John Stokdyk takes soundings from around the accountancy profession to find out where people should be directing their attention over the next year.
It would be tempting to say that innovation, integration and artificial intelligence (AI) are going to be the technology watchwords for 2018, but things rarely run according to plan in the accountancy profession.
There are some fascinating technologies on the horizon, but back in the real world a couple compliance challenges are going to assert themselves during 2018: the General Data Protection Regulation and Making Tax Digital. So, while not overlooking those two monsters, this is a chance to look beyond them to other key areas where the tech landscape is likely to change.
Data protection and GDPR
On 25 May 2018 the General Data Protection Regulation (GDPR) will be come into practical effect under UK law. Europe’s regulation is the new standard for data policy that effectively confirms the individual’s rights over data about them and makes organisations accountable for the personal information they hold.
For many accountants MTD obscured the advance of the new compliance requirements coming their way with GDPR. Since HMRC adjusted its MTD timetable last July, there has been a mad rush to find out more about GDPR.
According to AccountingWEB contributor Heather Burns, the scare stories and marketing messages about becoming “GDPR-compliant” are falling into the hype trap.
“The first step in healthy GDPR compliance is awareness: gaining an informed understanding of what the data protection revamp does involve,” she wrote in August.
“The businesses which will struggle the most with GDPR compliance were the ones that were not in compliance with the existing UK data protection framework to begin with.” While there are new requirements to have formal data protection policies and accountability in place, organisations that already have healthy levels of data protection compliance in place will find GDPR’s new requirements relatively easy and practical, she added.
There is no shortcut to doing the research – but vendors such as Thomson Reuter, IRIS and BTCSoftware have all been doing their best in recent months to educate accountants on the subject with helpful toolkits and guides.
Making Tax Digital
The transition to digital tax systems is a global phenomenon, explained Isobel Moulder in a Receipt bank blog in December. The rise of self employment, temporary “gig” assignments and the sharing economy have diminished the effectiveness of PAYE withholding taxes and encouraged authorities to explore how they can collect tax more effectively in a more fluid digital economy. The result is Making Tax Digtial in the UK, and numerous similar moves in other countries.
While the next year will be free from MTD compliance deadlines for the smallest businesses, vital preparatory work will be taking place at HMRC, software houses and at thousands of practices to ensure they are ready when VAT filing begins properly under MTD from April 2019. The time has flown by since the government switched its focus from income tax to VAT for MTD last July, and the legislative and technical framework is still not fully in place.
Pay careful attention to progress on these fronts during 2018, and keep in regular contact with your software suppliers to ensure your tools will be ready in time. This will be just one source of the information you will need to pass on to clients. Also bear in mind that the VAT efiling mechanism is likely to be the first phase of MTD; the mechanisms that will give tax agents access to data in their clients’ online tax accounts is still at the embryonic stage and income tax is likely to be back on the agenda after 2020. HMRC’s also wants to bring corporation tax into the fold at some point.
If you have the time and the inclination, as well as a few adventurous clients, it may be worth putting some of them through the MTD pilot scheme. Some businesses and accountants are already involved in income tax MTD trials, and VAT testing should be up and running from April 2018. Taking part will allow you to deal with snags before all your clients enter the system and open the door to a higher level of practical support from HMRC to deal with any issues you discover.
If the surge in cloud accounting stimulated by MTD dominated proceedings in 2017, the amount of effort Practice Excellence Award (PEA17) entrants put into digital marketing during the past year indicates that compliance isn’t the only thing they’re thinking about.
Social media activity (42%), content marketing (32%) and website development and SEO (30%) emerged as the most common outlets for digital marketing among last year’s award entrants, but for some firms these outreach efforts extended to online community building (10%) and video (8%).
Yet only 32% of entrants were measuring the results. Without systems in place to track whether their efforts are working, digital marketing enthusiasts risk wasting a lot of time and money. The practices leading this charge are realising this and putting practice and client relationship management (CRM) systems in place to get a better handle on marketing. This is the key lesson that practitioners should pick up from the pioneers.
It’s also worth connecting up the dots between marketing and digital tax. The client expense information, and how you collect it, goes into an electronic database that feeds HMRC’s needs. But it also forms part of an electronic workflow within your practice – as are marketing and client-chasing contacts.
Deanna Arteaga on our US sister site AccountingWEB.com took this stance when she highlighted marketing automation and workflow as big trends for 2018: “Accounting firms will look more holistically at the transactions or events that take place at each stage of the client engagement and discover new ways to improve efficient delivery of multiple services. For example, a client’s accounting software notes a possible tax opportunity and pings it in the CPA’s system for discussion at a quarterly client check-in (which the system also scheduled).”
To make the most of this trend, think about workflow, on-boarding and the different data flows and processes that need to take place within your firm and start planning how your systems will handle them.
Machine learning and rise of the AI assistant
Like it or not, artificial intelligence (AI) is infiltrating accountancy at a remarkable rate. It’s built into leading accounting applications from the likes of Xero, Sage, QuickBooks, Receipt Bank and Pandle, many of which will automatically suggest or assign expense categories or account codes based on learning from previous transactions.
As well as picking up back end processing work, AI is also feeding into front end client encounters in the shape of robot assistants such as Sage Pegg and QuickBooks Assistant. Responding to the technology habits of younger businesspeople, the most common environment for these bots is via chat messaging systems such as FaceBook, Slack, Chatter or WhatsApp.
According to the experts, digital assistants are starting to move from text to voice interactions, led by transition of Google’s Alexa voice recognition assistant from the consumer world into business environments. The big accounting software developers are all moving in this direction, along with industry giants Microsoft and Apple.
If you ever feel the need to make a trenchant comment about technology trends, but don’t know quite what to say, you will always be on safe ground by pointing out how emerging tech will converge with existing systems. At the moment, digital assistants tend to handle basic queries such as, “How much did I earn last month?”, “How much tax do I owe” or “Do you provide advice on IR35?”
Playing the convergence card and linking AI to some of our other themes for the year, it’s safe to assume that digial assistants will work their way into accounting workflows, for example chasing and collecting data from clients, or flagging up variances and trends in accounting data to suggest areas the accountant could explore in more depth.
This is the kind of technology trend that can start to make accountants nervous, but a key message from Receipt Bank and other technology suppliers is that automation won’t do away with the need for human relations and insights within the profession. As Isobel Moulder put it: “For many entrepreneurs there is real value in knowing that there is a human looking out for your interests, and most have no desire to decipher their financials…
“Accountants can still serve as the essential bridge between data-processing AI and business owners, but only if they keep up with the changes that accounting trends are bringing.”
About John Stokdyk
John Stokdyk is the global editor of AccountingWEB UK and AccountingWEB.com.