9 Developments Shaping the Future of Accounting

Accountants aren't just number crunchers anymore. Historically, organizations have relied upon these workers to supply accurate financial information and help meet fiscal goals. But that role is changing. And the future of accounting will soon involve more strategy and decision-making and focus less on pure math. 

Fast-evolving regulatory landscapes, business trends, and technological innovations are transforming how people collect, manage, and interpret financial data. The COVID-19 pandemic has also created new regulatory and tax concerns that have forced remote accounting teams to collaborate in new ways. 

As a result, more organizations are considering cloud-based technologies to conduct business at home. And as automation increases, accountants are focusing on new skills such as leadership and data analysis.

These changes have even impacted the Uniform CPA Exam, which now focuses on understanding business processes, automation, and data analytics. At the same time, it has also phased out other topics, such as specialized estate tax and trust knowledge.

In short, accountants are moving beyond spreadsheets and taking more active and strategic roles in companies and organizations.

This business guide puts the regulatory changes, emerging trends, and key technologies driving the accounting evolution into context. And it discusses how cloud-based software can support accounting teams in their new roles.

Chapter 1

Regulatory Changes

First, accounting teams must anticipate the shifting regulatory landscape in a post-pandemic world. For example, CFOs and controllers must now comply with reporting requirements from government stimulus programs. Yet at the same time, they must ensure proper documentation, recording, and reporting for audits. Plus, disclosure requirements for Environmental, Social, and Corporate Governance (ESG) will likely change soon.

So, let’s take a closer look at how policies are affecting the future of accounting.

Tax Policy

No matter the issue, accounting teams must stay up-to-date on tax policy, statutory, and regulatory changes, and COVID and other stimulus legislation.

For example, the recent Consolidated Appropriations Act—better known as the COVID stimulus—complicated tax reporting. Passed shortly before tax season, it introduced a string of policy and regulatory changes, including: 

• Tax extenders
• Paycheck Protection Program (PPP) expense deductions
• Second-draw PPP loans
• A simplified process for PPP loans under $150,000.

Those who effectively navigated those tax law changes freed up funds to weather other business challenges ahead. And many accomplished this with accounting software that made tax records readily accessible.

Environmental, Social, and Corporate Governance (ESG)

Many organizations are shifting focus to environmental, social, and corporate governance (ESG). And experts are anticipating new federal regulations for ESG, especially concerning financial disclosures for public companies. 

The new policies seem likely, in part, because the European Union recently began requiring financial services firms to disclose how they account for environmental sustainability in their investment decisions. And similar laws could follow elsewhere. In addition, the Sustainable Finance Disclosure Regulation (SFDR) is already mandating the disclosure of climate-related financial risks and greenhouse-gas emissions in a company’s operations and supply chain.

Fortunately, professional trade organizations are trying to help accountants prepare for any new ESG regulations. In November 2020, the AICPA shared plans for ESG educational resources. More recently, it identified six ESG trends expected to affect accounting professionals in the coming year, including ramped-up ESG reporting, environmentally focused policy documentation, and increased diversity.

New Accounting Standards

Throughout the year, the Financial Accounting Standards Board (FASB) updates accounting standards regarding financial statements and compliance with Generally Accepted Accounting Principles (GAAP). For 2021, FASB has instituted changes related to: 

• Asset acquisitions
• Credit losses
• Debt securities
• Leases
• Reorganizations
• Variable interest entities 
• Banking regulation disclosures

(If you need more details, the tax and financial consulting firm BDO offers a helpful summary of all the specific changes for 2021.)

Over the past few years, accounting teams have also faced new revenue recognition standards, standards for lease accounting, and Current Expected Credit Losses (CECL) Accounting Standard. While the pandemic may have kept some new standards from being implemented, they remain on the horizon. Therefore, accountants should pay close attention to them and stay current.

Chapter 2

Trends

In addition to an evolving regulatory landscape, other factors are pushing the future of accounting toward strategizing and decision-making. And three trends are driving the most change: moving toward a remote close, adopting continuous accounting practices, and frequent financial forecasting.

Remote Close and Online Collaboration 

The COVID-19 pandemic created a widespread shift to remote working. This new mode of operation requires access to collaborative communication tools such as Zoom and tools for e-signature and cloud-based file sharing. So, some accounting teams have enjoyed a major advantage if they have already been using this software.

Cloud-based accounting software and mobile accounting tools also have other obvious advantages. For example, you can complete month-end close from anywhere. You just need a computer and internet connection. And it allows accountants to access reliable, real-time data from anywhere.

Similarly, mobile financial tools are growing more important as millennials fill accounting roles. This generation expects consumer-grade technology that will only expand as the 5G network rollout continues. So, the future of accounting will become more mobile and flexible.

Continuous Accounting

Most accountants don’t need to stay late at the office anymore, which is fortunate because remote workers no longer have an office for pulling all-nighters. Instead, continuous accounting (also known as continuous close) uses automation and other technology to incorporate end-of-the-month tasks into the daily workload.

The method effectively spreads the book closure process over an entire period. So, instead of reconciling figures at the end of a month, you can reconcile a few items each day, preventing journal entries from piling up.

This way, automation and continuous accounting boost efficiency and data integrity. It frees up the time your accounting team would normally spend correcting errors and allows it to focus on more valuable projects.

Accountants are becoming more analytical as technology pushes them from reactionary and transactional to proactive and analytical.

Continuous accounting also offers faster access to important data, simplifies compliance and auditing, and empowers accountants by giving them more influence over strategic business decisions.

Improved Financial Modeling and Forecasts

Strangely, the pandemic created conditions that simultaneously hampered financial forecasting and highlighted its value. On the one hand, supply chain disruptions and unpredictable consumer demand introduced guesswork into forecasting efforts. 

Yet, on the other hand, the difficulty of gauging economic recovery and return-to-normal spending habits emphasized the value of precise forecasting. So, companies that have navigated that double-edged sword (thanks to timely and accurate data) have distinguished themselves with customers and suppliers.

But that increased use of budgeting, forecasting, and planning software, as well as data analytics and visualization tools, has further impacted accountants’ roles. Their function is becoming significantly more analytical as technology pushes them from reactionary and transactional to proactive and analytical.

This shift has blurred the lines between accounting and finance professionals. And the former has undertaken more responsibilities that have traditionally fallen on finance, especially at smaller businesses.

Improved predictive financial models have also helped drive the future of accounting toward proactive and analytical work. Armed with accurate, real-time data, controllers and senior accountants can build better models based on current business realities. They can also give companies a clearer picture of what financial challenges to expect.

At this point, accounting leaders who aren’t using scenario-planning tools will likely fall behind. The field now requires testing and re-testing assumptions by modeling cash flow, burn rate, and liquidity under various conditions. So, access to real-time information is now vital for building financial models that depict realistic best-, worst-, and average-case scenarios.

Chapter 3

Impactful Technologies

Accountants are not just contending with evolving regulatory requirements and emerging industry trends; they also must keep up with technological innovation. For example, organizations can now use cloud-based accounting systems to automate financial reporting, cash management, accounts payable, and month-end close processes.

A growing consensus claims that AI can and will significantly impact every industry in the future.

In fact, by 2024, more than 45% of IT spending will shift to cloud-based technologies, according to research firm Gartner. And in many instances, that technology will include accounting software. That’s why cloud accounting software skills are some of the most in-demand for accountants.

With that path in mind, let’s examine three technologies likely to impact on the future of accounting: AI, analytics, and cybersecurity.

Artificial Intelligence (AI)

A growing consensus claims that AI can and will significantly impact every industry in the future. Currently, accounting departments are using AI to automate mundane, highly repeatable tasks, allowing accountants to focus their time on high-value projects.

Accounting firm Ernst & Young, for example, uses AI to analyze lease contracts and quickly capture information such as commencement date, amount due, and termination or renewal options. This AI-generated data allows accounting professionals to spend less time looking for information and more time making decisions based on that information.

Machine learning, a type of AI, also allows a company to feed a year’s worth of expense reports into a travel and expense system. Then, the system can flag fraud or human error indicators. The more reports it can study and analyze, the better it will become at spotting potential issues (i.e., the system learns). That helps accountants save time and money processing reports and reimbursing employees.

It’s only a matter of time before AI automates and extracts insight from every accounting process. So, as more transactional work becomes automated, accountants must analyze technology-generated information. And therefore, they must play more of a strategic role.

Robust Data Analytics

Data will drive the future of accounting. And CFOs understand that. Brainyard’s Survey of business leaders shows a steady, sustained demand for more effective data use, such as identifying areas for savings, evaluating investment opportunities, or improving reports.

KPI (Key Performance Indicator) Tracking.

Once CFOs identify important KPIs, a cloud-based management system can keep those metrics up to date and readily available in dashboards. For example, a cash flow dashboard could show your current cash conversion cycle, accounts payable, accounts receivable, turnover, and other KPIs. And the dashboard would constantly update with the latest information.

So, instead of manually compiling that information, accounting teams can spend more time interpreting it and sharing insights with colleagues. They can also use AI technology to analyze large amounts of structured and unstructured data, uncover revenue trends, predict shifts in consumer behavior, and spot fraud.

Therefore, accounting professionals who use KPI tools don’t just enjoy increased productivity and accuracy. They also gain insights necessary for better decision-making. And they can provide the right data at the right time to the right people, such as internal stakeholders or clients. Plus, they have more time to make strategic contributions because they make fewer errors using financial management software. 

Cybersecurity

Data breach risks are more prevalent than ever, and finance divisions—typically home to accounting—are one of the leading targets. 

It’s clear that evolving regulatory requirements, industry trends, and innovative technology have transformed accounting.

In fact, cybercriminals often obtain sensitive information through “spoofing.” Through this scam, they steal data by pretending to be legitimate businesses or other trusted sources. And according to Abnormal Security, invoice and payment fraud from spoofing finance departments increased by 54% a week from Q2 to Q3 in 2020. 

Unfortunately, remote accounting teams face an additional layer of security risk. For this reason, your company’s leadership should identify problem areas, review scam response plans, and regularly check in with team members.

You must also train accounting teams to recognize potentially harmful emails and spot attacks. Then, your accounting teams can spread cybersecurity awareness because they’re already schooled in robust internal controls, access, and permissions. 

Chapter 4

Investing in Technology and the Future of Accounting

It’s clear that evolving regulatory requirements, industry trends, and innovative technology have transformed the future of accounting. Therefore, it’s essential to invest in the right software and keep up with recent and upcoming developments. And some systems are better equipped for the job than others.

NetSuite’s cloud-based financial management system offers all the functionality accountants need to adapt to their rapidly changing profession. NetSuite pioneered the Software-as-a-Service (SaaS) model, allowing customers to automatically receive biannual updates. This information helps finance divisions comply with regulatory changes, adjust to emerging trends, and utilize the latest technology. And since it’s a cloud platform, users can access NetSuite from any device with an internet connection, making remote closes a breeze.

The cloud-based solution also pulls real-time data from various facets of your business and has built-in reporting tools. Consequently, it establishes better transparency across all departments. Customers can also take their forecasts, modeling, and data analysis to the next level with add-on modules for planning, budgeting, and advanced analytics. Finally, NetSuite’s data centers adhere to leading cybersecurity protocols. As a result, the system offers a level of security most businesses can’t match on their own.

These advantages help accounting departments fully understand their company’s performance and ensure accurate, up-to-date financial records and reporting. They also give employees more time to weigh in on strategic decisions and establish themselves as key partners.

Today’s accountants need a flexible, robust system to support their redefined roles and earn the ear of those in the boardroom. So, if you want to support their work with a comprehensive financial management system, contact our team to have one customized to your needs.

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