How coronavirus will reshape accountancy

Accountants and bookkeepers have been on the front line supporting small businesses through a turbulent year.

Like many of us, they have also been under a lot of pressure. As the compliance and advisory needs of clients change, emails and documents have been surging, and they’ve had to adapt to new ways of working. It hasn’t been easy, exposing many weak spots in processes for practices.

The virus has forced many practices to speed up their digital transformation and as a result, they are discovering the benefits of working in the cloud. The ability to work remotely in real-time, with a flexible subscription and secure data storage, has proven to be game-changing.

A recent global SmartVault survey of over 1,100 accounting professionals in 18 countries, titled “Impact of COVID-19: State of Accountants” showed what we know to be true at Xero: that practices which prioritise their people, use cloud technologies, embrace change and stay connected to their clients are those weathering the coronavirus storm best.

There’s no question that 2020 marks ‘the point of no return’ on the digitisation of the accounting industry and the mandate for cloud-based operations to succeed.

As we look to the future, here are the trends and themes reshaping accountancy:

The rise of digital tax and practice management

We are continuing to build and partner with solutions that provide the best digital practice management platform for accountants and bookkeepers.

We recently unveiled our cloud-based practice management platform vision, known as “Next Gen Practice”. Under our practice management open platform, we allow our partners to do everything from manage tax returns and lodgement for clients, to manage their practice productivity and provide client insights.

One of those priority areas for the UK this past year, was the creation of a digital tax solution.

The launch of Making Tax Digital by HMRC was implemented to support a more flexible and resilient tax system for the country and we collaborated very closely to provide the best possible solution to our partners.

Earlier this year, we launched Xero Tax, a cloud-based tax and accounts production solution. With coronavirus unexpectedly triggering firms to all work from home, this was a critical tool to support digital tax workflows. We also added the ability to produce multiple filings across different browsers and tabs, which saves time and allows accountants to work with more than one client at a time.

We look forward to continuing to support the digitisation of tax and compliance in the UK and working with HMRC to deliver the next phase to all remaining VAT businesses.

Renewed focus on cash flow and insights

Cash flow is the number-one reason small businesses fail. Any slip or interruption in payments comes with immediate implications for payroll, solvency and perhaps survival.  So the answer here has to be a more reliable, immediate solution on the incoming side of the balance sheet, in the form of online sales and payment systems. Businesses that use online invoice payments get paid up to twice as fast.

When the margin for error is that slim, competitive advantage rides on the accuracy of choices, the ability to see patterns and correlations in data, to understand risk and to predict with unprecedented levels of confidence where your client will be in a week, or month, or two.

That’s why in the years ahead we see a rise in business decisions based on real-time data and predictive insights. It’s why we’ve released a number of new features on our business snapshot and short-term cash flow tools and why we believe that supporting small business clients to improve their cash flow will be a critical part of advisory services.

We also know lenders are tightening their risk profiles and that access to capital is a challenge for small businesses. Our recent acquisition of Waddle, a cloud-based invoice lending platform, was important for us to support our customers to better manage cash flow and gain access to working capital as needed.

New business models

Over the past decade, digital transformation has driven the growth of many new businesses. We’ve seen this for ourselves – sole traders, freelancers and gig-workers are taking advantage of digital business models.

The pandemic has accelerated these new business models emerging and established businesses are adapting to serve their clients in new ways. These businesses need flexibility, quick access to financials, and specialist advisory support.

As a result, we refreshed our Xero Starter plan, to help these businesses and ultimately support economic growth once the UK moves into a recovery state.

Accountants and bookkeepers have been critical for small business’s economic survival and will play an important role in the recovery. I believe this is a moment that will redefine the future, shining a light on the importance of the industry and define the next phase in its digitisation.

If you are an accountant or bookkeeper in practice, sign up to the Xero partner programme and get Xero Tax. You’ll get the tools, resources and dedicated account management to help get your practice and clients set up for success. Visit www.xero.com/xero-tax-partner to get started.