Plan for automation in 2021: Step one
Introducing a series of articles on how firms are streamlining their operations, Kevin Salter draws on the lessons learned during 2020 and presents an overview of the issues firms need to consider when automating their practices.
Accounting practice has changed almost beyond recognition in just half a working lifetime and there is little doubt that changes will continue apace. If we look back over 2020, it’s amazing how much has changed in half a year.
While double-entry bookkeeping has been around since at least 1495, the profession’s core principles remain – but accountancy is not all about relatively simple bookkeeping anymore.
What accountancy practices do continues to be a series of repetitive tasks. In a way, that is a blessing – serve a client well and you keep them for 10, 20, 30, 40 years or more. Prepare some accounts, have them approved, enter the figures on a tax return and file with HMRC – and the same again next year.
A few years ago, this was all a very manual and paper-hungry process. However, the digital revolution has changed our working methods. Firms cannot continue to do things the way they have always done.
Making tax digital on the radar again
Since the introduction of Making Tax Digital (MTD) for VAT last year, for example, businesses with turnover in excess of the VAT threshold have to file their returns electronically, but also keep “digital records” too. In April 2022, MTD for VAT will be extended to all VAT registered businesses.
Then, in April 2023, MTD for income tax will come into force, which means clients will have to deliver information every three months rather than every January.
New processes will be needed to deal with those interactions and to process accruals and adjustments for the quarterly updates to HMRC. Accountants will need to have starting balances in place from April 2022, so they need to get ready for phase two of MTD in 2021.
Covid-19 accelerates change
The softly-softly approach to bringing clients into digital accounting processes was swept away when public health rules required everyone to work from home in March 2020. If it was no longer safe or feasible to drop paper records around to the office, clients were more than willing to use digital portals.
Some practitioners may have implemented systems to handle remote working, but even then they faced volumes of work that exceeded anything they had experienced before. Email and text communications surged massively during the crisis and practitioners turned in large numbers to tools such as WhatsApp, Teams, Google Hangouts, and the good old-fashioned telephone to keep in touch.
Coping in a situation like this comes down to time and capacity, according to Sage director of product marketing for accounting and tax, Chris Downing. “We cannot predict tomorrow, but when clients need help, accountants drop everything to give it. If 90% of clients need help, you need to have the time to help them. The right tools and automation can save the time you need to do that.”
Areas for improvement
While the next few months in practice look like a slog through the latest lockdown and furlough scheme, then tax season and a further wave of business survival discussions, practitioners still need to be planning ahead.
We all have the experience of MTD for VAT to draw on, and can use the lessons learned to review internal steps and processes and tweak them if necessary to achieve more efficient methods.
The same principle applies to every office process – and everyone in the practice should be encouraged to challenge current methodologies and identify ways of operating differently that can achieve the desired outcomes more quickly.
These could be major step changes, or just small, but time-consuming tasks. Rekeying data, for example, is highly inefficient, time consuming and prone to error. Exporting data to a CSV file and then manipulating and importing it into another product saves some manual effort, but does not beat tight integration where data flows automatically between cloud-based accounting products.
Accounts and tax computations aren’t the only area that can be improved, for example. Obtaining client approvals of documents can be sped up significantly using a cloud-based portal with digital signatures.
Workflows and job monitoring
With MTD for income tax on the radar, workflows and job monitoring will become essential for coping with the increased workload that will inevitably arise. There will be less time available to check in on a regular basis with every client, so firms will need to rely more heavily on client dashboards that can show them which clients have issues that need to be addressed.
For example, if you can see the number of sales invoices outstanding, the debtor value and debtor days, you can see immediately which clients might benefit from implementing direct debits or automated debt chasing products.
Automated onboarding is another potential quick win. It’s just admin, but sending them a letter of engagement and dispatching a “welcome to the team” reply when it comes back is all part of making a good impression. The same approach can apply to almost any other workflow within the firm, around gathering data for tax returns or even advisory work, which is all about regular contacts to highlight things you have discovered about their business.
The automation roadmap
Automation is about much more than just technology and processes. People remain at the heart of accounting and whether they are staff or clients, they need to understand why it’s necessary to change and the potential benefits that automation can bring.
Take the time to experiment as a team with new tools and techniques to see how they work and what they can do for the business. Focus on internal change so you really understand the barriers and benefits. Once you have uncovered ways to make your practice more efficient, you can start applying those lessons to client businesses.
Then there are all the associated practicalities of implementation: finding the time and resources you’ll need to commit to the project, planning and budgeting properly for change, and choosing motivated people in your team to lead the transformation and bring colleagues along with them.
Further articles to come in this series will cover all of those points, starting with an automation roadmap that practitioners can adapt to their own circumstances. Then we will look in more detail at how automated workflows can help smooth self assessment season and hear from other practitioners about how they met their own automation challenges.
Sage is on a mission to automate data entry and speed up admin for every accounting and bookkeeping practice in the UK. Start streamlining workflows and spend more time helping your clients succeed. Get started today