Unit 15 Reading Activities Plus Questions

USA Speaker One:
UK Speaker Two:
The Future of Accounting

Since man started conducting business almost 7000 years ago, there has been a need to record and track these transactions - from this need came accountancy. As business changes so, too, does accounting and prior methods are forced to change- so the question is: how will accounting change as we move into the future?

There are many predictions on this topic, but in this article we have selected our top 5 for you.

1. Web-based technology

Although there are already web-based accounting solutions, we expect to see the number and functionality of them improve greatly in the coming years. These solutions will include software which integrates with the various government taxation organs. The result of which will be a system where compliance work is automated.

Current predictions are that this will reduce the amount of time spent on compliance work by 10% - 40%. As such firms will need to undertake new services which will offset this loss in billable hours and make it possible to stay afloat.

2. Simplified compliance

The trend of simplified compliance isn't new, and shouldn't come as a surprise to anyone. The simple truth is that governments want to be reelected, so it is in their own best interests to satisfy the people, and one way of doing that is to reduce the amount of red tape associated with owning and running a business.

We already have online filing of tax forms, and online help desks in taxation authorities - so the continuation of this trend may see a complete shift to a paperless system of accounting.

3. Fewer, but larger firms

Unlike the majority of professions, the accounting profession is still a cottage industry comprised primarily of thousands of small firms. In fact, it is estimated that there are over 1.2 million accounting firms worldwide, but only 60,000 have revenues of over $3 million, with most firms having fewer than 5 staff.

Most small accounting firms are currently made up of 2 partners and a handful of staff, who are only capable of offering limited services.

Arising from the reduction in compliance work, these firms may find it unprofitable to continue in this sector so we are likely to see smaller firms merging to form companies which can offer an extended range of services.

4. Additional services

In conjunction with point 3, larger firms will find themselves competing for clients by offering services which were traditionally offered by financial advisors, or even legal council. We expect these services to include:

• Growth - helping with the development of the clients company by advising them on methods to grow the business.

• Succession - aiding clients in selling commodities, or part or all of the business when the time is right.

• Planning - developing strategic plans for the company including asset and the owners, this is likely to take in retirement planning.

These additional services will aim at integrating all clients needs in one place, and will add to the growing trend for such work to be outsourced.

5. Business success center

By offering the additional services mentioned above, the accounting firm will be transformed into a center for business success. We speculate that these centers will be much more client friendly and each client will have their own relationship manager who will be responsible for advising on the best package of services for the client. This will avoid the current system of duplication of questions, when a client speaks with an accountant, a lawyer and a financial planner separately.

While these are only predictions of what will happen in the coming years and do not take into account any unknowns, one thing is for certain: the future of accounting looks exciting.

Discussion Questions
  • Which of these predictions do you think will come true and which won’t ? Why?
  • What are your predictions for the future of accounting?
  • How will the predictions in the article and your predictions affect your profession?

Quiz: Reading Questions

1. Arising from the reduction of compliance, accounting firms will undertake new services and will be able to bill more hours to stay afloat.
 
 
2. It is estimated that most accounting firms have fewer than 5 staff in this cottage industry and that small firms are merging to extend their range of services.
 
 
3. In conjunction with duplication of red tape, reallocation of accounts is needed.
 
 
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