How’s your accounting firm? Like any company, your firm faces daily accounting problems that are part of normal operations: staffing, client acquisition, cash flow, and profit management. But as part of the accounting industry, your firm encounters unique challenges based on the services you provide. Read on to learn more about the top five accounting challenges and how to proactively prepare for them.
Accounting problem #1 – pivoting your accounting skill set
No doubt your employees are masters of accounting fundamentals. They’ve studied, trained, and applied their skills to become experts in their field. But with a shifting environment brought on by advanced technology and economic pressures, new skills are equally important for their (and your firm’s) success. With the advancement of intuitive software, clients can manage uncomplicated tax preparation and basic accounting processes on their own. Rather than compete with that technology, you can move your firm to a more advanced advisory role, providing services that include:
- Wealth management and minimizing tax burdens for individuals
- Succession planning
- Profit management
- Mergers and acquisitions
Accounting problem #2 – utilizing automation and AI
For many industries, advanced technology, specifically artificial intelligence (AI), can feel like a threat. Will machine learning replace my business? For accounting firms, AI and automation can systematize mundane functions, relieve staff shortages, and provide actionable data. That doesn’t mean that humans will be eliminated from these processes. Your challenge is to balance the routine tasks that can be done via software with the creative functions only a human brain can perform. Artificial intelligence can be intimidating, so partnering with an experienced vendor can help you understand and embrace the possibilities it provides. While just a small percentage of accounting firms currently utilize machine learning, you can put your firm ahead of the curve by leveraging its potential.
Accounting problem #3 – fielding the demand for analytics
Embracing a new skill set and welcoming advanced technology can relieve the next accounting issue your firm faces – an increased demand for analytics. Your clients want every piece of information available about their businesses so they can enhance their daily decision-making and more accurately predict where they are headed. But they need that information in a digestible format.
According to Franklin University, your clients need accounting leaders who can translate data into valuable insights that can help improve business outcomes. There are four types of data analyses that accounting professionals should make available to clients:
- Descriptive analytics: what’s happening to a client’s business right now?
- Diagnostic analytics: why is that happening?
- Predictive analytics: what will happen next?
- Prescriptive analytics: what should we do?
Raw data alone won’t help your clients, suggests Franklin. They need your data analytic skills to analyze and contextualize it.
Accounting problem #4 – rolling with tax law and regulation changes
The more things stay the same . . . the more that tax laws change. That’s not exactly how the old idiom goes, but every accounting professional in your firm understands it just the same. According to the National Conference of CPA Practitioners, nearly 6,000 pages of new tax provisions are now in place as a result of the COVID stimulus bill (Consolidated Appropriations Act) alone. Your clients depend on you and your firm to stay on top of the changing regulatory climate and to keep them protected and in compliance.
Here’s where you can lean on software. While it’s important to understand the changes that have been implemented, using a robust tax package that is updated for compliance can make sure every detail is covered for the well-being of your clients.
Accounting problem #5 – keeping client data secure
According to a report by IBM, the average cost of a data breach in the US reached an all-time high of $9.44 million. A single data breach can have devastating effects on your clients’ businesses – and your firm’s reputation.
The best defense is a good offense; start by preventing attacks from happening. Prevention techniques include encrypting data and requiring two-step authentication for signing into customer data. Ensure you have a backup of all information on a secure cloud server to avert the loss of critical information. And consider hiring a data safety consultant to evaluate your current risk and implement an incident response plan (IRP).
Should the worst happen, put your IRP to work. Your plan should include how to stop a breach in its tracks, how to clean up after a breach, how to notify clients, and how to handle potential public relations issues. Ultimately, nothing good comes from a data breach, but having a plan in place will help mitigate its impact.
Managing the problems
Whether you’re part of a large accounting firm, or you’re an individual accountant, the technology you choose will be a critical factor in how you manage the issues ahead. With data as the new currency of business, your accounting system should be robust enough to help you collect and analyze your clients’ financial data with flexibility and accuracy.
For more info on these challenges and other tax problems, see what the top accounting issues of 2023 are.