Just like other professions, accounting has undergone drastic changes in recent years. These include disruption of innovative tech, regulatory shifts, new business models, and rising client expectations.
As per the Journal of Accountancy, the top three trends shaping the industry in 2023 include increased investment in technology, zero-day closes, and value creation for businesses. Such trends explain why the global accounting firm market outlook is bright, with a CAGR of 11.5% from 2026.
As exciting as the future is, it is not without workflow issues. Resolving these issues can help firms stay competitive, attract and retain talent, and drive higher revenue. So, what are the top accounting issues facing the industry in 2023?
This article will discuss the four main challenges along with their solutions.
Inaccurate Financial Reporting
In a parallel universe, every company’s financial reporting would be 100% accurate. However, this is not the case in reality.
Financial reporting is the process of exchanging sensitive and vital financial data with internal and external stakeholders. Important financial statements such as the business’ cash flow statements, balance sheets, etc. are included in financial reporting.
Accountants send and receive hundreds (sometimes even thousands) of documents and invoices. If a single one goes missing or its numbers are duplicated, the end financial report will be inaccurate. Creditors and investors rely on financial reports to make crucial investment decisions. In short, you cannot afford to publish inaccurate financial reports.
The first step to accurate financial reporting is to maintain error-free financial records. Since this process is prone to human errors, you must take the help of reliable document management software. This technology will eliminate all unintentional reporting mistakes from the accounting pipeline.
All your necessary receipts and invoices exchanged during a specified period will be accessible through a centralized cloud platform. No document will go missing, which means your balance sheets and income statements will remain error-free.
According to Mango Practice Management, another major aspect of financial reporting is ensuring not everyone has access to the accounting data. Since all info is stored on a digital cloud, you can control which team members have access to the files. This should largely eliminate deliberate fraud-related inaccurate financial reporting.
The Necessary Evil of Evolving Tax Laws
Accounting teams are always faced with concerns surrounding changes in tax laws. However, further changes may be in store from 2023 onwards. In most cases, tax law changes are difficult to predict.
In case new changes are not accounted for, any failure to prepare accurate tax returns will lead to penalties. How can your firm’s accountants keep abreast with the constantly evolving tax regulations?
- Latest Industry Events
Let your staff attend insightful seminars and events, such as Synergy, that offer the latest updates. Besides knowing about trends, they will also understand current issues facing the accounting industry and any recent tax law changes.
LinkedIn has emerged as the number-one social platform for business professionals. Industry leaders often post the latest tax updates in the form of LinkedIn posts and blog newsletters. Encourage your team to subscribe to the experts so they’re on top of the regulatory changes.
As tax laws nationwide change each year, accountants have the opportunity to become tax advisors (not just tax preparers). As tax advisors, your team will help clients by answering the following questions –
- Which recent tax law changes should my client be aware of?
- When do those changes take effect?
- Are there any tax-saving opportunities that will help me add further value to my client?
Upskilling the staff in every area (including tax expertise) is your golden ticket to navigating the current tax landscape. Without knowledge of current laws, your team may end up giving wrong advice (causing a rise in tax audits).
Risk of Cyberattacks
According to Globe Newswire, cybercrime is expected to cost US businesses a whopping $10.5 trillion (per year) by 2025. That is more than three times the figures of 2015! Though companies in all industries are at risk, those in the financial sector share a special burden of this threat.
With hundreds and thousands of invoices and documents exchanged daily, rooting out vulnerabilities is the need of the hour. The top reasons why cybercriminals may choose to attack your business include:
- The gargantuan volumes of sensitive information, which is not only valuable but also difficult to replace once stolen
- Lack of up-to-date software that makes the company an easy target
- No proper cybersecurity training for employees
A data breach or a cyberattack does not just cost your company its hard-earned dollars. You also risk impacting productivity and business reputation. Listed below are the key areas to look out for –
This is a type of malware that uses asymmetric encryption to keep its victim’s data hostage for a ransom. Once the data gets encrypted, you cannot access valuable documents, applications, and databases.
You will then need to pay a ransom to gain access once again. However, there is no guarantee that the cybercriminal will keep their word, and the threat may spread across the network. Ransomware has the potential to paralyze the entire organization.
What makes this malware more dangerous is anonymous cryptocurrency (making it tough to track down the cybercriminals). Some ways to protect business data from ransomware include up-to-date software, multi-factor authentication, data backup, and reliable cybersecurity software.
Usually carried out via email, a phishing attack involves sending fraudulent messages that appear to belong to a trusted source. This cyberattack tricks you into downloading malware or divulging sensitive data.
The purpose of phishing is to gain access to passwords, financial information, or even personal data. It opens the door for crimes like theft of money or identity. Multi-factor authentication and anti-malware software should help.
However, employees must know the red flags like requests for personal info, emails with typos, and links to unfamiliar websites.
Your company’s security posture can easily get bent out of shape due to untrained and careless employees. The World Economic Forum (WEF) states that 95% of cyberattacks are a result of human error.
How can your employees open the door to cybercriminals? Through easy-to-guess passwords, reuse or sharing of passwords, lack of awareness regarding malware, etc. You should require all employees to create strong passwords and change them frequently. Enforce policies and protocols to protect sensitive data and have a backup of all vital information.
The industry is currently experiencing a massive cultural shift. From the wake of 2023 onwards, it is tech fluency that will decide a business’ future. Accounting professionals will be required to upskill themselves to make the most of different technologies.
The great transformation will not happen in complete isolation. Accounting firms will need to keep an eye out for the key trends shaping the industry’s future. With meaningful action to overcome challenges and adapt to trends, your company will stay relevant and profitable.