Fintech and the evolving role of the practitioner

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The digitalisation of the accountancy profession has accelerated in the past couple of years. Of course, the current need to work remotely is shining a spotlight on just how virtual and agile we have become. But the arrival of open banking in 2018, and HMRC’s Making Tax Digital for VAT initiative, phased in from April 2019 were also game-changers.

The requirement for VAT-registered businesses with a taxable turnover of more than £85,000 to keep digital records and submit digital VAT returns saw large numbers of businesses switching to online accounting software. In March 2019, there were more than
2.7 million VAT-registered businesses in the UK – out of a total of almost six million private enterprises.

Despite these advances, however, accounting lags behind other sectors when it comes to the adoption of digital tools. While a large proportion of businesses are now keeping digital records, millions more are not. Furthermore, businesses might be using accounting software, but they are not embracing apps to the same extent – often because their accountants are not encouraging them to do so.

Over the coming years, this is likely to change for a couple of reasons. Firstly, HMRC plans to implement Making Tax Digital for Income Tax and Corporation Tax, possibly as early as 2021. Secondly, business owners’ expectations around their accounting tools are changing in response to the continuous technological advances that they see in other parts of their lives.

‘Many younger people in business will choose accountants on the basis that they know they can work well with their technology,’ says Ed Molyneux, founder and CEO of cloud-based accountancy software provider FreeAgent, part of the Royal Bank of Scotland group. ‘Those practices that haven’t embraced digital will find themselves increasingly unable to provide a service for their clients that is in line with what’s expected.’

The role of the accountant will inevitably change over the coming decade as more accounting and tax processes are automated. Thanks to technology taking over most of the compliance burden, accountants will no longer have to go through carrier bags full of receipts, check their clients’ spreadsheets and do tax calculations. ‘That frees them up to spend time on the things they would genuinely rather be doing, which is helping businesses get started and advising them on how to grow and how to address issues,’ explains Molyneux. ‘It’s about offering more of a coaching style of advice rather than getting the numbers together, crunching them and filling in boxes on the tax return.’

Greater integration

Developments in fintech are also set to influence how both accountants and their clients operate. Greater integration between banking and accounting systems is going to result in the rise of ‘business hubs’ – data hubs that businesses can use not only to analyse how they’ve spent their money, but also to track and pay bills, reimburse expenses and pay staff on the payroll. Accounting software providers are also exploring how they can use these hubs to deliver insights to business owners, as well as to develop broader ecosystems that connect businesses with useful products and services.

FreeAgent already has Radar, an insights notification service that uses smart analytics to assess business owners’ accounts and provide them with timely advice on how they can better manage their finances. ‘A notification may say something simple like “this invoice is now overdue, go and chase the payment, and here’s how to do it tactfully”,’ explains Molyneux. ‘So rather than people having to research what to do on the internet, we’ve told them what’s going on before they’ve even realised it themselves and created a way of helping them.’ FreeAgent also offers business owners a live forecast of their VAT, corporation tax and self-assessment liability.

FreeAgent and other accounting software providers are also set to collaborate with banks to make information such as credit-score data and insurance products available to business owners through business hubs. Self-employed people may potentially be able to use the hubs to access information on their mortgages.

‘Banks would love to be able to offer better mortgage rates and streamline their processes,’ says Molyneux, ‘but they can’t because they haven’t got the data for it. The hub would have real-time information about the health of a business that is much more insightful than a set of accounts from a couple of years ago.’

Greater use of analytics in business hubs will enhance accountants’ ability to offer advice that enhances business decision-making. For example, through analysis of comparable datasets, it could highlight when businesses are charging too little or too much for their services, and where they might be able to access raw materials and products at more competitive prices. Artificial intelligence will also help to improve the quality and responsiveness of support that business owners receive when they have queries while using their business hubs. Accountants will therefore find that less of their time is taken up with basic enquiries, enabling them to offer higher-value advice to clients.

Molyneux believes that developments in fintech will transform what it means to be an accountant, bringing benefits to the profession. ‘With the right mindset, there’s an opportunity here,’ he says. It’s about the profession focusing on the things that are impossible to do with software – coaching and mentoring business people, and helping them through problematic times.’

This article was first published in the May 2020 UK edition of Accounting and Business magazine

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