What does the future hold?
Technology is forcing the accountancy profession to change. There is a significant shift away from simple compliance into advisory opportunities, with cloud accounting being a major disrupter. The days of charging on a per-hour basis are potentially coming to an end in favour of a model where accountants charge by task and for value added services. This change has been seen first-hand by some of the attendees at our newly formed Digital Advisory Panel, a group of representatives from academia, industry, AAT and HMRC, who will plan and advise on the challenges accountants and businesses will experience in the face of emerging technologies.
The industry faces other issues as a result of the impact of technology. Clients may be reluctant to embrace the move towards digitisation. Accountants therefore need to give consideration to how they can encourage clients who are reluctant to use new technologies.
Secondly, accountants could face increasing competition in the advisory space. Other industries, such as banking, are also looking to position the services they offer as advisory in nature. Banks can now aggregate data through open API which reduces the risk for them in being able to give advice; this risk had previously prevented banks from being more active in this space.
The increase in the amount of digitally stored data will also require a greater awareness of cyber security risks. Accountants have a role to play here, increasing client awareness of these threats.
The Panel agreed that while increasing use of cloud storage is a good thing, there are inherent server related risks. For example, clients should be utilising two factor authentication to ensure information stored in this way is as secure as possible, and password risks can be minimised through usage of products like Microsoft hello biometric security. There is a need for businesses to understand their own systems and cyber protection methods; changes ahead such as the introduction of GDPR further underline this.
Is regulation keeping up with technology?
With all the new innovation going on, it’s fair to ask whether some of it may be stifled by the inability of regulation to keep up. The view of the panel was that it was. For example, the digital-only bank Atom Bank has said that its current account launch has had to be delayed because of a ‘looming threat of new regulation’.
An online presence means that where a company is based can be of less significance. As such there are increasing examples of businesses basing themselves in jurisdictions where regulation typically changes more quickly (such as the Isle of Man). Some regulators are trying to provide scope for innovation. The Financial Conduct Authority allows businesses to trial technologies in a closely supervised environment called a ‘regulatory sandbox’ where regulations are flexible so as to enable innovation. The impact of negotiating the details of the UK’s exit from the EU is also likely to hamper regulation development.
Impact on small business
Smaller businesses are less likely to be tied to older technology systems, and as such may be more agile in adapting to the changing environment. Larger organisations however, will have a different advantage, of having the financial wherewithal to invest in innovation and as such to leverage and deliver sizeable changes.
There is increasingly scope for businesses to manage cost implications by only needing to pay for the software they use, through monthly subscriptions, rather than having to bear the cost of significant investment up front – an interesting dynamic when taken in the context of debates on the impact of Making Tax Digital on smaller businesses.
The next AAT Digital Advisory Panel will take place in December 2017.
Adam Harper is AAT's Director of Strategy and Professional Standards.