To fully appreciate the transformative phase that is steeped in emergent accounting trends, the accounting profession is experiencing a metamorphosis, evident when one scrutinizes the recent modifications to the CPA exam. The distinguished licensing benchmark, with a legacy exceeding a century, proclaimed that its 2021 edition would prioritize a comprehension of business processes, automation, data analytics, and cultivate “a mindset steered by digital acumen and data-driven strategies.” As part of this evolution, it has opted to retire certain themes, including assessments on the distinction between IFRS and GAAP standards, and in-depth knowledge on estate taxes and trusts.
Defining Accounting Trends
Accounting trends are adaptive responses to changes in landscapes, technology, and market dynamics, shaping the current face of the accounting profession.
How is the Accounting Profession Transforming?
Driven majorly by swift technological advancements, changes in the accounting sector are unfolding at an unprecedented pace. This evolution was significantly expedited by the pandemic, leading to a broader acceptance of cloud-based accounting software and a shift towards automation and artificial intelligence.
Embracing Technology and Automation
The perpetually advancing technology and an increasing trend towards automation of monotonous accounting tasks stand as some of the most thrilling developments in the accounting realm. A multitude of processes, including approval workflows, bank reconciliation, journal entries, inter-company consolidation, revenue recognition, lease accounting, and depreciation, are being automated.
While many accounting functions hold potential for automation, there exists a gap in understanding the technologies and the resources needed for their implementation. Yet, those who embrace this shift are witnessing significant advantages. Approximately 70% of companies that have automated over a quarter of their accounting functions report moderate to substantial returns on their investment.
Influence of Artificial Intelligence (AI)
Across various sectors, there’s a unanimous agreement on the transformative role AI can play in finance and accounting. Companies employ AI and robotic process automation (RPA) to automate repetitive tasks, liberating accountants to allocate their efforts to more impactful and valuable activities. For instance, accounting firm EY has leveraged AI to simplify the analysis of lease contracts, thus enabling finance professionals to focus on data-driven decision-making.
Significance of Accounting Software
To ensure successful RPA, transactional data from multiple sources and formats needs to be standardized and consolidated – a process known as harmonization. To be effective, AI demands massive quantities of data, and most crucially, the outputs of these technologies must be trusted by accountants – a role fulfilled by accounting software.
About 36% of companies intend to implement cloud-based accounting solutions shortly. Enterprise resource planning systems can integrate your accounting software and financial data with other crucial business areas like supply chain, order and production management. Such an integrated ERP platform offers actionable insights into your business.
Data Analytics and Forecasting Tools
Among many helpful accounting tips, one of the most influential is to amplify the use of budgeting, forecasting, and planning software, along with data analytics and visualization tools. The finance functions are becoming progressively analytical, with technology helping shift the accounting department from reactionary to proactive and analytical. Recognizing this demand, the IMA recently launched its Data Analytics & Visualization Fundamentals Certificate program, designed to equip accounting and finance professionals with critical thinking, problem-solving, and technological skills required to guide business strategy.
With an unprecedented speed, organizations are digitally transforming their business processes. Accounting and finance teams are at the forefront of these changes, adopting novel revenue models, channels, product offerings and more. One of the most formidable challenges is leveraging technology to support business strategies and adapt to evolving conditions.
While workplace wellness programs are a popular benefit provided by employers, managing these programs can be intricate for accountants. Payroll managers and accountants need to ensure health insurance discounts earned through wellness programs are accurately calculated as withholdings in paychecks. Changes in tax laws impacting how items in wellness programs contribute to tax-deductible business expenses also need to be considered. Besides potentially improving employee health, wellness programs can be instrumental in enhancing employee engagement.
Online Collaboration and Remote Workforce
Particularly beneficial in remote work scenarios, cloud-based software enables geographically dispersed teams to collaborate and execute crucial financial processes, like month-end closing. Accountants will need collaboration tools like Zoom and functional collaboration tools for e-signatures and cloud-based file sharing.
Evolution of the Accountant Role
In the future, as more transactional work gets automated, accountants will increasingly be seen as leaders and decision-makers. Relying heavily on soft skills, leadership, and emotional intelligence traits, accountants will need to leverage insights from data analysis and their financial expertise for successful careers.
With increasing instances of data breaches, finance departments are becoming prime targets. Breaches can lead to identity theft, personal data and credit card information theft, and spoofing, where an email is disguised to appear from a trustworthy source. Training to recognize potentially harmful emails and spot attacks will be vital for accounting teams, who are already adept at detecting anomalies.
Changes in Tax Policy
The 2022 Consolidated Appropriations Act, better known as the COVID stimulus, spanning nearly 6,000 pages, presents a colossal challenge for accountants. This act, along with other tax policy and regulatory changes, underscores the importance of understanding changes in tax policy.
Statutory and Regulatory Compliance
Accounting and finance teams need to be cognizant of changing statutory and regulatory norms, including COVID stimulus legislation. Leadership changes at the SEC will likely impact financial reporting requirements and scrutiny.
Environmental, Social and Corporate Governance (ESG)
ESG will be a significant focus for companies, with expectations of new federal regulations. These may include mandatory disclosure of climate-related financial risks and greenhouse-gas emissions in operations and supply chains. Major investors are also calling for increased diversity, affecting all areas of business, including finance and accounting. Professional trade organizations aim to equip accountants for these changes.
The Financial Accounting Standards Board (FASB) periodically issues updates about changes affecting financial statements and maintaining GAAP compliance. The 2021 changes included aspects related to asset acquisitions, credit losses, debt securities, leases, reorganizations, variable interest entities, and banking regulation disclosures.
Machine learning and RPA are redefining the approach to accounting. Continuous accounting embeds tasks typically done at the end of a period into daily activities. The benefit is not only reduced late-night work for your accounting team but improved efficiency and data integrity, allowing the team to focus on a culture of continuous improvement by monitoring process efficiencies.
Organizations of all sizes might benefit from outsourcing some or all of their finance and accounting functions. Smaller companies may do so to avoid hiring additional personnel, while larger firms may outsource some or all of their accounts payable to save money. Outsourcing may also offer access to skills, technology, and expertise not easily or affordably replicable by hiring new staff and investing in your own infrastructure.
As we venture further into 2023, accountants will persist in demonstrating their adaptability and vital role in business development. They will deftly navigate emerging trends, integrating them into their professional toolkit, to guide and propel businesses forward, regardless of the nature of the journey that lies ahead.