The accounting industry is facing a number of challenges, but by staying up-to-date with the latest trends and technologies, firms can position themselves for success in the future. In this article, we’ve delved into the latest research, surveys and trends, as well as spoken to leaders in the space to give you a summary of what you need to know in 2023.
At a high level, we’re seeing continued digital disruption, growing concerns surrounding talent and new areas of interest in management accounting. Accountants and bookkeepers are having to consistently adapt to changes in order to meet client expectations and stay ahead of the curve.
Increasing demand for advisory services from accounting firms
A survey of 2,000 accounting firms published by Wolters Kluwer Tax & Accounting last month found that 84% of respondents saw an increased demand from clients for advisory services in the past year. Accountants are being pressured to move beyond solely offering compliance work like tax preparation, accounting and bookkeeping services.
In particular, there’s an increasing demand for accounting firms to provide advice on using technology to increase efficiency, introduce automation and extract valuable insights. However, we spoke to one of our advisors, Mike Jesowshek, Partner at IncSight and Podcast Host at Small Business Tax Savings Podcast, who argues, “Advisory is what I consider a buzz word. There is no consensus on exactly what an advisory service entails.”
“If you ask 10 accounting firms and 10 business owners what ‘advisory’ means to them, you will likely get 20 different answers. This is good news for accounting firms because it allows you to tailor your offering to what you are good at and what you think small business owners in your niche need the most.”
He warns accounting firms to avoid advisory services until compliance work and relationship building is at the highest standard. Technology advancement can make compliance work easier but there’s often a lot left to be done. In terms of client relationships, introducing advisory services will require a strong foundation and even more intimate discussions.
Cloud-based accounting technology is still a challenge
Cloud-based accounting technology has gained widespread adoption in recent years, as it allows for easy access to financial data and streamlined collaboration. However, despite 77% of users saying they have experienced positive results after implementing cloud accounting, according to CapActix, accounting firms are still struggling to keep up.
In the previously mentioned Wolters Kluwer Tax & Accounting survey of 2,000 accounting firms, over 80% of firms felt their tech stacks weren’t at their fullest potential. According to The CFO’s recent survey of senior finance leaders, this could be due to a lack of expertise with almost 60% of respondents not having the required skills for digital transformation.
Martin Chee, Partner at boutique accounting firm ECSK and CFO at Amaka, explains that introducing integrations can help accounting firms maximize their tech stacks, “Using apps separately and without integrations can mean you’re leaving value on the table for your firm and your clients. Firms should identify opportunities for automation and data-sharing between apps to ensure they are extracting the most out of them.”
“For instance, firms that work with clients who use e-commerce and POS systems will benefit from using an accounting integration that, as an example, syncs transactions from WooCommerce into Xero on a daily basis. Then, by linking reporting and forecasting tools into their cloud accounting tool as well, they can ensure their tech stack is consistently producing accurate, timely and informative data.
Playing catch up: RPA, AI, blockchain and neobanks
Robotic Process Automation (RPA), artificial intelligence (AI), blockchain and neobanks are examples of technologies that have had a larger impact in industries outside of accounting. In 2023, we’ll see accounting firms, particularly those at the cutting edge of innovation, playing catch up by allocating resources to upskilling and implementation in these areas.
In The CFO’s same survey of senior finance leaders, they found a third of respondents already have a plan in place to implement RPA, but AI is still lagging behind. RPA allows bots to automate repetitive tasks such as invoice processing or document management. AI can help in a range of domains such as forecasting, identifying fraud, predicting cyber threats and more. These can help firms compensate for difficulty finding and retaining talent.
In a global survey of 1,280 senior executives run by Deloitte, 76% reported that they believed blockchain-based digital assets will be a strong alternative or replacement for fiat currencies in the next 5 to years. In order to facilitate this rising adoption, accounting firms will need to take into account how blockchain impacts internal controls, financial reporting, audits, tax, region-specific regulations and industry-specific regulations.
Neobanks, licensed banks that operate completely online, are changing the banking landscape with Insider Intelligence expecting the space to double by 2026. In a survey of 600 people, Airwallex found that 42% of SMEs in particular are looking to switch from legacy banks to these fintech platforms in 2023. Accounting firms will not only have to have an understanding of neobanks, they should also be able to implement and recommend solutions in order to maintain lasting client relationships.
Tax legislation and cloud-based tax compliance solutions
In the tax space, we’re expecting to see a mix of positive and negative change for accounting firms. Bad news first: In regions such as the US, the constantly evolving tax legislation will continue to pose a challenge. Firms will need to stay on top of changes to maintain adherence.
On the flip side, Wolters Kluwer Tax & Accounting’s survey of 2,000 accounting firms found that tax seasons are getting better with almost 80% of respondents saying technology has helped them save time on tax returns. The firms with a cloud-based tax compliance solution implemented have been able to report 7% revenue growth compared to 4% without.
Finding and retaining talent vs. outsourced accountants
In many regions globally, finding and retaining talent is expected to be a continuing concern in 2023. Wolters Kluwer Tax & Accounting found that accounting firms with 20 or more employees are particularly concerned with retaining talent. According to Airwallex, businesses are even more concerned with retaining employees than attracting employees.
On top of using technology to combat this challenge, more accounting firms are looking towards solutions like outsourcing. Rather than having to find more employees, functions like bookkeeping, payroll and tax can often be outsourced. In particular, accounting firms are looking to offshore outsourcing.
Management accountants dipping into ESG and DEI
An emerging trend in management accounting is ESG (environmental, social, and governance) and DEI (diversity, equity and inclusion), according to the Journal of Accountancy. Rather than purely focusing on reporting and financial statements, management accountants can advise on ESG and DEI as a means to add value.
Even professional organizations like the AICPA are looking to encourage more uptake in these areas. For example, the AICPA has introduced a grant for an apprenticeship program that specifically aims to support DEI. We can expect there to be growing interest in ESG and DEI this coming year, especially in larger firms.
Increasing revenue is the top 2023 goal for accounting firms
Where a few years ago, the top goal may have just been to stay afloat, expanding revenue will be a key priority for accounting firms in 2023. In Wolters Kluwer Tax & Accounting’s survey, they found that regardless of accounting firm size, growing revenue and profit was the number one goal.
Expanding profit can be done through introducing value-based pricing, increasing margins and/or raising rates. Loren Fogelman, a coach for accounting professionals and firms and owner of Business Success Solution, claims that you can expect to retain at least 80% of your clients after a fee increase, so long as you’ve invested heavily in client relationships.
“Raising rates is top of mind for firm owners in 2023. You need to connect with the value of your firm’s services before you can expect your clients to recognize its value. Explain that you are making some changes to your firm and how it will benefit them. Avoid justifying a rate increase because of the economy and higher expenses.
“It’s better to meet with clients over simply sending your new rates in an email. The meeting starts off with your client sharing their 12-month goals. Next, educate your client about how your firm can assist with achieving those goals. This establishes your firm as a valued partner. Finally, share your new rates and how this works.
Key takeaways on latest accounting trends for 2023
In conclusion, the accounting industry is facing a number of challenges in 2023 such as digital disruption, growing concerns surrounding talent, and new areas of interest in management accounting. Firms need to stay up-to-date with the latest trends and technologies to position themselves for success.