Disruptive area # 1 – Compliance is being commoditized by technology

The adoption of Internet (commonly called cloud) based technology is growing at a rapid rate of knots. You can’t stop it happening. There is social behaviour /change in action (people want to access their information on their handheld device) and there are massive technology companies investing huge sums of money to drive the change – if they don’t they won’t be in business.

The applications that are used over the internet are very sophisticated, very accurate and can connect to other internet systems. For example the Accounting system can connect to the client management system, which can connect to the stock control system and the distribution system. At the client end inexpensive applications can ‘talk to each other’ and give real time information to the business leader.

Here’s an example in action.

A customer (of your client) buys a product / service by whatever means. It is scanned using the bar code and automatically registers the sale into the online accounting system. Bank accounts, income statements and balance sheet data are automatically updated. The action also updates the inventory management system that there is one less product. The client management system (assuming the customer used a login/user name/loyalty card to identify the customer) and the buying habits of that customer are updated and now can be tracked. A real time report / dashboard is automatically updated/sent and the leadership of the business can see the trends or reports immediately on their smartphone or tablet. They might be on a private island at the time sunning themselves and the report comes through or they can check when they choose.

This level of automation (all driven through the internet) enables the business leader to make instant management decisions and run a better business. It’s happening right now. No spreadsheets manually updated. No paper filing and updating. No need for a meeting to tell me the numbers. No waiting. No people. All real time. All automated.

It’s exciting and it is happening right now. In my business I have had this level of automation for 2 years.

Let’s look at the accounting process.

Previously it used to be on a spreadsheet, server or hard drive and kept at the client’s premises. A bookkeeper (or spouse of the owner) did the data entry using manual key strokes. At the end of the year a file was saved and sent to the Accountant with supporting information. There would be questions and queries back and forth and the Accountant would then prepare a ‘set of accounts’ and present back to the client some 2-9 months after the initial data was received. The preparation of the historical data was a necessary evil as it had to be done to comply with the government authorities.

However, the data was old data. It was redundant. What help is it when you tell me ‘I should have done this and that’ 9 months after the fact? No help what so ever!

Enter internet based accounting systems. The products available offer real time information that do not need people to do the data entry. With these systems the data is more accurate (super computers are doing the processing not people) and there are less mistakes. As well as that the accounting systems are offering excellent reporting and data analytics which were only previously offered by Accountants as a management accounting package. Revenue I used to spend with you is now delivered by technology.

As well as that because the information is more accurate and the systems only have one version the time spent at your end to prepare annual accounts is far less. In fact we are seeing anything from 30% – 60% time reduction at the Accountants end (in year 2 onwards) for accounts preparation work. What do you do with that time saving? Do you reduce your price? Unfortunately for you the technology companies are directly promoting that ‘you will be more efficient working with your Accountant when you buy our product’. You have been selling ‘hours’ for all these years and more efficiency means less hours and less hours should mean a cheaper price. That’s what the business community is thinking.

We are seeing more price pressure on compliance than ever before and it will only escalate.

Let me add one more to the mix before we get onto solutions. One click lodgment. With all the internet data (which is much more accurate) already in the internet accounting system how long will it be before the government authorities get their systems ready and allow direct lodgment? The government authorities do not care about the intermediary called an Accountant. All they want is their tax money! The reason the majority of the Accounting profession exists is to make sure that the government gets the correct amount of tax money that it is owed.

One click lodgment is not far away and it will bypass Accountants and eliminate a big chunk of their revenue.

Technology is disrupting the industry and there is more to come. Is your firm ready?