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How tech innovation is reshaping accountancy firms


Modulr’s Tom Kelly looks at how, as a result of an unprecedented crisis, technology innovation is reshaping the accountancy firm as we know it.

2nd Sep 2020
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To date, no period has been as transformative as the one we’re currently in. The Covid-19 crisis has lifted the lid on a myriad of inefficiencies and highlighted the absolute need for digitalisation. 

No more so is this the case than in accountancy. For decades, accountants across the UK have relied on payment processes that are manual, time-consuming and error-prone. Heavily reliant on legacy infrastructure, their issues have been compounded by the flaws in incumbent banking services. All of which has created a perfect storm as accountants try to help SMEs stay afloat during these challenging times.

Accountancy before the digital age 

Prior to the pandemic, many accountants had not fully embraced digitalisation. Some were still driving to their clients’ offices and picking up folders of paperwork to do critical tasks, like reconciliation and cashflow analysis. 

While many accountants were doing certain elements digitally – thanks to Making Tax Digital – they weren’t always storing data in a centralised way, instead sending sensitive information over email or via third-party file transfer systems. For these practices, the sudden shift to remote working was undoubtedly a shock.

But there is always a silver lining to be found, even in the most challenging of times. With the UK’s fintech scene thriving, there are lots of new technologies that accountants can, and should, take advantage of as we move beyond the initial crisis. Not only to better support their clients, but also to open up new service line opportunities. The problem is that many don’t know where to begin with digitalisation – or what the tangible benefits are. 

But digitalisation can provide genuine benefits to both accountants and their clients, especially around areas such as payments and cashflow. 

Overcoming hidden payment inefficiencies 

The majority of payments processes are still tied to traditional banking systems. As such, there are numerous disparate systems accountants have to rely on, with information spread across multiple different platforms and no way to bridge them all together. Due to this, accountants are chained to the physical office if they want to be able to access all the information they need. But as Covid-19 has proven, this lack of flexibility simply isn’t workable or appropriate for today’s working practices. 

The fintechs have helped unchain accountants from their desks with solutions that automate payments workflow. With one single touchpoint, accountants can get an overarching view of payment workflows across all clients – regardless of what accounting software their clients use. 

A clear example is payment splitting. When done manually – receiving an incoming payment, dividing it based on a calculated percentage and then sending two separate payments – it is a time-consuming process. It’s also highly prone to error. But when automation is applied, it allows payments to be split automatically based on customisable rules. 

Payment splitting in practice

A property management business that collects rent from tenants is typically a complex process, as payments are often sent directly to the estate agent’s bank account and then manually reconciled and split before the funds get sent on to the landlord. 

If automated payment splitting was implemented, the amount collected and sent on would be done automatically – significantly reducing the operational costs and admin time involved in reconciliation. 

Improving cashflow oversight 

As the economy recovers from Covid-19, cashflow will continue to be critical for SMEs. With traditional methods like Bacs, the payroll process is long and laborious for accountants. With the entire process taking up to a week, it leaves SMEs with a large chunk of cash tied up in limbo and off their books. It then becomes impossible for accountants to have a real-time view of their SME clients’ cashflow – something which the pandemic has taught us is more vital than ever. 

The Faster Payments scheme has meant payments no longer need to be held in limbo for at least three days as is the case with Bacs. By moving to just-in-time payments, accountants are able to let their SME clients hold onto their cash right down to the very last second. This, ultimately, enables them to have greater control, visibility and forecasting on cashflow throughout the coming months. 

Though a relatively new scheme, it has already had a huge impact on UK commerce and, post-pandemic, this is likely to accelerate.

With finance teams able to predict with greater accuracy what cash they will have and when, they can enable businesses to become more strategic with their money. For example, choosing to pay invoices when it makes most sense for the business. Or even advising on what and when they can afford to invest in technology or new hires. 

Concluding thought

Having a real-time handle on cashflow will become even more critical as businesses try to recover from the impact of the Covid-19 lockdown. 

With the right technology infrastructure in place – from automated payments, to making use of Faster Payments – accountants will not only be able to reduce operational costs and inefficiencies as a firm, they will also gain real-time visibility of their SME clients’ cashflow and financial health.

Armed with this knowledge, accountants can become true advisors to clients, providing insight and counsel that SMEs will be desperate for both now and in the coming months and years. This is a real opportunity for accountants to move towards greater digital harmonisation and offer a richer service to their SME clients. 

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