How to know when it’s time to update your accounting technology
Is your firm running its gears on outdated accounting technology? That is a question many accounting firms should consider as they look to remain competitive, better serve clients, and expand bandwidth in today’s challenging environment.
Advancements in technology continue to have a significant impact on how accounting professionals work and serve their clients. Given the ever-changing regulatory landscape, increase in client expectations, and ongoing war on talent, keeping pace is imperative. Unfortunately, failure to do so places firms at a significant disadvantage.
In fact, a recent survey by Accounting Today found that half of the firms surveyed said they plan to boost their spending on technology in 2023. However, the survey also found that keeping up with changes in technology is among the top challenges facing firms.
This article explores the signs of outdated technology and provides suggestions on how firms can choose the accounting technology that is the best fit for their firm and make a successful transition.
How do you know when your accounting technology is outdated?
It can be easy to get caught up in the day-to-day whirlwind of accounting and meeting clients’ needs. However, firms looking to remain competitive and drive greater profitability must pause to reflect on how they can work smarter and faster. Is their current technology a drain on efficiency and profitability?
As outlined in the Thomson Reuters white paper “Mind the gap: Identifying gaps in your software this tax season,” there are several indicators to help firms determine if their accounting technology is outdated and in need of a refresh. Ask yourself the following:
- Is staff spending too much time on time-consuming tasks like repetitive, manual data entry or data clean up?
- Is there a lack of efficient integration across systems and with many third-party applications?
- Is staff spending too much time on tax research and keeping pace with legislative changes?
- Does your current software lack the ability to automatically download and install subsequent releases and updates?
- Are you constantly waiting on clients to provide all documents or requested documents in a timely manner?
- Is staff spending too much time communicating with clients requesting documents?
- Does your technology lack scalability?
Answering yes to some or all of these questions is a clear indication that your firm’s accounting technology is likely outdated.
What are the risks of using outdated accounting software?
Change is not easy. However, it is critical that firms remain open to change as there are several risks associated with using outdated accounting software. Let’s take a closer look.
Compliance
In today’s fluid regulatory environment, staying up to date on the revolving door of changes can prove challenging. If firms are unable to keep up with regulatory changes and compliance requirements due to antiquated software, they risk losing clients, hurting their reputation, and losing money.
Inefficiencies
Many of today’s firms are facing strained bandwidth. Using software that lacks sufficient automation and integration capabilities results in significant workflow inefficiencies. Wasting time on repetitive, time-consuming tasks like manually entering data impairs the firm’s ability to work smarter and faster and places a greater strain on staff. This is a risk firms cannot afford to take.
Speaking on the importance of integration capabilities, Mark Bendele, Accounting CS® manager for Thomson Reuters, said, “One of the things we always look at is integration, like integration among products within the [Thomson Reuters] portfolio as well as integration with third-party vendors. When we start looking to integrations, such as libraries and other types of technologies, if it is becoming more and more challenging to ‘talk’ to other systems, that is a good indication that you might need to upgrade this particular library or this particular third-party component.”
Inaccuracies
Manually entering data is not only a drain on time and resources, it can also lead to a greater risk of human error. Inaccuracies lead to client frustration, loss of time, and loss of profitability.
Version control issues
When multiple associates are unable to simultaneously work on the same file due to outdated software, it can lead to version control issues. This, of course, leads to a significant drain on staff time and firm efficiencies.
Security
Accounting firms are the gatekeepers to a treasure trove of sensitive data. Using outdated software can subject your firm to holes in security and greater risk of data loss and theft. Falling victim to a security breach can damage a firm’s reputation and result in the loss of clients, profitability, and potential penalties.
“If I can’t update my system to be top-notch in all of those areas I’m going to say, ‘Ok, now it is time to really do an overhaul of the application,’” Bendele said.
What new technologies are changing the work of accountants?
As noted earlier, advancements in technology continue to change the way accountants work and serve their clients. Firms looking to remain competitive must not overlook the important role such advancements can play for the profession.
Take, for instance, cloud-based accounting. The reality is that cloud technology is table stakes for today’s firms. Firms that have yet to shift to the cloud, or even to hosted solutions that offer remote software access, should rethink their approach.
The cloud not only provides anytime, anywhere access but is also the key to unleashing the power and capabilities of advanced technologies like artificial learning (AI) and data analytics.
Artificial intelligence
AI is increasingly playing an important role within the accounting profession. With the help of AI, auditors can shift away from sampling to reviewing all of a client’s transactions in real time, in a way that no human could. This leads to improved outcomes as auditors can better identify risky transactions, anomalies, and deliver higher-quality audits. According to the most recent CPA.com and AICPA PCPS CAS Benchmark Survey, 24 percent of top performing CAS practices are leveraging AI.
Data analytics
It comes as little surprise that 38 percent of top performing CAS practices are leveraging data analytics, according to the CAS Benchmark Survey. Data analytics is a game-changing tool that enables accountants to uncover higher value, strategic insights for their clients. Such insights enable clients to make more informed business decisions, reduce costs, identify process improvements, and better mitigate risks.
RPA
Robotic process automation, better known as RPA, has also changed the way in which accountants work. RPA is a software tool used to drive efficiencies by automating simple, repetitive tasks across applications. Leveraging RPAs to augment the role of accountants enables them to have more time to better service clients and focus on higher margin, higher value services like advisory. According to the CAS Benchmark Survey, 12 percent of top performing CAS practices are leveraging RPAs.
APIs
An API (Application Programming Interface) is a connector that allows two otherwise disparate systems to communicate with each other and share data. This enables firms to connect siloed systems to drive greater efficiencies, enhance automation, and reduce risk of errors. When data is isolated in disconnected applications, and, therefore, must be entered manually, it proves to be highly inefficient and increases the risk of human error.
There is no doubt that today’s tools and functionality are largely geared toward automating as many day-to-day tasks as possible. This means no more reliance on paper-based forms and inputting data multiple times into spreadsheets. The result is a streamlined workflow, higher profitability, and more engaged team members. Furthermore, weeding out time-consuming, manual tasks provides accountants more time to focus on higher-value, higher-margin services like advisory.
How to choose new accounting technology
When choosing new accounting technology, the needs will vary depending on the firm. “This is dynamic to the accounting firm’s size, scope, what their long-term and short-term strategy is,” Bendele said. Therefore, there are some key factors to keep in mind:
- What is the firm’s target business (i.e., advisory, payroll, etc.)?
- What is the firm’s scalability? In other words, how big and fast can the firm grow and can the technology support that growth?
- Ensure the new technology has robust integration capabilities.
- Ensure the new solution is user-friendly and intuitive.
- Security is critical so make sure the vendor has strong security measures in place to keep the firm and client data safe.
- Choose a software provider that can deliver excellent customer support and service.
Selecting and implementing new accounting technology can seem daunting, but the good news is that you don’t have to navigate the change alone. Invest in accounting solutions that help ensure your firm is on the path to success. Read our white paper on identifying the must-have features of accounting software for more in-depth information.
To read more about other problems in the accounting industry, check out our blog on “Top accounting issues in 2023”.
