But it’s not only these developments that are altering the UK’s accounting landscape. With many business owners using a plethora of increasingly sophisticated accounting software products, and with further regulatory changes on the horizon, a new age of automation is underway that looks set to drastically change the way that small business clients manage their financial admin.
For example, the Second Payment Services Directive (PSD2) is going to require that all banks let third-party apps and digital services legitimately connect to customers’ accounts and access data within. It’s a vision shared with the UK’s Competition and Markets Authority, which has mandated that banks should open up customer accounts to approved integrations. By 2018, digital services like cloud accounting software will, with customers’ permission, be able to provide a flow of financial information that is easier than ever to manage.
This is a change that many accountants will be viewing with alarm, as one of the core functions of accountancy - expense management and bookkeeping - is set to be taken over by newly-empowered consumers. It is a story of digital disruption familiar to many other business sectors.
At FreeAgent, we know that accountants are concerned that this kind of automation will threaten their profession. In fact, in a recent poll we carried out over 30% of accountants said they believed a robot would take their job within the next 20 years.
Technology is fast approaching the point of being able to collect, categorise, process and submit a business’s financial information. And while business owners will gain from this efficiency, many of the bread-and-butter functions of a typical small business accountant are going to quickly become commoditised.
However, I don’t believe this is a doom and gloom scenario. On the contrary, the changing landscape represents a great opportunity for accountants to harness the power of automation and thrive by moving their services up the value chain.
Regardless of how sophisticated or integrated software becomes, business owners will always require the expertise of an accounting expert to help them properly understand their financial data. This will be especially true over the next few years as MTD requires business owners to provide regular tax updates to HMRC through software. For many, this will represent a quantum shift in how they manage their finances - and there will be an inevitable demand for expert advisors who can help them navigate the legislative change.
By working closely with clients through technology that automates basic admin - such as cloud accounting software like FreeAgent - accountants can provide the kind of higher-value strategic consultancy services that will help attract (and, more importantly, retain) clients in the digital tax era. And this will be true regardless of whether those clients are small businesses tentatively taking their first steps with MTD, or more technically-proficient ventures no longer requiring services like reconciliation or receipt management.
The age of automation is dawning and the accountancy profession currently faces a choice over how to proceed. I firmly believe that forward-thinking accountants who embrace and adapt to this change now will be the ones who benefit most in the future.
Ed Molyneux is CEO and co-founder of FreeAgent - who provide cloud accounting software for accountants working with contractors, freelancers and micro-business clients.