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Why 2020 could be a nightmare year for traditional firms

As we move into 2020, challenges are mounting for accountants as more digitally-minded entities enter the accountancy sphere determined to take a share of the revenue.

22nd Jan 2020
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Disruptors such as fintech, Open Banking, blockchain and AI sees the financial services industry (FSI) colliding with the accountancy sector, and many accountancy practices/firms will need to adapt quickly and grow in these areas in order to compete, or risk losing ground to these newcomers.

The rising threat of the millennial accountancy firm is also snatching clients from traditional practices, and many are likely to struggle in adapting new services to meet an ever-demanding client base as they cling on to the ways of the past.  Accountants will need to grab digitalisation with both hands – their survival now depends on it.

Making Tax Digital and HMRC

Last year, HMRC’s Making Tax Digital (MTD) initiative had a big impact on how accountancy firms engage with clients. In 2020, accountants will need to decide which MTD compliant software they will be adopting, especially with the next MTD rollout due in 2021.

With HMRC set to return as ‘preferential creditor’ status in April 2020, Duncan Swift, President of insolvency and restructuring trade body R3, is warning that it will become harder for businesses to obtain lending and borrowing costs are likely to soar, and accountants will need to wary of this when advising clients.

Therefore, accountancy firms will face a 24/7-on’ dilemma whereby they will need to make themselves available to their clients, online, 24 hours a day.

Client data and Open Banking

2020 is also the year when ‘know your client’ takes on a whole new meaning.

Accountants need to develop the upper hand when it comes to knowing their own clients by becoming so integrated into their clients’ businesses that they too, like FSI, are strategically able to use the practice’s client data to strengthen the accountant-client relationship.

Live feeds on the financial state of the practice’s clients via Open Banking will show the most current transactions on a daily basis, and with the link into accountancy packages and bank accounts, machine learning can be applied to forecast and manage cash flow allowing accountants to become more efficient in managing their clients’ affairs based on present data.

But with Open Banking also comes the threat of third-party digital accounting service providers to automate and commoditise some accounting functions as they begin encroaching on accountancy firms’ revenue. Accountancy firms will need to mitigate against this by becoming fully digitally connected to their clients to harness the power of digital technology even further.

Productivity and workflows

We can expect to see 2020 become the year for ‘productivity’, and traditional accountancy firms need a radical overhaul in their operation.  Without the right productivity tools in place, staff will find they need to work longer and longer hours just to get things done.

According to French researchers, being first at the office and the last to leave may help get you that promotion, but you get an 29% greater risk of stroke thrown into the bargain – and those who worked long hours (as many accountants do) for at least ten years had a 45% greater risk of stroke.

In 2020, productivity will become the enabler that will drive better ways of working in reshaping the accountancy workplace.  Practices which have gone digital are already experiencing more streamlined and speedier workflows within the firm. This filters through to their clients, and many are already saying that over 70% of clients now return documents within 24 hours, while 50% of clients return documents within the first two hours of receipt, according to research from Prism.

Driving adoption

Digital transformation will fundamentally transform the way accountants engage their clients. Accountants will need to become a centre of excellence for their clients, and move towards a more integrated advisory role within their clients’ businesses, taking advantage of the extra revenue this brings to the practice.

As accountancy firms begin taking on new markets, some will enter the legal space and extend their offering into supplying legal services. The Big Four are already drawing additional revenue of $30bn from the legal services market.

2020 is set to present many challenges for accountants. What issue is causing you sleepless nights?

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