Until now, CPA firms were structured for reliability and efficiency, independent of revenue generated. With fierce competition, changing expectations, and a digital landscape, it is imperative to adopt an evolved approach to survive and thrive.
Accelerating time to business value is what will set an accounting firm apart from others. This requires an infrastructure capable of leveraging existing resources to support the rapid growth of the digital ecosystem while managing both cost and risk.
Technology has significantly reduced the lead time needed by accountants to prepare and present key financial information to stakeholders. Cloud computing, RPA, and artificial intelligence/machine learning improve accuracy, accelerate business processes, aid in better reporting, and more.
Leveraging technology has led to different components of an organization working in harmony as a cohesive unit towards a singular goal.
Impact on Business Value
Technology has made it possible to go higher and process faster. Technology in concert with a changing business approach has created tremendous value addition to accounting and taxation.
1. Computerized Accounting
The development and use of computerized systems to track and record financial transactions is the biggest impact of IT on accounting. Hard copies of ledgers, spreadsheets, and hand-written financial statements have all been translated into a digitized system capable of presenting individual transactions into financial reports.
With several accounting systems available, there are customization options based on specific industries and other pertinent metrics. There are also features to accommodate any economic changes in business operations. This provides transparency and visibility allowing easier report generation leading to improved decision making.
2. Improved Accuracy
Physical systems come with their share of human error such as incorrect and duplicate entries. Digital accounting systems have an internal check and balance measure that ensures all transactions and accounts are properly balanced prior to the preparation of financial statements. Additionally, these systems do not allow journal entries to be out of balance when posting, guaranteeing that individual transactions are correctly recorded.
This further improves accuracy by offering differential access to financial information allowing adjustment only by qualified supervisors.
3. Accelerated Processing
Digital accounting systems allow large amounts of financial information to be processed fast. The reduced turnaround time further lowers the amount of time required to close out each accounting period.
Month and year-end closing periods are highly labor-intensive. This is especially taxing on accounting departments with longer hours and higher labor expense. Reducing this time period lowers the cost and improves overall company efficiency.
Impact on a Global Scale
Importance of Data
With technology changing the way accounting firms work, the importance of data cannot be overlooked. High-quality datasets provide valuable insight, improving decision-making capabilities. This also allows preemptive measures to be set up to avoid or minimize direct business impact.
Data is slowly changing the world of accounting from a reactive to a proactive ecosystem.
Shifting to an open business model has made leading accounting firms look for ways to tighten their internal financial processes to enable innovative development. This has caused core operating infrastructure to be treated as an asset to be reused, shared, and monetized through APIs. Fintech companies are seen as potential partners in this endeavor.
These developments have added pressure on financial firms to provide access to their proprietary environments. However, the extensive IT infrastructure that powers banks, insurers, and other financial services are often run by a complex patchwork of legacy systems. This has made it tougher for back offices to keep up with the evolving needs of the industry.
Regulation and Cybersecurity
With data-rich financial institutions becoming open-architecture environments, they become the prime targets of cyberattacks. This has led to regulators laying down some cybersecurity rules for financial service firms. These new regulations establish uniformity and baseline standards; increasing transparency, providing accountability, and protecting against privacy violations.
This has led to an increase in compliance budgets further causing a multiplication of compliance demands on a global scale. Getting ahead of this has necessitated the finance industry working with regulators to address cyber risks, including policy issues related to intelligence, coordination, resilience, and response.
With increasing cybersecurity budgets and recruitment of specialized talent, cybersecurity is being integrated into the minutiae, from overhauling legacy systems to adopting new technologies.
Relationships between financial firms, FinTech, and BigTech are evolving rapidly. Financial firms have been competing with technology companies for campus hires for several years now. With evolving needs, collaborations are increasingly becoming the norm. Fintech firms, in particular, offer the thrill and versatility of a startup with the resume boost of working with emerging technologies
This has resulted in a change in business models and management with digital framework development required in-house. Firms also need specialists for risk management, recovery, and compliance programs. This boils down to the rise of digital banking and insurance, with the back office requiring training and familiarity with customer experience.
Traditional legacy institutions are responding by venturing into novel territories. Incubating FinTech-style solutions in a digital factory and working with universities to develop qualified talent is on the rise. Additionally, this offers a lucrative option of gaining talent through partnership or acquisition.