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3 accounting industry trends for 2018: What you need to know and how to prepare

Do you have a pile of invoices and receipts that seems to grow faster than you can process them?

Generating expense reports and invoices, creating billing reports, filing tax documents, and monitoring constant changes in banking and finance compliance standards such as Sarbanes Oxley and GAAP (generally accepted accounting principles) are just some of the unique business challenges that accountants and finance managers must deal with.

However, there is some cutting edge technology on the horizon that will help small businesses meet these accounting challenges over the next couple of years.

In this article, we’ll break down the latest accounting industry trends, look at how the latest technology could impact your business, and tell you how to prepare.

1. Blockchain will streamline key accounting functions

You may have heard of blockchain, but what exactly is it? IT advisory firm Gartner defines it as follows:

“A type of distributed ledger in which value exchange transactions (in bitcoin or other token) are sequentially grouped into blocks. Each block is chained to the previous block and immutably recorded across a peer-to-peer network, using cryptographic trust and assurance mechanisms. Depending on the implementation, transactions can include programmable behavior.”

In other words, blockchain is a public ledger that executes value-based transactions through cryptography, thus eliminating the need for any third-party authentication.

Transactions do not only refer to monetary transactions, but also include taxes, votes, property, confidential documents, and more.

Image from:Top 10 Strategic Technology Trends for 2018” (full content available to Gartner clients)

 

The image above highlights the key characteristics of blockchain on the left, along with functionalities of blockchain on the right. At the center of the image are some examples of blockchain frameworks developed by Microsoft and IBM, along with their industrial applications.

 How blockchain will help accountants and finance managers

Blockchain will enable accountants to track financial transactions within a supply chain from manufacturing and transportation to the end consumer. This development will redefine how accounting software is designed to include more parameters related to bitcoin transactions, rather than cash-flow or debit/credit card transactions alone.

Accountants and finance managers can use blockchain technology to tackle the following business challenges:

Many people think bitcoin is synonymous with blockchain, though this is not entirely accurate. Bitcoin is just one example of a cryptocurrency that uses blockchain technology for distributed ledger transactions that are authenticated by multiple users without risking financial security.

Bitcoin represents a paradigm shift for accountants at small and midsize businesses (SMBs), since it redefines transactions based on bookkeeping to digitally linked blocks that contain financial information. In the past decade, digital cryptographic currencies have quadrupled to include a huge market capitalization of more than $43 billion as seen the table below:


The top 10 cryptocurrencies based on market capitalization value in ascending order
(Source: World Economic Forum Report, “Realizing the Potential of Blockchain“)

2. Edge computing will be a cost effective alternative to the cloud

In the last two to three years, cloud computing has been one of the top trends in the accounting industry.

However, over the next five years, cloud computing will be complemented by edge computing. This is due to the increased communication between IoT devices, along with the interconnected users, places, and processes, which make up the “intelligent digital mesh,” according to Gartner’s report, “Top 10 Strategic Technology Trends for 2018” (full report available to Gartner clients).

Edge computing is a scalable form of computing that generates, collects, and analyzes data at the site of the data generation—not at a centralized location, e.g., a data center.

How edge computing will help accountants and finance managers

Edge computing allows accountants and finance managers to host accounting software on a “local server,” meaning the server architecture is located closer to the data transactions than in cloud computing to reduce the volume of data sent in a wide area network (WAN).

Edge computing can help users redistribute accounting functions based on high volume of demand for payroll management or tax compliance.

For example, if your business is spread across locations, and in one location there is more demand for payroll management rather than tax compliance, you should host your set of payroll software application next to those business centers.

Benefits of edge computing include:

When the accounting industry mostly relied on hard drive and paper-based workflow management, onboarding new clients—along with their data—was a key challenge. Edge computing hosts accounting software closer to a business’s analytics frameworks to reduce paperwork, making it easier for businesses to increase scope, as cloud-based accounting firms are five times likely to add more clients than traditional firms.

It’s important to note that most accounting software vendors have not yet deployed their accounting software with edge computing capabilities. However, edge computing will help streamline the cost of accounting software, as it will model pricing based on usage as compared to the site license model seen in legacy accounting software deployments.

3. Machine learning will increase automation of accounting tasks

A key business challenge that many accountants and finance managers face is data entry of records to maintain account ledgers and manage billing and tax filing activities.

Most accounting software can automate data entry and other redundant tasks to some degree, but this automation is often not complex and will be improved further. This is where artificial intelligence (AI), with the help of machine learning, comes in.

How machine learning will help accountants and finance managers

According to ICAEW’s 2017 “Artificial intelligence and the future of accountancy” report, accountants can use machine learning to improve accuracy and speed when entering data, through automation, better detection of fraud, and enhanced predictive analytics.

The following are some more benefits that machine learning will offer to accountants and finance managers:

How to prepare for the latest accounting industry trends

An important note about these trends is that they are still in their development stages, and will bring more business opportunities for accountants and finance managers within the next five years.

Here are some other key takeaways to keep in mind as you look ahead toward leveraging these latest accounting trends:

Next steps

These are just some of the latest accounting industry trends that are disrupting the profession of accountants and finance managers.

Check out these additional GetApp resources for the latest information on accounting software:

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Abhishek Singh :Abhishek is a lead content analyst at GetApp. He writes thought leadership blogs on small business finance and accounting challenges that help small business leaders find the right software solutions for their mission-critical business priorities.