to engage with an accountancy practice. Nearly gone are the days that smaller firms present their receipts in the proverbial shoebox and ledgers that would not look out of place in a Dickensian setting. They will almost invariably be using sophisticated software that interfaces with their accountant, usually in a Cloud environment. However, from a glass half full perspective things look brighter. The aim of any professional services firm is to make themselves indispensable to their client. This can be extremely difficult to achieve. However, the technological advances and the efficiencies these bring arguably free-up time to enable an accountant to diversify their role and have the time to focus on value-added services for their clients, such as analysing the accounts (that have largely been prepared using automated software), undertake forensic work, and to give a business advice. In other words, shifting the emphasis of their time and support to advisory work.
No matter which side of the fence you sit, the technological advances can’t be avoided. We have, however, considered ways in which you might look to prepare yourself for this so that you are best positioned to adapt and meet any challenges face on and reap the benefits the advancements will bring:
1. Increased reliance on software and cloud computing will lead to a greater cyber risk both in terms of attacks on the server where such data is stored, but also a greater risk in the event that access to that data is interrupted for non-malicious reasons (e.g. problems with local Internet connection or issues experienced by the server host). Ensure that you are prepared for problems with accessing data and have contingencies prepared, perhaps in the form of back-up servers where possible.
2. Ensure cyber risks are considered at a strategic board level and not viewed as an isolated IT issue. Consider the use of third party-penetration testing for the purposes of assessing any data vulnerabilities. Accountants are seen as aggregators of data and you will usually have a wealth of sensitive client data and hold their financial footprint. This is highly lucrative information for a cyber criminal.
Finally, consider ways to protect the business financially in the event of an attack or system failure, including the benefits of a cyber insurance policy to cover any business interruption losses and crisis management costs, and have agreed procedures to deal with any cyber or data event.
3. Introduce a regular training programme for staff focusing on the awareness of cyber risks and issues. They will often be the first line of defence for any cyber-attack (e.g. identifying and not acting upon a phishing email) and it is key that they are awake to the risks and threats that technological advances bring.
4. Don’t lose your expertise and become “de-skilled”. Put simply, don’t rely entirely on the automated processes. In the event of a failure of the automated processes or inability to access data, then ensure that you have sufficient skills to enable the numbers to be crunched in a traditional accountancy way! Ensure that regular and continued training continues, if nothing else this will be key in any event for being able to offer the value-added services in the form of analysis and advice.
5. A greater reliance on advisory work may bring increased risks arising from potential claims and thus lead to a greater involvement by your professional indemnity insurers. However, there are ways to minimise these risks in the form of:
a. Carefully defining the scope of work that you will be undertaking for your client; and
b. Agreeing (and negotiating where applicable) suitable limitations on your liability in the form of liability caps.
Advisory work is generally seen as higher risk to insurers but on the reverse of this, these changes in roles will likely lead to a reduction in claims arising from mistakes and errors in general accountancy work. A high proportion of claims in this area are driven by simple clerical errors such as missed time limits and as such, these errors should reduce.
6. The use of social media should not be overlooked. Increasingly more and more of us resort to these mediums when looking for assistance or recommendations. A carefully considered social media presence with good thought leadership content can set you apart from your competitors. Take advantage of this and review your website and social media content regularly to maximise your visibility in search engines so that potential new clients can find you online.
Technological advances can be embraced and not seen purely as a threat. The key is to ensure that you are best placed to take advantage of this and have processes and procedures in place as part of your general risk management programme.