The speed of technological change in accounting has been incredibly fast and pervasive over the past decade. We’ve seen big changes in the accounting process and the efficiency of the average firm’s practice management. We’ve seen new ways to record, track and analyse financial data. And we’ve seen a significant jump in the value your firm can add for clients.
All in all, the impact of tech has been profound. We’ve moved from clunky, desktop-based software applications to complete digital business systems. And these systems can manage not just the accounts, but every area of the client’s business.
To put this evolution into perspective, we’ve picked out the five main advances in technology that have affected accounting. And how they’ve expanded your firm’s capabilities.
1) The cloud and online working
Step back ten or fifteen years, and the average accounting firm was based firmly around an office-based, desktop system. Packages like Sage 50 and the original desktop version of QuickBooks were the software of choice for many practices. And then, along came cloud.
The concept of working from an online system ‘in the cloud’ had been around for decades. But in the early 2000s, technology was finally fast enough and accessible enough to be used via the web. This is the point that Kashflow (2005) and Xero (2006) introduced the idea of cloud accounting. Ditching the desktop system in favour of a web-based accounting application was a bold move, but it’s now the norm for most modern firms.
Cloud accounting has made it easier to:
- Escape the restrictions of the office and become more mobile
- Access real-time financial information around the clock
- Collaborate with clients in real-time, using up-to-date numbers
- Work from the latest software versions, without costly updates etc.
2) The app stack, automation and APIs
By the late 2010s, platforms like Xero, QuickBooks Online and Sage’s updated range of cloud products had begun to add finance and business apps. Application programming interfaces (APIs) made this possible, allowing third-party developers to connect and integrate their apps. Apps began to appear that expanded your firm’s abilities and made life easier for clients.
Receipt Bank (now Dext) was introduced to automate the bookkeeping tasks, and Chaser appeared on the scene to automate the credit control processes. And this expansion of platform-independent apps hasn’t slowed since. There are now over a thousand apps in the Xero app store, catering to almost every conceivable business activity.
Combining these apps into a custom ‘app stack’ allows the firm to:
- Create a foundational set of apps that can be bespoke/individual to for each client
- Automate most of the manual admin processes to become more efficient
- Enforce a standardised way of working for all clients and reduce human error
- Add industry-specific apps to meet the needs of each client’s sector
- Ensure every client is ready for Making Tax Digital and digital compliance requirements.
3) Open Banking and fintech
It’s now three years since the Payment Services Directive Two (PSD2) legislation was first introduced and Open Banking became a reality in the UK. The aim of PSD2 was to to improve customer authentication processes and to improve the regulation around third-party involvement in financial transactions. What this has meant, in reality, is an explosion in new financial technology (fintech) providers in the banking and financial services space.
Previously, your clients would have had limited choices when it came to choosing a business banking provider, with just a few alternative lenders like MarketFinance. The big high-street banks had this sewn up and had become complacent. As Open Banking becomes more established, it’s now far easier for new digital challenger banks to set up and find a hold in the market. And that’s been good news for your clients.
The rise in fintech has brought about:
- Easier ways to track clients’ spending, through live bank feeds, coding of transactions and greater access to their banking data
- A greater choice of digital business bank accounts, from alternative providers like Tide, Starling and Monzo
- More options for payment gateways, from payment providers like Stripe, GoCardless and Shopify etc.
4) Blockchain and cryptocurrencies
One technological innovation that’s really shaken up the status quo is the invention of blockchain technology. Blockchain, or ‘distributed ledger technology’, works by splitting up information into discrete blocks or ledgers. This creates a chain of data that can only be accessed by those with the correct authority.
The encrypted nature of blockchain makes it perfect for logging financial transactions in a highly secure and safe way. A practical use of blockchain has been the growth of cryptocurrencies, like Bitcoin, and other crypto-based means of investment, like non-fungible tokens (NFTs). These crypto assets are stored in a digital wallet, which allows users to access these funds.
Some of your clients will already be dabbling in cryptocurrencies. And blockchain is likely to become an even bigger part of the standard accounting process. As an ambitious firm, there’s a growing need to get up to speed with crypto-based accounting.
Areas to explore could include:
- Exploring the potential of distributed ledger technology for secure bookkeeping/accounting
- Getting clients up to speed with tax planning and compliance for their crypto-based assets and the investments held in their digital wallets
- Integrating blockchain into your clients’ existing digital systems to help with areas like supply chain management and carrying out identity checks etc.
5) Alternative funding and new business finance
An additional bonus of the growth in fintech has been the expansion of the business finance market. Previously, the client’s bank was their first port of call for additional funding and finance facilities. But with so many new routes to alternative finance in the digital market, it’s become easier than ever to find the best funding for your ambitious small business clients.
Fintech software and integrations with the client’s accounting data have revolutionised the process of reviewing a finance application. Lenders can look back through your client’s accounts, payment history and cash flow statements to check their current financial health. And this has made it easier to check for red flags, and offer finance in a swift and seamless way.
This expansion of the business finance market has meant:
- A greater choice of business finance providers and lenders, with alternative providers like MarketFinance opening up the market
- More options around specific financial products, with tailored facilities that offer invoice finance, credit and government-back funding like the Recovery Loan Scheme
- A more flexible way for clients to create a workable funding strategy, with helpful funding advice from you and your team of advisers.
How MarketFinance can help
At MarketFinance, we believe technology is a major asset for any accounting firm. As software, apps and digital technology continue to evolve, we want to help put this useful tech at the heart of your finance, funding and accounting processes.
By staying at the cutting edge of these emerging technologies, you give your firm a distinct competitive advantage. Clients want the benefits of fintech, blockchain and crypto explained to them in clear, simple terms. If you become that expert, and help them incorporate the best tech and software tools into their business, you make your advice invaluable.
We partner with thousands of accountants and business advisers to support their firms, team members and end customers. And as a MarketFinance accounting partner, you’ll always be the first to know about developments in funding, finance and accounting technology.