Voices of the Industry: Accounting

Voices of the Industry: Accounting

Voices of the Industry: Accounting

Introduction

Looking way, way back at the early developments of accounting, dating to ancient Mesopotamia, and moving towards ancient Egyptians and Babylonians who made it possible to progress with developments in writing, counting and money, and early auditing systems, it is now unimaginable how the industry has grown. When thinking about the main catalyzers which led to the fast transformation and shift, there are quite a few remarkable ones. The accounting industry moved from mere exchanges of cash or goods, society moved to the concept of tax systems, to managing costs for WWII ammunition, developing solid infrastructure and a brand new field – forensic accounting, bridging the differences between G.A.A.P and IAS for the US, and even leading to one of the most prestigious education degrees: the MBA.

However, none of these developments have had a stronger impact than technology. When reviewing the comprehensive ecosystem and considering important players and stakeholders, together with the current socio-economic context imposed by the Covid-19 pandemic, the accounting industry finds itself at the center of massive change.  Does this mean that the accounting industry is heading towards a new era? Will AccountTech become the next big thing? And how does it relate to other developments in fintech? We have asked the opinion of industry experts from the accounting field to help explore the current state and flux of the industry. 

Accounting & Digitization

When it comes to the topic of digitization for the accounting industry, Jan Wietsma, Partner at MKB-bedrijfscoach & Board Member at NBA, explores how new technologies are on the verge of implementation within the workframe. However, different technologies are expected for different practices. Audit is likely to see more AI, ML, process and data mining, and predictive analytics. For SME, robotization and standardization will be the norm, leading to full automatization at the workplace and minimization of human effort and error. For advisory, business intelligence tools and continuous monitoring will pave the way for an accounting industry focused on consultancy.

“The accountancy industry will face a number of changes as a result of ongoing digitization. In doing so, we must make a distinction between the Audit practice and the regular SME and advisory practice. In the Audit practice, more and more will be used on AI, Machine Learning, Process and data mining and predictive analytics to be able to perform proper controls. In regular SME practice, increasing robotization and standardization will ensure that many activities related to administration, annual accounts and tax returns will hardly involve human labor. At the same time, the importance of Business Intelligence and Continuous Monitoring is increasing and that results in much more consultancy work.” 

Jan Wietsma, Board Member NBA

When zooming-in on how the accounting industry has been dealing with digital transformation, Yeelen Knegtering, CEO & Co-Founder at Klippa, argues that Klippa has been able to thrive by focusing on providing its clients with fast and smart solutions, by offering unique solutions that present great points-of-difference within the competitive landscape.

“Klippa provides both end to end solutions as well as building blocks for other software solutions. Klippa let’s larger organisations and consultancy firms focus on the operational side of the digital transformation, where we focus on the technical tools that reap you the benefits of the transformation. Smart solutions that safe time, money and prevent errors and fraud. Especially in these teams, where companies are looking to move fast, these out of the box building blocks make sure companies can hit the ground running. Because while many companies feel they have unique procedures, the reality is that many procedures are the same or very similar and therefore great candidates for digital transformation.” 

Yeelen Knegtering, CEO & Co-Founder at Klippa

And when analyzing threats that may arise due to digitization, Jan Wietsma emphasizes the importance of vision and leadership, two factors which can greatly affect the success of business models for accounting firms. 

“The greatest threat to business models concerns the issue of vision and leadership. The impact of digitization is not treated integrally, but fractionally by many (accountant) organizations. As a result, many opportunities are missed and a lot of value is lost. An organization ultimately sacrifices competitiveness, while at the same time opening the way for new parties who do have a broad and shared vision of the impact of digitization in the customer service concept in relation to internal control.”

Jan Wietsma, Board Member NBA

Regulatory changes and consequences for the Accounting Sector

One step forward for digitization in accounting is towards regulatory frameworks, according to Jan Wietsma. However, there is a certain reluctance in terms of fully trusting an AI system to deal with compliance issues. 

“The focus in the accountancy industry is often too much on the compliance aspects.  As a result, the customer often gets out of sight. At the same time, many compliance aspects can be easily digitized. But practice also shows that there is often ‘fear’ of trusting the outcome of the digitized processes. The benefits affair (the “toeslagenaffaire”, a case of misuse of data, causing a bias at the Dutch tax authority, leading to financial harm for citizens) has also shown that things can go completely wrong. So in the coming years we will have to put a lot of energy into the reliability of AI.”

Jan Wietsma, Board Member NBA

New Technologies

Cloud, OCR and AI are the path to go when discussing automation in accounting. By reducing the time spent on manual labor, Yeelen Knegtering, CEO & Co-Founder at Klippa, believes that this way more clients and customers can be served. Furthermore, when looking at the human capital, the future probably will involve mundane tasks realized by computers and software systems, while the bigger picture will fall under the responsibility of humans.

“The accounting industry has long been an industry with a lot of manual labour. Digitization using cloud based software enables the accounting industry to share data easier & work together with clients, meanwhile getting real time insights into import business KPIs. At the same time, OCR and AI are automating manual labour such as data entry, approvals and audits. This enables accounting companies to serve more customers by reducing the time spent per customer. We will probably see fewer smaller firms in the future and more big firms with large amounts of clients, mostly served by software, where humans are only needed for advice and edge cases.”

Yeelen Knegtering, CEO & Co-Founder at Klippa

Furthermore, Knegtering highlights the issue of resilience and low rate of technological adoption within the accounting industry. In this sense, Covid-19 has acted as a facilitator for change in many cases, with businesses needing to adapt to the new climate conditions. By having an open mindset, both companies, employees and stakeholders can benefit greatly from digitization, especially cost-wise and in the decision making process. 

“When people and companies have been doing things for a long way in a more or less the same way, they usually get a bit blind to the benefits of change and are usually also unwilling to change. Because the current way of working is so comfortable, the hassle of change for most people is just too much. The global pandemic has forced people and companies into a new mindset, because there was no other option than changing and adapting. People have experienced the benefits of digitization on a huge scale and this has removed a lot of the friction to change. Having an open mindset towards digitization allows you to properly way the benefits versus the cost and allow you to make the best decisions. Therefore more and more companies are now quickly investing in digitization, because they have felt the benefits.”

Yeelen Knegtering, CEO & Co-Founder at Klippa

Competition from New Market Entrants

Robert Jan Verheggen, COO & Co-Founder at Klippa, emphasizes how new market entrants using technological advancements, such as AI, are setting the tone for the accounting industry. The focus has been shifted from a traditional mind-set, to incumbents showing interest in the sector and aiming for small, local markets.

“AI is taking over the jobs of ‘traditional bookkeepers’ quickly. The old skool manual labour is now redundant and the added value of a bookkeeper is now purely on advisory. For many years, accounting has been a local, country-based development, but nowadays you see international giants such as Xero and Quickbooks set foot in all European countries. Mostly because of their superior UX and connectivity possibilities.”

Robert Jan Verheggen, COO & Co-Founder at Klippa

Data availability and interoperability

In recent years, the accounting software market has grown in value to over $12 billion, with an expected value of over $19 billion by 2025 (ProgrammableWeb – “10 Popular Accounting APIs”). And this prediction is mainly due to technology and data possibilities, such as application integration, cloud computing, automation, AI and blockchain. Thus, as emphasized by Robert Jan Verheggen, COO & Co-Founder at Klippa, companies are eying the accounting software market. 

“Every modern day company wants to use your accounting data also outside of the tool they’re using. It’s the same shift as in any other industry. Accounting solutions without API’s are bound to lose in the long run.”

Robert Jan Verheggen, COO & Co-Founder at Klippa

Bookkeeping, administration, assurance or advisory: What is the key “ingredient” for Accounting?

Many debates are sparkled with regards to the core of the accounting industry. Experts are divided between four segments: bookkeeping & administration, assurance or advisory. Robert Jan Verheggen, COO & Co-Founder at Klippa, explains why he believes that advisory is the essential component above all:

“Advisory without a doubt. Talking about modern industries, it’s a matter of years before the manual administration and bookkeeping is fully automated. For slower industries and for assurance it might take another decade or so, but the added value of accounting firms should be shifted towards advisory.”

Robert Jan Verheggen, COO & Co-Founder at Klippa

Keep an eye out for the next “Voices of the Industry” article, with a focus on the regulatory sector!

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