Home / Latest News And Updates / What are the biggest challenges for accounting practitioners?
06 Mar 2024
Accounting practitioners like you offer indispensable services to businesses and individuals alike. However, with technological advancements and regulatory changes affecting the accounting profession, as well as shifting client demands and issues with recruitment in many accounting firms, you face an array of challenges. Understanding these challenges and implementing effective solutions is vital to ensure continued success.
This article delves into a number of the challenges facing the accounting profession and explores potential solutions that could help you address them.
If you are an accountant in practice or industry and would like more information about becoming a 20:20 Innovation member, why not book a free 30-minute demo with our team today.
Tax laws are continually changing and this is a formidable challenge for accounting professionals. Navigating tax is a task that demands precision and expertise.
The sheer complexity of tax rules creates a significant hurdle in itself. Accountants have to continuously educate themselves and then adapt their strategies to ensure that their work is accurate and constitutes the best advice for their clients.
An election year, as 2024 looks to be, increases the potential for budget changes that everyone needs to be kept up to date with. 2024 might even be a year of three tax bills. It could be a complex tax year!
Changing tax laws can upset long-term tax planning. Caveats to tax planning advice are almost as important as the advice itself. Firms can easily find themselves exposed to complaints from clients who become disadvantaged by tax law changes. Trying to head off problems by proactively reviewing advice that has already been given can be difficult to organise and manage.
The diversity of tax laws across different jurisdictions can also pose significant accounting challenges to firms. Because of globalisation, many businesses, even small businesses, now find themselves operating in multiple countries. This requires accountants to be able to navigate a maze of international law and treaties for multiple jurisdictions, demanding not just technical proficiency but also a nuanced understanding of cross-border taxation principles.
In addition to all this, the consequences for non-compliance can be severe, ranging from financial penalties to legal repercussions.
The complexity of accounting standards and regulatory requirements poses accounting challenges to firms in complying with them when preparing financial statements.
New regulations and amendments to accounting standards and the format of financial reports need to be kept up to date with. Without robust internal controls it is challenging to ensure that each set of financial statements prepared by your firm is accurate and compliant.
Your firm may also be serving a wide diversity of clients and this means that reporting requirements can vary from client to client. For instance, financial reporting and accounting standards for companies, charities, trusts, partnerships and the self-employed all carry their own unique requirements for what needs to be included in the financial statements.
New developments in automation and artificial intelligence (AI) are providing opportunities across the accounting industry but are also presenting challenges.
One of the primary challenges is the disruption to traditional accounting roles and workflows. Automation and AI can automate routine tasks like data entry, reconciliations and basic analysis - things that would traditionally have been done by entry-level or trainee accountants. This may leave the skillsets in accounting teams looking unbalanced.
Improper use of software or relying on AI, when human expertise and judgment is needed, can cause significant accounting issues and loss of reputation.
Concerns about data security, privacy, and ethical implications of AI algorithms add another layer of complexity for firms. Firms must continue to ensure compliance with GDPR while safeguarding sensitive client information from cyber threats and unauthorised access.
Recruitment and retention poses a major challenge for accounting firms due to several interrelated factors.
Firstly, the accounting profession faces fierce competition for top talent. Skilled professionals with accounting expertise are in high demand across various industries. Accounting firms therefore compete not just with each other but also with other businesses who are offering attractive compensation packages and career advancement opportunities.
Secondly, the demanding nature of the work in an accounting firm can lead to high levels of stress and burnout among employees. Just consider the impact the January Self-Assessment deadline has on your firm. However, this is not the only time of year where long hours, tight deadlines, and the pressure to deliver accurate results exist. This can be an issue particularly among younger generations who prioritise work-life balance and well-being.
In addition, the traditional hierarchical structure of many firms may hinder career progression and professional development. This can lower employee morale. Accounting firms that fail to provide clear pathways for advancement and opportunities for skill enhancement risk losing their top performers to competitors.
Client expectations change over time and this along with ongoing technological advancements in the accounting field mean that employees must keep updating their skills and knowledge. Add to this that talented staff are often looking for ways to improve their own technical ability. If employees feel unsupported in these areas then they will likely seek opportunities elsewhere. The requirement on firms to invest in ongoing employee training and development is therefore considerable.
The accounting industry operates within a framework of constantly evolving regulations and standards. Regulatory changes made by the ICAEW and ACCA take time to absorb and adjust to.
Rules and procedures around anti-money laundering, CPD, DPB (investment business) and handling clients’ money demand that firms have strong internal controls. The amount of red tape that firms are handling both in day-to-day work and around client onboarding can be considerable.
Over the past few years, accounting technology has advanced at an unprecedented rate. For instance, cloud-based accounting systems and cloud-based payroll are now the norm for many clients.
These innovations offer promising opportunities to improve efficiency, save money, enhance the accuracy of financial reporting, reduce accounting errors, and promote a closer, more proactive, working relationship with clients. However, they require significant adaptation and investment. Integrating new technology and software also often brings about unexpected accounting challenges to firms.
Software developers release frequent updates and new features to accounting software, and firms need to continually assess and integrate these changes into their workflows. This demands ongoing training and upskilling of staff.
The sheer volume of accounting software options can be overwhelming for firms. Evaluating the features, functionality and compatibility of different software takes careful consideration and an investment of time and resources that are often in short supply.
Clients often look for advice from their accountants on their accounting system. APIs in cloud-based accounting software make it possible for apps from different providers to work together. Rather than having a single system that tries to do everything, for many businesses stacking these apps allows them to build a customised accounting system that is connected with other business software.
Cloud-based accounting software allows businesses of all sizes to deal with their financial data, perform financial modelling, measure cash flow, handle accounts receivable and payable processes, and deal with expense management. Linking to their project management and CRM systems is also possible. For accountants to be knowledgeable about the various software available and how its functionality might apply to the firm's client base is a daunting task!
A dilemma facing many firms is that of being understaffed while at the same time being inundated with a high volume of work. This predicament can come about because of unexpected client demands, seasonal fluctuations, difficulties in recruiting adequately qualified finance professionals, a skills shortage, or inadequate planning.
When confronted with a shortage of qualified accountants, accounting firms are forced to allocate their existing resources more thinly. This leads to increased workloads and stress levels among employees. The resulting strain can negatively impact productivity, quality of work, and morale, ultimately affecting client satisfaction and retention.
Moreover, the inability to promptly address client needs due to staffing shortages may result in missed opportunities to generate extra fees and cash flow and also damage the firm’s reputation. More than ever, clients expect quick and accurate financial services. Any delays or shortcomings in service delivery can erode their trust in you and jeopardise the long-term client relationship.
Many accountants are finding it increasingly challenging to deal with HM Revenue and Customs (HMRC). Just getting to speak to someone on the phone can be a significant investment of time. HMRC's struggles with answering phone calls in a reasonable time have been well documented in the news.
When HMRC gets it wrong or issues an incorrect tax demand to client, this usually results in panicked phone calls or emails from clients needing reassurance. Not only does this add to your workload, but HMRC's errors may at times make it seem like your firm is at fault and so jeopardise your client relationship.
While cybersecurity may have been something once left to the sole IT specialist in the office, it is now becoming evident that cybersecurity is an issue that firm leaders need to be aware of and proactive about managing.
If you have a website, particularly with a client portal, or you use cloud-based accounting software then the risk of a data breach due to a malicious cyber attack continues to increase.
The National Cyber Security Centre (NCSC) have warned that use of artificial intelligence will increase the volume and impact of cyber-attacks in the next two years. This is because artificial intelligence allows novice cyber criminals access to skills and techniques that would otherwise take years to develop.
Data breaches carry legal consequences, can trigger reporting requirements and dent your firm's reputation.
The question that many firms find themselves constantly reviewing is: do we know what our clients actually want?
For many years now, accounting professionals have been encouraged to add value to the client relationship. Marketing professionals encourage up-selling and cross-selling for the different services that your firm offers for the greater profitability it can bring.
Many businesses and individuals are looking for advice and support from a proactive advisor. This may call for you to act as a virtual finance director, or to be an IT specialist advising on accounting technology and software.
At times you may find yourself avoiding doing additional work for a client on the basis that they will resist the costs. However, when they leave you for another firm's services you find out that they were willing to pay extra and were feeling frustrated at not getting more proactive advice.
On the other hand, there are many clients and potential clients who simply want a peace of mind, straightforward, cost effective and quick compliance service.
How do you decide what type or level of service a client wants and is willing to pay for? Is it better for your profitability or work satisfaction levels to pursue one type of client over another? These questions are not always easy to answer.
Such a detailed review of the challenges facing the accounting profession can seem overwhelming. However, for every problem there is a potential solution. Let's review some that are helping firms like yours to successfully meet these challenges.
Training programs and CPD can be used to keep you and your staff up to date. Firm membership in a training organisation like 20:20 Innovation can allow you easy access to courses that cover tax, financial reporting and technology. Online webinar courses mean that vital learning can be accomplished without wasting time on travel.
Spending a few minutes at the start of a year to map out training needs and book yourself and your staff onto a range of courses can make it much easier to stay abreast of changes to tax laws, accounting regulations, and technological developments and how they relate to your clients.
Including soft skills training as well as technical training within a training program can benefit employees. Talented employees will appreciate the opportunity that this can provide, which can help with boosting employee morale.
A training program can also provide a way of upskilling your firm, so that it remains optimally placed to take advantage of new opportunities that come along.
Consider whether employing specialists can benefit your firm. Having a tax or VAT specialist or a cloud accounting or technology specialist can broaden the reach of your firm, while providing peace of mind that someone is available to deal with complex technical matters.
If specialists are not available, or are too expensive to fit with your firm's financial constraints, are there staff who might have an aptitude to train for a specialist role?
Alternatively if your need for such specialist services is relatively low, are there technical helplines or services that can provide you with specialist technical help on an on-demand basis? While this is more expensive on a 'per-hour' basis, your usage may justify this.
Software can take much of the heavy lifting out of accounting processes.
Finance teams can usually work and collaborate more effectively and quickly with accounting data when using software. Software can also handle large amounts of financial data and perform complex calculations that can make it easier to add value to your compliance work.
Software can help with internal controls and identifying accounting issues by controlling processes and procedures and ensuring a certain standard of work quality. For instance, disclosure checklists can help with ensuring that the statutory financial statements you prepare meet accounting standards.
Added value services can sometimes be added with little effort with the right software. For instance, accounting software may help identify accounting trends from the underlying records, or produce a cash flow based on past data.
Data analytics is a potential growth area that software is making available to exploit. The data that each business may have at its disposal in its accounting software or CRM and sales databases can be considerable, and data analytics may be able to unlock insights for you and your clients that could be very valuable.
Be willing to try things out. Take advantage of free trials to find out whether a software or app could be useful to you.
To offset the changes that automation and AI are bringing it may help you to reevaluate staffing needs, reskill employees, and redefine job roles so that staff are focusing on higher-value activities that need human judgment and expertise.
Many professionals now value work-life balance highly, and this can be a key component in attracting staff when you cannot compete on salary alone. Could you offer flexible work arrangements, such as work hours that fit around the school run? Or is remote or hybrid working a possibility? Sometimes this can open up options of securing talented staff who would otherwise live too far away from your office to consider working for you.
While automation and AI may require re-thinking the structure of your accounting team, it could also help to plug a hole if you are struggling for capacity. For instance, apps that automate collecting receipt and invoice information can save time on processing transactions.
It is one thing to set up policies and procedures, it is another thing to ensure that they are being followed. Periodic compliance reviews can help to make sure that you are complying with rules and regulations. Where any shortcomings are identified you will have opportunity to correct them before it becomes an issue.
Many firms find using an external consultant to conduct the review very helpful. The fresh and objective view that an external consultant provides can help to keep everyone on their toes and let you benefit from best practice ideas. Evidence of such external reviews can also be helpful if the ICAEW or ACCA come calling.
In view of the risks involved with use of IT obtaining Cyber Essentials certification and having robust policies in place for IT can be a strong defence against data breaches and malicious cyber actors.
Training staff, and promoting an open, no blame culture can also be helpful in quickly identifying weak spots.
Networking is a tried and trusted method for developing a business. As well as winning new business, networking can be a good way of finding out what is working for other firms and businesses. While there are opportunities to network online, few things beat face to face interaction.
Becoming part of a local group organised by the ICAEW or ACCA can provide you with support and camaraderie.
Conferences can be an excellent networking opportunity as well as a way to learn what is happening in the accounting industry. New software and technology is often promoted and demonstrated at conferences. Taking time to visit one or two conferences a year may pay dividends in knowing what current developments are.
Taking time out to work on your business rather than in your business can allow you to more clearly identify your personal objectives and see how the business may be able to help you fulfil them.
Preparing a strategic plan for your firm can help make it easier to identify the type of client and kind of client work that will bring the most advantage to your firm.
20:20 Innovation can help you in successfully meeting these challenges. Our extensive training program can provide you and your team with vital skills and the latest knowledge in accounting, tax and IT. Our compliance and file review services can ensure that your work and your firm's policies and procedures are in line with the latest guidance. We have resources that can help you provide a proactive service to your clients and membership of 20:20 Innovation also gives you networking opportunities with our forums and conferences.
If you would like more information about joining 20:20 Innovation why not book a free 30-minute demo with our team today or call us on +44 (0) 121 314 2020.
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