The adoption of new technologies in accountancy to drive efficiency and keep pace with client demand, was already well under way before COVID-19 came along and changed everything – accelerating the adoption of everything from cloud computing to artificial intelligence (AI).
In fact, according to a series of reports from Sage, in the space of a year, the proportion of firms describing themselves as “early technology adopters” rose from 35% in 2019, to 44% in 2020.
That transformation seems set to continue at pace, with 22% of firms currently investing in new technologies, 21% planning to do so in the next 12 months, and a further 21% expecting to take action over the next one to three years.
What’s more, accountancy firms that have already invested in new technologies are reaping the benefits:
- 58% point to improved efficiency and productivity, 41% believe technology has made their staff more competent and confident, 35% say technology is helping them to increase client retention rates
Technology trends in accountancy
It’s fair to say there are broadly two big trends driving the adoption of technology in accountancy. The first is a longer-term change, driven by big, transformative technologies. They include:
- Cloud computing: Small and medium-sized firms are increasingly drawing on the power of the internet to provide accounting software as a service and make it easy to access data anytime and anywhere. These benefits and more seem likely to see more businesses adopting cloud-based accounting systems
- Big Data: Systems to store, organise and analyse vast amounts of data are enabling accounting firms to track client performance more accurately and gather vital insight at speed – for instance identifying potential tax or general business efficiencies . As sophisticated data analytics become more commonplace, more accountancy firms are expected to invest in this capability
- AI: Artificial intelligence algorithms are increasingly being employed to take over time-consuming, repetitive tasks in accountancy, and their use is becoming more sophisticated – including in generating financial models and even in allowing predictive analysis of financial performance
The second is the short term, rapid change forced on the industry by COVID-19 restrictions. As Microsoft CEO Satya Nadella put it:
“We’ve seen more digital transformation in the last two months than we’ve seen in the last two years.”
Those trends are well known, a huge surge in home working driving adoption of a range of technologies – from video conferencing and collaboration tools, to e-signature capabilities and beyond. These changes in the way accountants work, and the technologies that enable them, seem to be here to stay. In a recent survey, just 12% of all accountancy staff wanted to return to the office permanently when COVID-19 restrictions are lifted.
New technologies: risks and solutions
Clearly, however, new technologies don’t just bring benefits - there are risks too. So, what are these risks?
- Cyber-crime and data privacy: An increased reliance on cloud and remote systems naturally creates a greater exposure to cyber-crime – from hacking, ransomware attacks and data leaks, to social engineering attacks like phishing – all of these issues can have serious consequences. There is the cost of rectifying damaged systems and reputational damage, as well as potential fines for privacy breaches, so robust security is a must. However, with cyber criminals becoming ever more sophisticated and increasingly targeting professional services firms, specialist cyber insurance to help limit the impact of an incident is becoming more important
- Mistakes, errors and omissions: New technologies may bring huge benefits by automating processes and enabling sophisticated financial analyses, but mistakes or oversights in implementing and using systems, or in interpreting the data they generate, can lead to errors in professional advice, potentially leading to liability claims from affected clients. Robust staff training and oversight is clearly crucial in mitigating these effects, but it is also very important to review professional indemnity (PI) insurance arrangements as part of technology adoption – to ensure that existing PI cover is not affected or invalidated by new ways of working
Seek expert help
As technology adoption in accountancy increases, navigating the associated risks will be vital to reaping the benefits. So, if you are unsure or need help, seek advice from a specialist. Remember, the team at Marsh Commercial is always on hand to assist and advise – from help with risk management to support finding the right insurance for your practice – from professional indemnity cover to cyber and office protection.
Sage, The Practice of Now, 2020