Accounting is a fundamental element of any business. From credit, debits, to tax filing, the accounting process takes care of every financial aspect of the business. The accounting team has to collect all the financial transactions that take place to conduct the business and prepare a financial report. Accounting is the best way where a company can evaluate their expenses and income for a period of time and make wise decisions for future operations.
For years, this process has been done manually, and accountants face many issues with compiling all the financial data. The traditional approach for accounting is prone to errors such as wrong journal entries, loss of hard copies, omission errors, etc. But as the definition of business is changing due to globalization, the accounting process is expected to become more accurate and reliable.
By becoming digitally enabled, modern businesses are handling accounting challenges smartly. These new trends are transforming the accounting system for good and making it permanent place in various sectors and business enterprises.
Here are the top 5 accounting trends that will never fade and fill the gap in the traditional accounting system:
1. Automated Accounting and Accounting Software
Automated accounting has changed the approach of businesses to recording financial transactions. Rather than manually entering financial records and matching them at the end of the month, most businesses today prefer using an automated accounting system.
An automated accounting system or accounting software automates all aspects of bookkeeping and accounting. There is no need to enter a financial transaction or calculate tax manually; the accounting software takes care of everything. Modern-day accounting software has become even smarter and more accurate in recording financial transactions. It uses OCR technology that captures and processes invoices automatically.
Automated accounting solves data quality issues and reduces overhead costs. It helps to fast pace the AP (account payable) process and eliminate the need for storing hard copy documents. Another exceptional piece of technology that is having a major impact on automated accounting is the use of AI. AI's ability to analyze, interpret, and self-learn has made it a valuable tool for accounting. In accounting, it helps to reduce fraud by analyzing the pattern and flagging the transaction that is abnormal. It can even assist in the monthly or quarterly procedure.
By implementing an AI-based prediction model, it can identify possible risks in the accounting process. Besides that, having all data consolidated in one place, it becomes easier for auditors to carry out the audit work. With all these benefits, it is clear that automated accounting is the trend that will stay forever.
In today’s time, accountants are expected to be involved proactively in making important business decisions, and this new role requires advanced technologies. Fortunately, data analytics has become advanced and provides detailed insights into the company’s financial health.
There are four types of data analytics techniques- descriptive, diagnostic, predictive, and prescriptive. Data analytics in accounting not only recognizes trends and metrics but even helps accountants to forecast future risks.
Further, accountants can use data analytics to predict account receivable balance, reduce the collection period of accounts receivable, customer behavior, auditing, etc. Since accountants are experts at gathering all the financial information and preparing reports, data analytics could make them even more efficient. It could save their time and derive the most valuable aspect of accounting without any errors.
3. Cloud Accounting
By moving traditional accounting processes to cloud infrastructure, business owners can massively reduce operating costs. It allows them to access financial data from anywhere and anytime through a laptop, desktop, or even a mobile app. There is no need to manage a rack of files or servers in the office; everything can be stored in the cloud accounting software.
The power to access the data from anywhere allows users to update data in real time. It reduces error rates and assists business owners in making quick decisions as all the information is latest. In the event of disaster or fire incidents, all the financial data is secured in a safe place. Security is another benefit of cloud accounting.
Cloud providers always ensure that organizational data is accessible to authorized persons, and in case users want to give access to other people; they can always control the level of access. Besides that, it is scalable and can be easily integrated with third-party tools to meet all the requirements of a growing business.
Blockchain projects are drawing massive investments from investors, and their popularity is increasing day by day. The distributed ledger eliminates the need to record accounting data in multiple databases and has the ability to influence all record-keeping processes.
It also helps to get clarity over the available resources and obligations of the organization. Further, blockchain could be pretty helpful in the auditing process. Currently, auditors need account reconciliation, journal entries, trial balance, sub-ledger extracts, etc., in electronic form or as hard copies to perform the audit. But with blockchain technology, the auditor can access real-time data through read-only nodes, enabling them to access information in a consistent format. It helps to overcome the labor-intensive manual data extraction process.
With blockchain technology, there are fewer instances of fraud as all financial transactions can be directly recorded into a joint register. All entries are cryptographically sealed and traceable. It makes the accounting process transparent and less prone to fraud. Blockchain technology has the potential to simplify the accounting process and certainly qualifies as one of the popular trends in accounting.
5. Accountants with specialized skills
The accounting landscape is changing rapidly, and the old accounting system has been replaced with a smart accounting system. Since most of the accounting work is now automated, accountants can see themselves involved more in strategic work and assist business owners in solving business-critical issues. It is possible only when they are well versed in advanced technologies such as data analytics, artificial intelligence, and the blockchain. It is necessary that accountants upgrade their skills regularly to add value to the organization.
A seamless accounting process is undoubtedly essential for all sizes and types of businesses to derive financial insights and drive future growth. It can have a profound impact on business financial stability. But recently, the role of financial reporting has evolved as businesses become digitized, global, and more complex. It has created new challenges and compelled organizations to change their strategies to manage accounting systems more efficiently.
Therefore, businesses are adopting the latest technologies and data-driven approaches to gain more control over the accounting system. From automation to data analytics and cloud computing, these new trends bring new dimensions to accounting practice and assist business owners in building robust financial systems. Considering its enormous benefits, it is obvious that these trends will never fade and change the accounting system forever.