From AI to talent shortages: how to prepare for the accounting industry of the future

From the evolution of AI to talent shortages, accountants will face many changes in the coming years. But do today’s accountants have the skills necessary to adapt to the accounting industry of the future?

by | 31 Jul, 2024

A person's hand reaches towards a robot hand

We speak with a range of UK-based accounting experts about the challenges that the future will bring – and how accountants can prepare for them.

The rise of the robots

Love it or hate it, AI isn’t going anywhere.

“Technology has helped us increase the depth and breadth of services we offer, but it also presents serious challenges,” says Paul Beare, founder and MD, Paul Beare Limited, an international accounting firm that helps businesses set up in the UK.

“Over the next few years, the biggest challenge will revolve around the increased use of AI-enabled software, [as it] becomes standard issue for even the smallest firms.”

Consequently, many SMEs will conduct their own financial management, which threatens to render accountants redundant.

“We have to accept we live in a self-serve culture; so, offering a full-service package may not fly in the future,” says Beare.

To remain relevant, accountants should start to think of themselves more as business partners.

“[We need to provide] knowledge, skills and expertise that clients can’t get from a Xero-type package,” Beare says.

He advises accountants to consider specialisation in order to future-proof their skillset

“Your niche might be certain sectors or industries, or certain types of clients on specific things,” he says.

“[Ours is] helping firms set up in the UK. [Our] experience and insight aren’t included in a software package. Helping [firms] navigate the peculiarities of UK business is a major value-added service, saving time and money, and ensuring [our clients are] compliant.”

Battling threats to cyber security

Fifty per cent of all businesses – and 70% of medium businesses – experienced a cyber security breach or attack in the 12 months leading to April 2024, according to the UK Government’s Cyber Security Breaches Survey 2024.

In 84% of attacks, the method was phishing, while 35% involved cyber criminals impersonating organisations, and 17% were conducted via viruses or other malware.

Such attacks will increase as criminals become more sophisticated and the use of AI-driven software expands.

Emily Coltman, chief accountant, FreeAgent

“While technological prowess is making accounting easier, and opening up opportunities for business owners, it also means cyber criminals are becoming quicker at exploiting these opportunities,” says Emily Coltman FCA, chief accountant, FreeAgent, an accounting software provider.

For accountants, protecting their data and that of clients should be a priority.

“[Accountants should] ensure strong security measures are in place,” says Lauren Harvey, Accounts Manager, The Accountancy Partnership, an online accounting services provider.

“Breaches can cause significant financial and reputational damage for [an accountant] and their clients.”

Accountants can expect to play a bigger role in helping to protect clients from fraud.

Lauren Harvey, Accounts Manager, The Accountancy Partnership

“[We] must be alert to any signs of clients having fallen victim to scams, such as large sums of money leaving bank accounts in a short space of time,” says Coltman.

Two ways to stay on top of developments include regular training and signing up for alerts released by the National Cyber Security Centre.

Keeping ahead of regulatory developments

“We all saw how hard [it was to keep on top of new regulations] during the COVID pandemic, when clients expected accountants to know about new help schemes almost as soon as they had been announced,” Coltman says.

Another upheaval as significant as the COVID pandemic is unlikely anytime soon. However, changes are nonetheless on the horizon, with Labour winning the election after a 14 year hiatus.

“The new government will set out its legislative agenda in the months ahead – and this could potentially include changes in taxation,” Coltman says.

“We may see different legislation introduced, while existing proposals, such as Making Tax Digital (MTD), could go ahead as planned, or be postponed or even abandoned.”

For accountants, it’s important, not only to comply with changes, but also to explain them to clients.

“[Accountants should] make use of all available resources, such as government websites, industry and institute publications, professional networking websites and trusted partners, to keep themselves informed,” Coltman says.

Attracting talent

Almost 45% of accounting firms are “severely” or “significantly” affected by skills shortages, according to AdvanceTrack’s recent Accounting Talent Index Report.

Some 74% said shortages have worsened over the past three years.

Consequently, another major challenge facing accountants is that of attracting talent.

“[Accounting] isn’t a stuffy or drab job nowadays; but, if anybody was to draw a picture of an accountant, they would usually conjure up images of suited, boring and bookish men or women,” says Harvey.

“[Accountants] have a responsibility to redefine the profession’s image.”

Key is the development of training programmes and company cultures that attract the next generation.

“We’ve recruited some future stars through our Junior Accountant Programme,” says Harvey.

“The benefits to the company and the community by providing employment opportunities, and creating a diverse and multi-skilled workforce, have been great.”

Planning for succession

Last, but not least, succession is set to become trickier.

Lucy Williams, Managing partner, JS Accounting Group

“This isn’t a new challenge, but changes in our relationship with work following COVID-19 make this more challenging today than ever before,” says Lucy Williams, managing partner, JS Accounting Group. “This is for two reasons. First, many owners of accountancy practices want to exit sooner, and second, not as many people in the profession want to run an accountancy practice.”

Consequently, the accounting industry is seeing increased levels of consolidation.

“Selling to a consolidator can be very attractive for retiring partners, as it can give them a lump sum,” says Williams.

“However, exiting can be difficult, unless a management team is ready to take on the challenge. [But then there’s the question of] how to motivate management, if they will never have the same level of equity they would have had, had the firm remained independent?”

Another option is a management buyout, which means the management team takes over the business.

“At JS, conversations [about succession] began many years ago, which has resulted in a recent management buyout,” says Williams.

This has enabled the firm to maintain its character, clients and control over the future.

“[A management buyout] gives the management team the chance to prove themselves, add to the team as necessary, model affordability and financing options, and have open discussions about what everyone wants.

“The deal can be much friendlier than a third-party deal. You could end up with a chunk of cash on day one, deferred payments with lots of protections, a decent return on deferred payments, no claw backs for lost clients, and a management team you know and trust – and that has real skin in the game.”

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