Meet the CAs working in cloud accounting

Simplifying accountancy is becoming big business. According to an October 2021 report from US company Valuates, the global market for accounting software will reach $22.9bn (£16.8bn) by 2027, up from $14.1bn in 2020. It’s a world away from when General Electric first bought a computer to run its payroll in 1955, Peachtree Software introduced an accounting package for a personal computer in 1978, or even the 1983 launch of QuickBooks.

The growth in cloud computing technology has brought with it an explosion of companies introducing accounting products, reshaping the role of the CA and their relationship with their clients. These days, you can rarely get through an ad break without seeing a personal accounting app promoted. And more change is on the horizon with the government’s Making Tax Digital (MTD) push.

So, what does the future hold for this constantly evolving industry? We spoke to three CAs to gather insights into how emerging technologies, such as quantum computing, could influence the sector in the years ahead and the challenges and opportunities CAs can expect to face in the short, medium and long term.

Peter Hucker CA
Head of Operations, Xledger

Bristol-based Xledger is a cloud-based finance software provider for mid-market organisations. All our consultants and support team are accountants. While this is relatively unusual, we feel it gives us a significant competitive advantage in ensuring our clients receive high-quality implementation and ongoing support. Personally, I feel that being a CA has given me the confidence to understand and constructively challenge our clients and ensure we provide them with the best solutions to their problems.

Technology is constantly evolving and shaping our industry. Machine learning is one example. A practical application is the ability for a finance system to predict the analysis fields which need to be stamped onto a transaction, account code, cost centre, and so on. Machine learning will augment the role of those analysing data, highlighting trends and relationships between costs and their related revenue streams.

Looking further into the future, quantum computing will solve the problems which today’s super-computers can’t. As consumers, we are becoming increasingly data-hungry, and quantum computing will support the detailed analysis of that data. The role of a finance system will become part of a much larger ecosystem that will analyse the underlying factors which influence that data.

For instance, if you own a restaurant, not only do you want to understand why takings on a particular day may have increased, but also how this could be a combination of multiple factors, from the weather to the menu to a successful online advertising campaign.

Decentralised ledgers are also an interesting area of development in accounting software alongside the fintech space as a whole. We will see increasing alignment between technology and banking products. Within five years, finance systems will expand their product offering to include a range of facilities such as credit checks, factoring, currency exchange and in-system payments facilitated through open banking.

The accounting software industry is competitive, which is great for the consumer. To stay competitive, providers can no longer rely on just a name. They must invest in their product continuously. One of the advantages of Xledger is that, since our inception in 2001, we continue to be privately owned by product developers who are willing and able to take a long-term perspective on developing the very best product for our customers.

Kate HaywardD CA 
Executive General Manager, Global Strategy, Xero

As CAs, we all obsess over solving problems for our customers. Digitisation is about finding those solutions. It provides commercial value, not only to us but also to the accountants and SMEs we work with. In this industry, you need to continuously innovate. It’s like when you get a new smartphone, then a few years later, it’s dated. Tech moves on and there’s a better product on the market.

Xero is cloud-based and has open data sharing. Harnessing the power of AI and machine learning to innovate our products has been a key part of our global strategy. It helps us improve the experience for accountants and SMEs by streamlining critical business tasks, whether it’s reconciling transactions, filing taxes or forecasting. As a cloud-based platform, we also have strong security features to negate online threats, including hacking, malware and spyware attacks. Being able to develop products to help SMEs is one of the reasons why I get such pleasure from working in the sector.

The industry is also highly competitive – especially as all workflows become digitised. Everyone is looking to take a little piece of that puzzle and edge into a new area. Firms that originally looked to solve financial problems will begin to tack on some accounting, some compliance, and so on. But sometimes they underestimate just how complex the compliance world is – and CAs have an advantage here.

The next challenge in the UK is MTD, with the latest wave arriving this month. It will be a big change for SMEs, CAs and bookkeepers, followed by MTD for income tax self-assessment coming in April 2024. There are huge challenges that come with the digitalisation of the SME sector. We’re looking at how we can help get firms and individuals ready for that.

Covid-19 has been a particularly tough time for many small businesses. On top of everything, they need to think about how they are going to pay back the loans they took out – and how they set up for success in the future. Accountants will have a significant role to play in that. Continued digitalisation will be a big focus this year, with the pandemic having driven a 20% increase in digital expenditure among SMEs in the UK.

A CA in this industry brings financial rigour, commercial sensibility and strong people skills. But it’s not just about finance or being a CFO – what you show through those skills is business leadership. Qualifying as a CA helped me to become a leader.

Olly Cummings CA   
Commercial Director, Capitalise

Capitalise helps accountancy firms perform funding and other capital advisory services. From my own experience, I could see that accountancy firms would do large corporate finance or restructuring deals, but they very rarely did the middle piece – the day-to-day cashflow, lending and so on.

When accountants come to us, they can import their clients onto our platform using the cloud, and we then provide insights, intelligence and credit information on which clients need funding or have cashflow issues or opportunities. Then we help them with funding and finding that additional cashflow.

Many technology platforms are coming in and trying to perform the work and processes of accountants themselves. They’re looking to automate tax, R&D, VAT, and other key service lines. One of the challenges for CAs we’re seeing is that compliance work is becoming increasingly commoditised. That means it has become increasingly difficult to make any sort of margin in areas that are the traditional bread and butter of being a CA.

That poses a threat to accountancy, but it isn’t without opportunities. CAs are well-trained people and hugely knowledgeable about the workings of companies. So, we’ll see them move into is what is seen as advisory work and become more of a right-hand person to the company.

In addition, CAs can create wraparound products and packages, becoming a one-stop shop for their clients for everything that relates to commercial and business advice. They will need to recognise those opportunities and adapt the services they offer accordingly. In the long term, there will also be a discussion to be had around crypto. But there isn’t yet a platform that would help a company account for that.

A CA has to have a more holistic view of the business. Even now, as someone who no longer performs any form of accounting, it’s very useful to have the badge of being a CA and the knowledge that comes with it. It is not just about “doing the numbers” any more – especially as all numbers are about to become automated.