Accounting firms small, medium and large face unprecedented global disruption every day with their clients. They also face the transformation of their industry with the acceleration of digital capabilities the leading disrupter.
Mobile, cloud, big data, analytics, social media, the Internet of Things (IoT), block chain, machine learning and crowdsourcing are profoundly reshaping audit, assurance and risk assurance, and advisory and tax practices. In a survey last year, which built on research at Oxford University, respondents suggested there was 94% probability of some accounting and auditing jobs becoming automated in the next 20 years. For some tax preparation roles, the likelihood climbed to almost 99%. It is not surprising that in PwC’s recent report on the extent to which jobs are at a high risk of computerization technology accounting topped the list.
Uschi Schreiber from EY says plainly, to survive, the accounting profession must confront disruption and introduce new models to transform.
Audit, Assurance and Risk Assurance
Today approximately twenty-five percent of Australian businesses and forty percent of New Zealand businesses use cloud-based accounting software for example Inuit, MYOB, Reckon Sage and Xero to prepare financial statements. These platforms have:
- Commoditised compliance
- Provided accountants with an “unparalleled ability to drive business success” says MYOB CEO Tim Reed
- Dramatically enhanced business operations by providing access to a rich ecosystem apps, API’s and partnerships. Examples include the relationships between Reckon and trusted payments provider OFX and also their integration with PayPal’s payments technology for issuing invoices into its online accounting platform.
At the same time, accounting firms are applying automation tools, machine learning and data analytics to deliver enhanced services. Recently, KPMG has partnered with IBM to apply the cognitive capabilities of IBM Watson to tackle the immense volumes of structured and unstructured data related to a company’s financial and non-financial information. The World Economic Forum predicts that, by within a decade, 30% of corporate audits performed by artificial intelligence.
These changes herald the coming impacts of Bitcoin, and digital currencies which could transform remittances if it can overcome its inherent inefficiencies, and in doing so all aspects of accounting. The World Economic Forum predicts somewhat bullishly that, within a decade, 10% of global GDP could be stored on blockchains.
While search engines have replaced juniors and researchers, Wikipedia has become the poster child for crowdsourcing information and insights setting the scene for the others.
Deloitte estimates that 25% of what is done today on strategy engagements will be crowdsourced to solve complex problems faster and cheaper. Their initial findings confirm crowdsourcing can offer a purposeful, structured, social platform to solve business challenges, “eclipsing the role of focus groups” and delivering on average a 10 percent cost reduction for clients while slashing discovery time in half.
Groups such as 10EQS engage on an ad hoc basis with specialists from around the world basis to solve problems or gather insights, often approaching executives employed by rival organisations.
- Competitive talent on demand platforms like Expert360 connect experienced consultants to mid-size clients anywhere around the globe for two or three days a week, or for shorter periods; and
- Cognitive AI is expected to replace 30% of business consulting resources by 2017.
Online filing by individuals is now routine with twenty-five percent of all tax returns currently lodged with the Australian Tax Office (ATO) through myTax for free. These numbers will expand rapidly with the ATO focused on enhancing the usability of the myTax platform. In April 2016 for example, myTax was expanded to allow sole traders the ability to lodge their tax returns with the ATO themselves also for free.
At the same time, the preparation of tax returns has been made easier by cloud-based accounting software. Xero says its integration with Microsoft Outlook REST API allows small businesses to get a single, 360-degree view of all interactions with their contacts and customers and Sage, has partnered with Salesforce to develop a cloud version of its HandiTax solution
The World Economic Forum predicts that tax will be collected for the first time by a government via a blockchain by 2023, creating both opportunities and challenges for countries including the ability for new taxing mechanisms to be built into the blockchain itself (e.g. a small transaction tax).
While transformation is not new to accounting firms, the pace of change today is greater than ever before. The sum of demand and supply forces compel accounting firms to adapt rapidly to create new business models for growth, establish new technology capability (organically, through acquisitions and partnerships), continue to drive utilisation and reduce costs.