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accounting and taxation

The Impact of Technology on Accounting and Taxation

CPA firms have always been structured for reliability and efficiency, independent of the amount of revenue generated. However, today, with fierce competition, rising expectations, and an increasingly digital landscape, it is imperative that CPA firms adopt an evolved approach to survive and thrive. 

For instance, accelerating time to business value is what will set a CPA firm apart from others. This requires an infrastructure capable of leveraging existing resources to support the rapid growth of the digital ecosystem while managing both cost and risk. 

Technology has significantly reduced the lead time needed by accountants to prepare and present key financial information to stakeholders. Cloud computing, Robotic Process Automation (RPA), and artificial intelligence/machine learning in accounting improve accuracy, accelerate business processes, aid in better reporting, and more.

Leveraging technology has led to different components of an organization working in harmony as a cohesive unit towards a singular goal.

Impact on Business Value

Technology for accountants has made it possible to go higher and process faster. Technology in concert with a changing business approach is already creating tremendous value in the spheres of accounting and taxation.

1. Computerized Accounting

The development and use of computerized systems to track and record financial transactions is the biggest impact of IT on accounting and taxation. Hard copies of ledgers, spreadsheets, and hand-written financial statements have all been translated into a digitized system capable of presenting individual transactions into financial reports.

With several accounting systems available, there are customization options based on specific industries and other pertinent metrics. There are also features to accommodate any economic changes in business operations. This provides transparency and visibility allowing easier report generation leading to improved decision making. 

2. Improved Accuracy

Physical systems come with their share of human error such as incorrect and duplicate entries. Digital accounting systems have an internal check and balance measure that ensures all transactions and accounts are properly balanced prior to the preparation of financial statements. Additionally, these systems do not allow journal entries to be out of balance when posting, guaranteeing that individual transactions are correctly recorded.

This further improves accuracy by offering differential access to financial information allowing adjustment only by qualified supervisors.

3. Accelerated Processing

Digital accounting systems allow large amounts of financial information to be processed fast. The reduced turnaround time further lowers the amount of time required to close out each accounting period. 

Month and year-end closing periods are highly labor-intensive. This is especially taxing on finance and accounting departments with longer hours and higher labor expenses. Reducing this time period lowers the cost and improves the overall company’s Client retention rate.

Impact on a Global Scale

Importance of Data

With technology changing the way accounting and taxation firms work, the importance of data cannot be overlooked. High-quality datasets provide valuable insight, improving decision-making capabilities. This also allows preemptive measures to be set up to avoid or minimize direct business impact. 

Data is slowly changing the world of accounting from a reactive to a proactive ecosystem. 

Automation

Shifting to an open business model has made leading accounting and taxation firms look for ways to tighten their internal financial processes to enable innovative development. This has caused core operating infrastructure to be treated as an asset to be reused, shared, and monetized through APIs. Fintech companies are seen as potential partners in this endeavor.

These developments have added pressure on financial firms to provide access to their proprietary environments. However, the extensive IT infrastructure that powers banks, insurers, and other financial services is often run by a complex patchwork of legacy systems. This has made it tougher for back offices to keep up with the evolving needs of the industry.

UK’s open API standards for banking led to similar reform efforts in east Asia and Australia, with the European Union joining with its Second Payment Services Directive (PSD2).   

Regulation and Cybersecurity

With data-rich financial institutions becoming open-architecture environments, they become the prime targets of cyberattacks. This has led to regulators laying down some rules on cybersecurity for accounting service firms. These regulations establish uniformity and baseline standards; increasing transparency, providing accountability, and protecting against privacy violations. 

This has led to an increase in compliance budgets further causing a multiplication of compliance demands on a global scale. Getting ahead of this has necessitated the finance industry working with regulators to address cyber risks, including policy issues related to intelligence, coordination, resilience, and response. 

With increasing cybersecurity budgets and recruitment of specialized talent, cybersecurity is being integrated into the minutiae, from overhauling legacy systems to adopting new technologies.

Talent

Relationships between financial firms, FinTech, and BigTech are evolving rapidly. Financial firms have been competing with technology companies for campus hires for several years now. With evolving needs, collaborations are increasingly becoming the norm. Fintech firms, in particular, offer the thrill and versatility of a startup with the resume boost of working with emerging technologies

This has resulted in a change in business models and management with digital framework development required in-house. Firms also need specialists for risk management, recovery, and compliance programs. This boils down to the rise of digital banking and insurance, with the back office requiring training and familiarity with customer experience.

Traditional legacy institutions are responding by venturing into novel territories. Incubating FinTech-style solutions in a digital factory and working with universities to develop qualified talent is on the rise. Additionally, this offers a lucrative option of gaining talent through partnership or acquisition.

Check the blog: https://sentientsolutions.io/blog/cpa-firms-embrace-new-technologies-to-uncover-opportunities/

How can Sentient Solutions for Accounting help?

Sentient Solutions for Accountings is a one-stop solution when it comes to accounting and finance back-office services. Our team consists of a range of qualified and proficient Chartered Accountants (CAs) and MBAs, experienced with all major accounting systems such as Quickbooks, Netsuite, Sage, SAP, and Xero, among others. Throughout the process, we ensure compliance, security, and quality with a dedicated team working with you.

Our key differentiators:

1. Flexible service packaging offering greater than 40% savings

2. Overnight, timely processing of transactions

3. On-demand talent

4. Consistent quality

We partner with CPA firms to help them enhance their productivity, efficiency, and profitability. With world-class processes, a highly qualified and experienced team, and the latest in Artificial Intelligence in accounting (AI), Machine Learning (ML), and Robotic Process Automation , we are here for you every step of the way.

Please feel free to reach out to us in case of any questions.

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