These are changing times in the UK’s accounting industry. Quite apart from tax and regulatory changes on the horizon – especially relating to IR35 – technology continues to evolve at a frantic pace and a new age of automation is underway that looks set to drastically change the way that small business owners manage their financial admin.
For contractor accountants, there are also some big developments coming up in the next few years that are set to shake up how they work with their clients. For example, the Second Payment Services Directive (PSD2) is going to require that all banks let third-party apps and digital services legitimately connect to customers’ accounts and access data within. It’s a vision shared with the UK’s Competition and Markets Authority, which has mandated that banks should open up customer accounts to approved integrations.
By 2018, digital services like cloud accounting software will, with customers’ permission, be able to provide a flow of financial information that is easier than ever to manage. And that will mean that two of the core functions of accountancy – expense management and bookkeeping – will likely be taken over by newly-empowered consumers.
Technology is fast approaching the point of being able to collect, categorise, process and submit a business’s financial information. And while business owners will gain from this efficiency, many of the bread-and-butter functions of a typical small business accountant are going to quickly become commoditised.
Some accountants are naturally concerned that this kind of automation could threaten their profession. In a recent poll we carried out at FreeAgent, over 30% of the accountants we spoke to said they believed a robot would take their job within the next 20 years.
However, I don’t believe things look bleak for accountants. In fact, this technological shift is likely to be a great opportunity for accountants to harness the power of automation and thrive by moving their services up the value chain. Regardless of how sophisticated or integrated software becomes, business owners – and contractors in particular – will always require the expertise of an accounting expert to help them properly understand their financial data.
This will be especially true over the next few years as Making Tax Digital requires business owners to provide regular tax updates to HMRC through software. Despite the MTD legislation being removed from the most recent Finance Bill, it’s still expected to be reintroduced at a later stage – and for many contractors, this will represent a quantum shift in how they manage their finances. In turn, there will be an inevitable demand for expert advisors who can help them navigate the legislative change.
By working closely with clients through technology that automates basic admin – such as cloud accounting software like FreeAgent – accountants can provide the kind of higher-value strategic
consultancy services that will help attract (and, more importantly, retain) clients in the digital tax era. The age of automation is dawning and the accountancy profession currently faces a choice over how to proceed. I firmly believe that forward-thinking accountants who embrace and adapt to this change now will be the ones who benefit most in the future.
Ed Molyneux is CEO and co-founder of FreeAgent , who make award-winning cloud accounting software for accountants working with contractors and micro-businesses.