If there is anything that 2020 has taught us, it is that the future is anything but expected. Nevertheless, we must try and see what the future holds if we want to be prepared for it.
That is why we took upon ourselves the challenging task of trying to predict the future of accounting in the year 2025. Though flying cars and self-tying sneakers will still probably only exist in "Back to the future" reruns, there are some accounting trends we can cautiously assume will be in existence five years from now: The integration of AI and automation, rise of remote and borderless work thanks to cloud technology, and the blockchain revolution are three trends that are expected to impact the accounting industry the most.
Let us dive deeper into these trends and see what the future holds for accountants.
Artificial intelligence and full automation
Some automation in data-entry and classification is already in play today, but full automation will not be possible without an added function mimicking the human ability to infer meaning from context and learn from previous interactions.
The trend towards AI integration in accounting is constant, clear and fast-pacing: According to a 2019 research, the global AI accounting market is expected to grow from USD 0.66 billion in 2019 to USD 4.791 Billion by 2024.
When AI is fully integrated into accounting, it will have far-reaching implications on the perception of the role accountants play in their clients' lives.
Accountants will no longer be needed to "manage" the numbers for their clients. Businesses will be able to handle all basic financial capacities independently: Data entry and classification will be automatic. Bills, invoices and other documents will either be digitized or scanned (if paper will still be in use in accounting - an improbable notion), classified, handled and entered into the books without the involvement of human eyes or hands.
AI will eliminate any errors created by the human factor, monotonous and repetitive tasks such as data entry and manual AP/AR will be a thing of the past, and accountants, bookkeepers and small business back office work will save a lot of time with the successful integration of AI.
Instead, accountants will have to evolve into a more advisory role - helping their clients be more profitable, have better cash-flow, and make better business decisions. This also means that accountants will be more active, rather than reactive, in order to provide greater value for their clients. They will be the ones raising concerns, suggesting solutions, and drawing financial plans.
The fading away of the “number-crunching” aspect of the accounting profession will in turn increase the trend of moving from an hourly retainer billing approach, to an ‘added value service’ one, where accountants will make their revenues from offering specific services, such as virtual CFO and financial planning.
Second, automation will be able to process large quantities of complex data instantly. Data and payments from clients to vendors will flow freely online, and bookkeeping, payroll, and bill pay software will interact seamlessly.
This will eliminate any lag time between the actual transaction and the time it's recorded in the books, and accountants will have a "live" view of the numbers at any given time and will provide them with a powerful tool to help their clients with their financial decisions based on a hundred percent accurate real-time data.
Of course, the advancement of full automation is also dependent upon resolving the bottleneck of using paper checks for B2B payments and accepting cash in B2C transactions. Therefore the future of AI and automation goes hand-in-hand with the future of online, uniform payment methods, and as time will pass we will see more Accounting professionals and businesses saying farewell to writing and sending checks manually and to cash handling.
“No borders” cloud accounting
Cloud accounting enables accountants, bookkeepers and their clients to handle and access data from anywhere. If the old accounting model is that a business owner has his client within a driving distance so they can knock on their door and have coffee, this model will probably fade out of existence by the time we hit 2025 - As a recent poll found 81% of participating accounting firms they anticipate a moderate to significant increase in remote work post-pandemic.
Even now, in part "courtesy" of the pandemic, more and more accounting professionals are handling clients they have never physically met. The barrier now is divided into two: computing capacity and communications are still not up to par in order to facilitate a 100% transition to the cloud; and the psychological barrier of clients who still need time adjusting to the idea of giving the financial reins to someone they haven't met in person.
In the upcoming years, computing capacity will increase, and communication will also leap forward, thanks to advanced infrastructure such as 5G cellular networks, which is predicted to reach globally 40% population coverage by 2024. The mental barrier is also bound to be broken eventually.
The cloud revolution will have far-reaching impacts on almost all aspects of accounting: The playing field will be blind to state borders, and so, firms will have to readjust their marketing schemes to stand out nationally and attract clients with online marketing. The same will be true for hirings. These needs will give rise to peripheral industries - marketing and hiring professionals who specialize in national and online efforts.
The ability to work from anywhere (including a home office) will give rise to sole-proprietor accounting professionals, as overhead expenses (office space, back-office) that are now an entry barrier to the market will disintegrate.
To learn more on how accountants can use cloud accounting to grow their firms, improve efficiency and offer more services, read this article.
Currently, the effort to remove regulatory interstate barriers and promote CPA mobility is ongoing. AICPA and the National Association of State Boards of Accountancy (NASBA), the national organization of state boards of accountancy, are endorsing CPA mobility through a provision in the AICPA/NASBA Uniform Accountancy Act (UAA), allowing interstate practice through uniformity in CPA qualifications. CPAs who want to practice out of state can use the CPA mobility online tool offered in CPAmobility.org to find out on their ability to offer certain services in specific states.
Accountants and bookkeepers will have to find substitutes to retain their connection with their clients, and to keep client loyalty, as clients will also have a wider market, and fewer emotional attachment to an accountant they never met in person. Yes, Video conferences, newsletters and other forms of communication are important, but the real solution lies in a deeper level - of offering a proactive and attentive approach to and intimate knowledge to their clients’ needs.
There is a lack of clarity as to the future of outsourcing certain data management functions overseas: On one hand, the outsourcing trend is already on the rise, and cloud capabilities will make it easier to outsource. On the other hand, AI will probably eliminate most manual data management needs. AI just might be the end of the outsourcing industry. It's not a question of "if," but rather of "when."
The further implementation of cloud and remote accounting practices will also require a greater emphasis on computer security, as more financial information will be transmitted, stored and accessed digitally. Data encryption and security protocols will have to be put front and center, especially in the accounting industry, which deals with sensitive financial information for their clients, and holds fiduciary duties.
The security issue is a great segway into the next trend - blockchain, and its enhanced encryption and security capabilities.
Blockchain and Cryptocurrency
Cryptocurrency is becoming more and more popular as time goes by, and it's only a matter of time before businesses widely embrace it as an acceptable form of payment in B2C or B2B transactions. Accountants will not have the privilege of ignoring this trend and will have to gain expertise in the field. The AICPA is already in the process of preparing CPAs for blockchain integration into accounting and is offering training and certification for accounting professionals.
However, the real tectonic shift is in the impact of blockchain on accounting regardless of cryptocurrency. While blockchain technology is inherently associated with cryptocurrency, its uses are much broader.
Blockchain, also known as distributed ledger technology (DLT), is a digital system that records data (any data) transactions in multiple locations simultaneously and instantaneously. Each data transaction added to the 'block' has a unique digital signature, it's time-stamped and encrypted.
Because all the network participants collaborate in authenticating the validity of each new transaction, it makes data tempering almost impossible. By its virtues, blockchain provides unprecedented security and accuracy.
Therefore, it is easy to see how this technology has the potential to change the face of the accounting profession. If it is successfully and fully integrated, it will eliminate double entries, balancing, and confirmation, as all parties share the records of all transactions. Additionally, self-balancing and continuous checking will eliminate the need for manual reconciliation. All the data will be available and traceable for auditors and tax authorities.
Having said that, as with all technologies that are decentralized in nature, in order for blockchain to revolutionize accounting and finance truly, it needs to reach a critical mass and undergo standardization. Be it with regulatory tools, market forces, or a combination of both - change is underway.
With 2025 in the horizon, it’s never too early to prepare for the changes to come. Accounting professionals who embrace smart technology early on will position themselves ahead of the curve and thrive in the digital age.
*This blog post is intended for informational purposes only and is not intended as financial advice.
**Melio does not provide legal, tax or accounting advice, and you should consult with a professional advisor before making any financial decisions.