As a result of new accounting and financial regulations, more than half (51%) of finance professionals say their company has upgraded its accounting technology (specifically finance and procurement systems) in the last year, with 31% rushing to upgrade in the last 6 months, according to our new research report.
Regulations like Making Tax Digital have battered businesses in recent years, with swathes of new rules putting pressure on them to meet much stricter compliance and reporting requirements.
It is, therefore, no surprise that so many firms have suddenly stepped up their investment in accounting technology to try and stay on the right side of all these new rules.
The accounting technology race – when did UK businesses last upgrade their accounting technology?
- In the last six months – 31%
- Within the last year – 51%
- Within the last five years – 16%
- Within the last six to 10 years – 4%
But while it might seem like the accounting technology revolution is at peak upheaval, the reality is that it is just getting underway and accounting firms, businesses and even tech and software vendors haven’t seen anything yet.
Look around the EU, or further afield in Brazil or Argentina, and you start to understand exactly what is coming down the road for UK businesses.
In a lot of countries, governments are moving to the point that every single sale has to be registered digitally (this is already in place in many countries) and means that businesses have to report digitally on every transaction. Accurate business revenue becomes transparent and all tax (on every transaction) is correct.
Making Tax Digital is our first incarnation of this in the UK.
Organizations becoming more dependent on accounting technology – this is the future of accounting
Smaller organizations in particular are set to have a much harder time in the new digital accounting world (even more so than they probably are now) and we are likely to see an even more prolific shift towards financial and accounting automation.
Every organization is going to find itself becoming increasingly dependent on accounting technology and software that introduces functionality required by the government in terms of Making Tax Digital, as well as functionality for collecting revenue and costs in the next few years.
This is already proving a significant challenge for many businesses: some initial research shows that thousands of companies have missed the first deadlines for MTD VAT returns, and many are struggling to adopt new accounting technology as they are unable to train or find staff to operate it.
And according to a YouGov poll, this new tech adoption is not likely to get smoother anytime soon, with 57% of respondents to the survey stating they felt “unprepared” for new changes – despite reporting deadlines having already passed.
Challenging times ahead in the future for accounting technology and software vendors
While businesses and accounting firms are set for a tough time in the coming years, those they turn to for help – accounting technology and software vendors – will likely bear the brunt of it.
For example, it is going to become increasingly difficult for smaller tech/software houses that sell in multiple geographies because:
- legislation will be different in each territory, and
- the tech/software will have to be adaptable to become country specific based on the legislation.
This also means a rapid rate of upgrades is going to be needed.
It is likely that the number of organizations upgrading their accounting technology and software will increase significantly– just because of the need to access the new functionality.
We’re about to see the consumer model of SaaS subscription services become the norm in business and enterprise software, with vendors providing automatic upgrades as part of their services as standard.
These upgrades are already becoming a key value proposition for tech and software vendors in the accounting and financial sectors because businesses don’t want the worry and the hassle of upgrading locally deployed accounting technology or software. As new legislation comes in SaaS software is automatically upgraded, providing huge efficiencies and comfort for customers, whilst simplifying ongoing support for the provider.
It’s a brave new digital world out there and firms need to get geared up for the future of accounting because the days of locally deployed accounting technology and software are numbered, and the clock is ticking down.
Want to learn more about how technology is changing the role of finance, enabling it to fill a strategic as well as functional role? Download our report by clicking below.