Evolution and the automated accountant
Frank Woods explains how automation can work for your practice, making it more efficient and you more profit.
Glance at the accounting press recently and you’ll get the impression that the profession is undergoing a revolution. Technology such as cloud accounting software and reforms such as Making Tax Digital have given commentators lots to talk about (and accountants lots to think about) in the past few years.
For most accountants though, things haven’t actually changed that much – yet.
Spreadsheets and shoeboxes
Take for instance the way that accountants collect and process their clients’ information. Manual methods such as spreadsheets and shoeboxes full of paper still dominate accountants’ in-trays.
Data files from small business accounting software still only represent the minority of most accountants’ inputs, and data from cloud accounting systems only a fraction of that. So why, despite huge advances in technology, is so much still being done in the ‘traditional’ ways?
The simple answer lies in an inconvenient truth about small business accounting: many small business people don’t want to do it. The millions spent to make it simpler, faster and even more enjoyable have not significantly changed the fact that so many small businesses lack the time, skills or even just the desire to use small business accounting software properly, or at all.
Accountants, of course, have understood this all along. This is why so many accountants have responded with incredulity to HMRC’s plans to force small businesses away from paper and spreadsheet records and onto digital tax updates each quarter. Accountants know this is unrealistic and expect a lot of the work to end up with them.
Overwork the biggest challenge
More work for accountants may seem like no bad thing. However research, such as The Bankstream Accountants Confidence Index, has consistently shown overwork is already practitioners’ biggest challenge, followed by difficulties with staffing.
Practice capacity constraints are putting a limit on how much of their clients’ work accountants can take on. Furthermore, research has shown that when accountants try to push work onto clients, more time is lost to rework of client errors – time which is often subject to significant write-offs.
With accountants caught between the irresistible force of regulation and the immovable object of client capability, it’s no wonder so many feel under pressure.
Evolution of accounting processes
Amid the hype about revolution, something important is evolving for accountants. The increasing availability of client transaction data and systems that automate the collection and processing of client data is allowing practices to operate with far greater efficiency.
Such efficiency gains are enabling accountants to take on more work for their clients without increasing practice resources or costs. The end result is a viable alternative to pushing more work towards their unwilling or unable small business clients.
Bank data feed systems (like Bankstream’s) demonstrate the power of this evolved process. Accountants receive their clients’ bank transaction records digitally, every day, with the authority of their client, and their client’s bank.
As these transactions are received, the software automatically allocates them to the appropriate income and expense codes (according to instructions provided by the accountant). This process eliminates the need for accountants to wait for client bank statements to arrive, eliminates the manual data entry of the transactions and even eliminates the coding of repetitive transactions.
Most importantly, this approach also eliminates the need to rely on the client to possess any accounting or computing skills. In fact, the only task for the small business is to respond to their accountant’s requests for additional information when required (a process also automated by the software).
Manual clients, automated practices
In recent years, there has much talk of revolution in small business accounting. Yet most small businesses continue to use traditional methods to get their books done. Small business people often lack the time, skills or desire to become part-time accountants and so the revolution has not gained universal support.
A more evolutionary approach is now taking hold – rather than shifting work from accountants to their clients, practice automation is allowing the work to remain in the accountants’ domain, yet be completed far more efficiently.
We expect that the much of the hype about ‘revolution’ in small business accounting will soon give way to the quiet but relentless evolution of the modern, automated, accounting practice.
• Frank Woods UK & Ireland general manager, Bankstream.