Accountancy has provided the perfect environment for automation. We spoke with Chetan Mistry of Smith & Williamson and Steve Lucas of Receipt Bank about why and how accounting firms have become hives of technology…
Innovation where it counts
Receipt Bank was founded in 2010 to create a simple, cost-effective solution for business accounts management. Their services aim to make life easier for accountants and their clients, harnessing the cloud to cut out unnecessary processes and automate decisions. According to Steve Lucas, Receipt Bank’s Head of Customer Experience, accounting firms have used automated technology such as Optical Character Recognition (OCR) software for decades. The problem with such systems, he explains, is that they can take millions of pounds to set up. Until recently, this meant that smaller companies were unable to take advantage of them.
“I think it’s William Gibson who says that the future is already here, but it’s just not evenly distributed,” Lucas says.
Chetan Mistry, a partner at Smith & Williamson, confirms that accountancy is no stranger to technology. Not only this, but as businesses become more familiar with automated solutions, they are more enthusiastic about using them.
“Accounting, generally, has adopted new technology as and when it’s been realized if you think about handwritten ledgers all the way through to Excel,” he says. “The challenge is to make sure that new technologies bring value to clients. What we’re finding now is that the appetite for and attitude toward some of these technologies has changed. Our clients are becoming more technologically advanced.”
Technology aside, simply hiring an accountant to help with a tax return remains a hefty financial burden for SMEs. Therein lies another problem: if accountants only interact with businesses in cycles, then they miss out on data insights from extended time periods.
From lump sum to subscription model
Thanks to the availability of cloud technology and data analysis tools, the calendar-bound nature of accounts are transitioning into a longer-term, subscription-based model. In contrast to contacting an accountant only in the months leading up to the end of a tax year, Receipt Bank constantly tracks accounting data.
“By creating an effortless bookkeeping workflow that automatically captures the expense at the time of the expenditure, you remove anxiety and the physical effort required to enter information into your books,” says Lucas. “Instantly and painlessly, you can go from 18 months of out-of-date information to seeing your business financials in real-time. This real-time information allows you to make better decisions on how you spend your business capital in the future, something accountants and bookkeepers are well trained and ready to help with.”
This also means that accountants now have a much closer relationship with clients and can augment the physical meetings that are still very important to accountants and their customers.
“Cloud accounting lets you see your clients’ data in real-time; for example, you could see a client struggling with cash flows, set up alerts in the cloud to help them, and monitor their performance. It brings the accounting advisor closer to that business,” explains Mistry.
So, the subscription model makes sense because businesses get the insights that come with real-time, consistent visibility as well as the service they would have paid for anyway. Rather than appeasing the tax man, cloud-based financial management is about feeding value back into the business in a way that benefits everyone – from the employee filing an expenses claim to the accountant making an overall decision about a company’s accounts. At the same time, Mistry points out that it’s still important to have face time with customers. As of yet, algorithms can’t provide the reassurance or trust that a human can.
“At the moment, we live in a trust economy where accountants provide assurance on figures,” he says. “We are shifting to a truth economy, where things are just ‘right.’ At the moment, we’re not there yet – just look at fake news. It will be an interesting space as we all try and understand the move from trust to the truth.”
Another important shift has seen large businesses widening their client base to include small to medium enterprises. As tech drives down costs, a more fluid ecosystem has emerged in which smaller companies can afford the services of big accounting firms. This is certainly due, in part, to the fact that a closer working relationship means better insights, but it’s also because of impending legislative changes. The UK’s newly enforced Making Tax Digital (MTD) initiative, for example, requires businesses with an annual turnover of over £85,000 to keep and submit digital VAT records. While the regulations have been met with reluctance, it’s hoped they will help businesses to manage their accounts and, in turn, create a more secure economy.
Know thy network
The development of always-on, automated accounting services has driven customer experience and satisfaction, reducing the amount of time and effort that goes into bookkeeping.
“What we’ve seen is that a lot of our customer base has started to offer services in real-time, cutting down a year’s worth of data entry from 50 hours to two hours or less,” says Lucas. “This has allowed them to be a lot more competitive around pricing their services; they can reallocate the time and expense that would have gone into data entry into providing real-time, helpful advisory services that previously would have been prohibitively expensive to SMEs.”
This has also led to wider procurement accessibility. By using a data analytics platform called Looker, Receipt Bank hopes to bolster the buying power of individual businesses when it comes to buyer-supplier negotiations. On their own, small companies have far less buying power than their bigger competitors. However, if a small business can provide up-to-date information, then other small buyers can be identified and connected to create a base of buying power.
“Before Looker, it could take us four days to collate all of this information, form a question, and get an answer. Now we can get those answers in minutes. This dramatically speeds up the number of things we can learn and constantly refine the service while looking for new opportunities of value that we can unlock for our customers. Looker provides a 360-degree customer view of our salesforce, marketing, and support desk information, which helps us clearly identify what we’re doing well for our customers and where we can improve.”
Has all this change made it harder or easier to become an accountant? According to Mistry, trainees will have a different skill sets, but the core foundations will stay the same.
“We have a cohort of trainees who start from age 18 to 21 and train for three to five years. The technology used by these guys can be very advanced, but some of it is exactly the same as what we’ve been using for the last five to 10 years.”
That said, the accountant of the future will deliver services in a different way and will need to have more understanding of the digital environment. Does this mean that existing accountants have to reskill?
“There’s a little bit of extra training needed because to qualify as an accountant, you need to study tax law and changes in the environment, and now you also need to have a grasp on the technology advancement opportunities available. I think accountants have always been looking for ways to keep learning and keep retraining,” says Lucas.
Over time, there has been a steady flow of technology into the accounting profession, gradually disrupting the work of accountants. Most of this, according to Lucas and Mistry, has been facilitated by the cloud, which has enabled businesses and their accountants to build better relationships. The ability to gather and analyze data at low cost – but also at scale – has meant that far more businesses are able to use accountancy technology to stay on top of the numbers. As such, accountancy has become far more transparent, inclusive, and competitive.