The accounting function is an integral part of any business, whether small, medium or large. While managing company accounts and books can be a technical and sometimes complicated process, keeping track of the numbers is something business owners cannot afford to neglect. A lost receipt or unlisted expense means a missing transaction, which could have significant implications for a business. As such, good recordkeeping of your income, expenditures and other transactions is a must for all forms of business.
Accounting is also how a business can understand if it is profitable or performing well. It can also help executive and management teams make key strategic financial and commercial decisions that can impact the business and operations in the long run.
With the COVID-19 pandemic putting industries in a whirl, many businesses around the world have moved their operations online and have leveraged and integrated new technologies for their business. This has been the case particularly in the area of accounting and finance management.
This article will walk you through the latest and emerging accounting trends that startups, small businesses and small and medium-sized enterprises (SMEs) should know about and understand to stay competitive in their field and ensure that the business can scale with 100% confidence in their accounts and finances. Let’s get started!
The Global Accounting Industry: An Overview
The accounting industry saw a significant level of change and growth as a response to recent global events. Management teams saw the increased importance of having their accounts and finances in order to avoid liquidity issues and other financial risks. Check out these fascinating figures and trends that are shaking up the global accounting landscape.
The global accounting services market is predicted to reach $1,324.77 billion in 2022. (The Business Research Company)
This number is a significant jump from the $1,175.88 billion in 2021. The increase is attributed to companies readjusting their operations as they bounce back from the effects of the pandemic. By 2026, the accounting services market is expected to hit $2,019.02 billion with the projected rise in demand for accounting and tax advisory services.
Accounting and bookkeeping are the dominant services performed by accounting firms worldwide. (Sage)
Sage’s The Practice of Now 2019 report gave a sneak peek of the accounting services market and industry—showing that accounting and bookkeeping are the top accounting services required globally. Other services popular worldwide include payroll (25%) and personal and corporate tax management (24%).
The Philippines has one of the largest populations of qualified professional accountants among Asian countries. (Business Mirror)
Many Filipinos are interested in accountancy as a profession. In fact, more than 100,000 students across the country would sign up for the Bachelor of Science in Accountancy program in the hopes of working in the finance field in the future.
Today, the Philippines has over 190,000 recorded certified public accountants (CPAs) on the Board of Accountancy. In last year’s October and December CPA licensure examinations, the country welcomed over 600 new CPAs, and we can expect this number to grow in the years to come!
Micro and SMEs represent about 90% of public accountants’ clients. (International Federation of Accountants)
Traditional reporting, tax preparation, financial reporting, external audit and assurance services are among the services accountants mainly offer to SMEs.
One of the challenges confronting SMEs within the Association of Southeast Asian Nations (ASEAN) is the lack of skills to understand and leverage financial data for key business decision-making. Through their services, accountants and accounting services providers lead businesses toward financial literacy and business growth.
Accounting and bookkeeping tasks are bound to decrease as accounting automation solutions get adopted by businesses. (World Economic Forum)
Various accounting and bookkeeping tasks, along with data entry, payroll and auditing, are among the tasks set to move towards redundancy come 2025. These are believed to be the result of the distribution and reallocation of work between humans and machines becoming more commonplace.
Around 67% of accountants say that the implementation of cloud technology contributes to the success of their client businesses. (Sage)
Another survey from Sage suggests that using cloud-based programs allows accountants to help their clients on the road to success. With these tools replacing various types of administrative work, accountants and accounting services providers get more time to nurture their soft skills and improve their service offerings, ultimately improving client interactions and performance.
Emerging Accounting Trends SMEs Must Know About
Digital transformation will drive most of the changes in the accounting industry, for both businesses and professionals. Here are several key accounting trends that SMEs must be aware of and consider carefully when looking to scale their business.
Transition to Cloud-Based Accounting Systems
Businesses are moving to the cloud for many reasons, including scalability, cost reduction, and accessibility. SMEs that wish to streamline their financial processes at any time should already be considering the benefits that cloud-based accounting can have for their company.
This makes financial management easier for accountants and businesses, as it provides convenient access to data, team and management collaboration and importantly, greater transparency. From tracking inventory to monitoring expenses, cloud-based accounting systems let you create simplified workflows and save time and resources in the short-term and long term.
Outsourcing Accounting Services
Not all businesses have the resources or capacity to hire and train an accountant. The good news is that small businesses and SMEs can outsource accounting in the Philippines and other countries to solve recruitment challenges and benefit from expert independent support. Doing so helps business owners focus on core operations and growth strategies instead of spending time and costs seeking to balance the books themselves.
Outsourcing the accounting aspect of your business ensures you get to work with trained and experienced professionals and technologies that might not be readily accessible to the business. Make sure you find a reputable accounting services provider or accounting firm to help ensure that you are receiving accurate financial data on a regular basis.
Fixed Remote Working
These days, it isn’t always easy to find top talents willing to work on-site, including professionals in finance and accounting. That’s why it can be a progressive step for businesses to amend their hiring requirements and adapt to a remote work setting to attract better candidates.
Now that online tools and technologies allow accountants to perform their job functions remotely, employers should consider working from home as a perk that can benefit both your accounting and finance employees and the business.
Increased Use of Finance Software
In the era of modernization and digitalization, there’s no doubt there is an increasing demand for efficient finance software solutions. In fact, from 2020 to 2024, the business accounting software market is predicted to increase at a compound annual growth rate of 6%.
Now more than ever, it is vital to invest in technology to keep up with the market and stay on top of the competition. SMEs can explore accounting and finance software that provides immediate solutions to their business needs, such as cash and spend management, monitoring of billing and invoicing and payroll processing.
With all the talk about cloud accounting and accounting software, you naturally expect automated accounting processes to be a rising trend in the industry. Application programming interface (API) for integrating sales or customer data and optical character recognition (OCR) to reduce encoding times are just two examples of where automation can really drive a business forward. Automation technology completes a task as long as it satisfies the defined rules. About 43% of accountants say the integration of technology has made them more productive.
Automating transactional accounting tasks eliminates the repetitive and non-value-adding part of the job, giving people in your company more time to focus on strategy-building efforts and other value-adding activities. However, automation still needs an excellent accountant to verify data accuracy and integrity, ensure processes and controls are being monitored and help businesses make intelligent financial decisions on the underlying financial information.
Integration of Business Software
Application or software integration allows for a seamless workflow. Small businesses can look into specific online accounting software or enterprise resource planning (ERP) systems that can provide a level of upgrade to support their day-to-day operations.
Apart from the accounting system, other modules you can integrate into your centralized system include inventory management, sales management, order management, customer relationship management (CRM) and of course, employee management.
Online Filing of Taxes
If your finances are in bad shape, you will need to spend a lot of time working on your tax computations in order to ensure 100% accuracy. Online tax filing software and tools allow you to automate your tax filing, keep track of your tax returns and make bookkeeping more straightforward.
You can navigate through these applications on your own or work with an accountant. Either way, online tax filing serves as a convenient and valuable solution for small businesses and SMEs. However, as with any type of technology solution, it is important to ensure that whoever is leveraging such systems for a business fully understands how to use these systems properly and professionally.
Implementation of Blockchain Technology
In case you didn’t know, blockchain technology is not just for cryptocurrency. Blockchain is helping the finance and accounting sector by reducing the costs of maintaining immutable ledgers and verifying transactions. This can be useful in external auditing since data manipulation is next to impossible and transactions are secure and publicly available.
Integrated Invoicing System
Accurate and streamlined cashflow management is crucial for businesses. With a modernized and integrated invoicing process in your operations, your company can monitor account payables and receivables for recurring transactions, meaning the company should always have a clear understanding of its financial position.
When you automate your invoicing, provided it is set up correctly, you can put this task on autopilot, avoiding duplicate entries, bookkeeping mistakes, and other inefficiencies that might arise due to human error.
Data Analytics and Forecasting Tools
Today, accountants are often expected to do more than traditional accounting and bookkeeping. Some of the essential skills employers look for include strategic thinking and business advisory.
The utilization of data analytics and forecasting tools for budgeting, auditing and risk management, among others, helps position them to be more effective advisors. More and more, companies are able to leverage data and data analytics tools to fully understand the various functions within their business and make important business decisions based on this knowledge.
Welcome the Future of Accounting with Confidence
Now more than ever, the accounting industry is quickly advancing with continuous innovations and improvements. The trends listed above are just some of what businesses should expect and consider exploring this 2022 and onwards from the perspective of accounting services and streamlined finance activities.
As entrepreneurs are encouraged to accelerate their digital transformation across all of their operations, a great place to start is with your accounting processes. CloudCfo, a cloud accounting firm in the Philippines, assists startups and SMEs with their online accounting, bookkeeping, tax services needs and more.
Get in touch with us to learn how you can modernize and streamline your accounting and finance function today!