Technology continues to transform and change the way business is conducted across all industries, and the accounting and finance industry is no exception. Advances in accounting software are transforming systems and processes and converting traditionally manual tasks into automated features.
As we near the end of a turbulent 2020 and start fresh in 2021, accounting and finance teams will continue to face the challenges of working remotely and completing tasks that were once done in the office. Owing to the challenges created by the COVID-19 pandemic and the ongoing demand from customers and other stakeholders, accounting software trends are shifting to support the needs of accounting and finance teams. In this article, we look at a few of these trends and how they will be used by companies in the coming years.
The number of companies utilizing cloud-based accounting will grow and accelerate in 2021, incentivized by cost saving, productivity gains, and agility enabled by cloud computing.
Cloud-based accounting software allows users to access their software and data from anywhere they have an internet connection. The “cloud” gives companies access to financial information and other shared resources that run on the providers’ servers, making accounting duties more accessible and the whole process more efficient. Multiple people can access items and documents while making changes and comments as needed. If on the contrary, an organization doesn’t have access to a cloud-based system and is trying to maintain the general ledger (GL) for example, there are many challenges they have to overcome. In that case, accountants have to manually record accounts payable (AP) and accounts receivable (AR) transactions by accessing several sources, such as their bank, AP automation and AR automation software, paper receipts or invoices, and so on. This is not only time consuming and tedious but also opens the door for human error which will undoubtedly cause inconsistencies further down the financial closing process.
Cloud-based accounting is becoming more prevalent due to fewer barriers to entry and the need for fewer resources. Sage’s annual The Practice of Now Report states that 67% of respondents believe that cloud technology makes their jobs easier by enabling collaboration with clients and improving service offerings. The report also asserts that cloud-based technology makes tasks such as preparing quarterly or yearly returns much easier and allows accountants to watch for problems and provide timely advice to clients.
Due to the COVID-19 pandemic and the fact that many employees are working from home for the foreseeable future, companies are being forced to quickly implement or upgrade technologies that will help them best adapt to these new circumstances. Moving an organization to cloud-based accounting software from desktop or server-based software allows business decision makers and employees to have secure, remote access with fewer technical issues and sometimes at a lower price.
According to a Microsoftsurvey of 151 companies who have already deployed cloud computing, the biggest benefits are productivity gains and cost savings. More and more companies will transition to cloud-based accounting when they realize the potential benefits of computing in the cloud.
Related to cloud-based accounting, remote accounting, or mobile computing, is the notion of accounting “on the go,” providing accounting professionals the ability to work remotely using online portals and apps. This functionality gives employees the power to track financial data, manage accounts, and record expenses while outside of the office or away from their computers. It’s safe to say that with the ever-growing popularity of cloud-based computing and the widespread acceptability of electronic documentation, remote accounting is becoming increasingly attractive to accountants. This functionality allows accounting firms to service the ever-growing demand of their customers, 24/7.
Now is the time when companies are being forced into adopting new technologies and processes because their employees are required to use them to succeed from home. In fact, studies show that giving accountants and accounting teams the tools necessary to carry out their jobs remotely is not only what the employees want, but it can also be beneficial for the company. According to a Canada Life survey, 77% of employees who work from home agree that they are more productive than when working in an office. This could be due to a more structured and calm environment with fewer distractions. A Stanford survey found that employees who work from home are 13% more productive than their in-office counterparts.
Challenges integrating with ERP
With the increased adoption of cloud-based accounting and finance platforms, a challenging trend that we will see is integrating this software into ERP systems. Since so much of the workforce will be working remotely in 2021, teams will need reliable, remote access to their ERP systems. For example, usually, ERP systems or other financial platforms help finance professionals with the month-end closing task by automating processes such as reconciliation management, importing or integrating spreadsheets, flagging inconsistencies, reporting, workflows, and so on. A lot of times, organizations rely on several platforms in the close process that each perform a specific task. A budgeting and forecasting platform might share information with financial close software, which in turn pulls data from an ERP system.
But what if an organization is using an on-premises ERP platform whose software runs using in-house servers at a company-controlled location? When companies using their own IT infrastructure, people, and processes are forced to shift to a cloud-based system, it’s sometimes necessary to implement this system into their current ERP platform. Generally, an ERP or accounting system is able to digest the financial information fed to it, and produce at least the three standard reports (income statement, balance sheet, cash flow statement) accurately and quickly, assuming the information it received was correct. Without access to a system to assist in the creation of these reports, accounting and finance teams would have to manually collect, review, and enter data into a template. This would require coordination between multiple employees to make sure the data is first correct, and then format the reports to match reports from previous periods. This increase in human interaction can lead to errors and mistakes that ERP systems help to avoid.
As more companies move and adapt to cloud-based platforms in the coming year, they should consider looking for answers to some of the following questions to help define their system needs and navigate any integrations more easily:
Does the cloud system need to integrate with third-party software?
What information flows through your accounting system?
What type of reports does your finance team use? Are they custom or standard reports?
What information do your finance and accounting teams need to share with other departments?
There are a lot of moving pieces in the world of accounting and finance software. It involves complicated calculations using data from multiple sources where the end game is to create important reports that management and other stakeholders use to guide the financial direction of the company. With the assistance of a cloud-based ERP, accounting, or financial close software, accounting and finance teams working from home full time can stay productive, while making sure that there is clear communication across teams regarding processes and responsibilities.
Using automation for the entire accounting lifecycle
The allure of time savings, and increased effectiveness of finance will drive investments in the adoption of an automation enriched accounting and finance software in 2021.
One of the most important features of accounting and finance software is the automation and streamlining of processes. This automation, or at least partial automation, can assist almost all facets of accounting, including accounts payable (AP), accounts receivable (AR), GL, balance sheets, cash flow reports, and profit and loss statements. It’s no surprise then, that web traffic to G2’s AP Automation and AR Automation category pages are up 78% and 74% respectively over the past year. Interest in automation is peaking and will continue to do so in 2021 as software products evolve and provide companies with advanced functionality, deeper reporting, increased efficiency, and expanded automation in their daily activities.
According to an Intuitstudy, accountants are spending 86% of their time on tasks that could be automated. Furthermore, the number of accountants and auditors will grow by about 22% by 2024 in the business and finance sectors, according to the Bureau of Labor Statistics. These statistics highlight the importance and demand for accounting software that contains automated features to make routine processes instantaneous, freeing up resources for more complex tasks and analysis. Most accounting systems have AP and AR functionality built in, but it’s not always sufficient and robust enough for companies of all sizes, whether they process a few invoices a day, or have to process thousands of invoices and deal with hundreds of suppliers.
As organizations continue to cut costs and find ways to become more productive, we will continue to see further investments into software that supports accounting automation.
According to a report by Vanguard Systems, AP automation software can save $16 per invoice or more, and depending on the size and scope of the software, can pay for itself within 6 to 18 months.
Accounting software companies are also increasingly incorporating artificial intelligence (AI) and machine learning into their software. AI are software applications that incorporate machine learning and algorithms into everyday functionality to automate a variety of tasks for users. AI has been gaining traction and popularity for years because it can be incorporated into any industry; accounting and finance teams can use this software to streamline data entry and analysis, reduce fraud, and enforce corporate policy by identifying noncompliance issues.
Another relevant example is Nym Health, which is a platform to automate revenue cycle management for hospital billing, just raised $16.5 million including funding from Google’s venture arm, GV. Their machine learning tools help hospitals with the perennial problem of billing, which can be particularly difficult due to complicated coding.
Automatic services are now commonplace in many sectors of the financial industry, such as tax preparation software, yet the accounting sector has yet to fully emerge and benefit from these resources. As industries develop and change, and software becomes more efficient and widespread, the finance and accounting industries will continue to incorporate platforms with automation features to maintain growth and sustainability in an ever-changing environment.
Accounting and finance is the backbone of most institutions, and it’s vital that these companies leverage software that helps automate and streamline as many processes as possible, freeing up time for other tasks. Automation is fueled by software advancement, and it’s up to each organization to stay up to date with trends, while fully utilizing the time and money-saving potential these solutions can provide.
The use of blockchain in large accounting firms and banks
Companies, especially banks, will continue to pursue blockchain technology in 2021 as they seek shared trust driven by transparency.
One of the most talked about (and disruptive) technologies to recently emerge is blockchain software, but what exactly is blockchain? It essentially is an efficient, reliable, and secure system for transactions that can’t be reversed or tampered with; it allows two parties to engage in secure digital transactions without a third party.
When blockchain was originally developed back in 2008, it was mostly used for cryptocurrency transactions, but now, blockchain is helping accountants by automating asset and ledger recordkeeping, as well as reducing costs associated with maintaining these records. The Big Four accounting firms have already begun investing in blockchain and it’s only a matter of time before more companies adopt this technology into their business practices as well. Once initially viewed as competition by the finance industry, more and more banks are now warming up to the idea behind blockchain technology. Hundreds of banks around the world are already using this technology with more to surely follow in the coming years.
These banks are using blockchain for a variety of reasons, including:
cross-bank and cross-border loans
blockchain-based digital wallets
improving trading accuracy
shorter settlement processes
The different variety of use cases illustrate that demand is rising for blockchain technology and it can be used across a multitude of industries, both large and small. The adoption rate may be slow, but it will be steady in the coming years and the overall security and transparency benefits will be worth it, with advantages stemming from features like smart contracts and securing IoT networks.
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Nathan is a research analyst at G2 focusing on finance and accounting ERP software and their respective markets. Coming from the world of finance, Nathan understands and is familiar with the importance of finance/accounting software, and the complexities, struggles, and nuances that come with them. He is naturally curious and passionate about all thing tech, and has previously worked for tech giants such as Oracle and Toshiba. He has over 13 years of analytical experience in industries ranging from health care and transportation logistics, to foodservice and software. Nathan received his MBA in finance and international business administration from the University of Illinois, Chicago, and his B.S. in production and operations management from California State University, Chico. In his spare time, Nathan enjoys listening to live music, building his record collection, cooking, and doing anything outdoors.