IFA: What’s ahead for 2024?

As 2024 gets underway, it is key to look ahead and try to plan for the upcoming changes in the accounting sector. There have been several significant shifts in 2023 and these are likely to continue across the new year. Jonathan Barber, Executive Director – UK of the Institute of Financial Accountants (IFA) shares his predictions.

The evolving digital landscape

Both AI and automation have heralded significant changes in the accounting sector. According to recent data, around 40% of accounting operations are now automated, aiming to increase both productivity and accuracy. AI has also been a massive adaptation for the sector, with its ability to rapidly evaluate large datasets, identify patterns, and even run data analysis to spot future trends.

By using tools such as these, accounting professionals can reduce the risk of human error and free up time to spend on more strategic services. But these changes are advancing rapidly and the sector needs to move fast to ensure it is not left behind.

According to a recent IFA member survey,[1] around 25% of respondents feel unprepared for the challenges that lie ahead for the sector. Whilst this is a relatively low number, it provides an opportunity for businesses to prioritise support and guidance for their teams.

Legislative changes

2024 is set to feature many significant legislative changes for which accounts must be prepared.

The updated Economic Crime Plan will deliver on proposals to address the continued rise in fraud, money laundering and sanctions evasion, as well as underpinning the biggest shake-up to Companies House in its 180-year history. Stronger anti-money laundering (AML) powers will be introduced to combat fraudulent activities, including the seizure and recovery of suspected criminal cryptocurrency assets; stopping the misuse of limited partnerships; and boosting company trust in sharing information, to combat economic crime. There will also be historic changes made to accounts and filing requirements for smaller companies at Companies House, as part of new powers.

In addition, Basis Period Reforms will impact any self-employed individuals and partnerships that do not use an accounting period end date between 31 March and 5 April.

HMRC is expecting accountants to share this message with their clients, as well as providing additional clarity, if needed, on the specific changes. The work required to adjust to these changes is likely to equal that of Making Tax Digital (MTD) for Income Tax when it comes into force from April 2026.

The key thing for accountancy firms to remember throughout these developments is that success relies on remaining knowledgeable and adaptable in the face of an ever-changing industry.

The growing importance of ESG

The importance of environment, social and governance (ESG) factors in accounting processes is growing, as demonstrated by the 200% increase in UK businesses obtaining BCorp accreditation in 2023. This indicates a significant change towards more ethically- and ecologically-focused operations, demonstrating it is possible to improve the planet, alongside making steady profits.

According to the Global Reporting Initiative (GRI) four in five major corporations currently report on sustainability, with compliance, risk management, and value generation also involved.

Many accounting firms are also adding ESG concerns into their reporting and advisory services, perhaps due to investors’ belief that companies with ESG practices are more appealing.

This provision is another adaptation made by outsourced accountancy services to help them comply with global sustainability standards. As stakeholders apply more pressure on corporations to be more accountable and transparent, this is expected to grow.

Demand for outsourcing

Global demand for outsourced accountancy services is expected to grow dramatically between 2023 and 2030, with a compound annual growth rate (CAGR) of 9.1%. The demand from clients has already been triggered, resulting in service and recruitment pressures for accountants and bookkeepers.

Many businesses, especially SMEs, are outsourcing their accounting to save on operational costs, while still accessing expert knowledge. Another aspect fuelling the trend is the digital transformation experienced by the sector, thus enabling seamless integration of outsourced services with existing teams and processes.

The rise of work flexibility

Post-pandemic, the transition to fully remote and hybrid working has left a lasting impression on the accounting industry. New legislation for businesses is set to drive further change when it comes into effect this summer. The updated Employment Relations (Flexible Working) Act 2023 aims to give workers more rights to request flexible working, so now is the perfect time for businesses to consider their flexible working practices.

A recent IFA survey[2]  asked members about the factors affecting their work in the last twelve months. 29.4% of respondents cited a change in personal circumstances; 14.5% cited a family crisis; 42% had been affected by personal or family health issues; and mental health challenges had affected 19.2%. For employers, this marks a continuation of trends seen through the pandemic and indicates a long-term requirement enabling flexible working.

This is further illustrated by a government-backed trial of the four-day working week, where 60 major UK employers took part in the pilot. As a result of the trial, 18 businesses adopted a four-day week with 56 companies extending the trial with a view to making it permanent. The trial included around 2,900 employees with the study revealing that while business revenue stayed broadly the same, sick leave went down by 65% and 71% of employees self-reported lower levels of burnout.

Businesses need to be able to adapt to support their employees while maintaining high standards for their clients, with a four-day working week being just one of the approaches. Compressed hours, annualised hours, home -working, self-selecting hours within a working day or even total control over hours worked are just some of the options discussed by firms.

Collaboration platforms and cloud-based accounting software are key for making flexible working a success and firms need to ensure that they are future-proofing their systems and processes now.

There are many changes to look forward to in 2024 and firms can get ahead of the curve by looking at things that will impact them in 2024 and beyond. By staying engaged, it is possible to use these changes as opportunities to future-proof your business.

[1] IPA Group Membership Survey 2023 Report of Findings (June 2023)

[2] IPA Group Membership Survey 2023 Report of Findings (June 2023)