With the rapid growth on cloud based accounting software like Quickbooks Online and Xero, it is clear that the future trends in accounting is leaning towards cloud based software. If current trends continue, upwards of 90% of small and medium sized businesses will be using some form of cloud based accounting software. Although this may seem like the end of accounting services as we know it, CPAs that stay ahead of this trend will be able to capitalize on this tremendous opportunity.
The Death of Data Entry
The biggest threat to traditional accounting services is the automation of data entry. Any CPA practice that has substantial revenue in traditional data entry services will see a significant reduction is revenue. Software like Quickbooks, Xero and Bill.com are commoditizing this function of accounting by syncing bank accounts, credit card accounts, accounts payable and accounts receivables to cloud based software. This means that small businesses will be able to outsource the bulk of their bookkeeping services at a fraction of the cost.
Increased Mobility of Accounting Services
Since cloud based accounting software can be accessed anywhere in the world, traditional CPA practices are more susceptible to loss of business. Since cloud based software allows ease of access, it is easier to outsource traditional accounting services to the lowest bidder. Instead of paying a local CPA firm $100 an hour for bookkeeping services a small business can outsource this same service to a freelance bookkeeper half way across the globe.
Accounting Services As A Commodity
Since cloud based accounting software can be easily accessed and outsourced to the lowest bidder, traditional accounting services will become a commodity. We are seeing this already with services like payroll being outsourced to companies like ADP and Paychex. Cloud based software allows activities like payroll and sales tax compliance to be automated to reduce error and increase compliance at a reduced price.
Business Advisory Services As The Bulk Of Revenue
Since traditional data entry and accounting compliance will be automated, the bulk of accounting revenue will come in the form of business advisory services. There is a huge opportunity for CPA practices who recognize this trend and who are able to advise clients on the best software for their specific needs. Xero offers over 500 add-ons for their accounting software so there is a huge upside for CPA practitioners who are able to advise their clients on the latest updates.
Increase Demand For Value Added Services
Since the future of accounting services depends on the effective and efficient use of cloud based software, CPA practitioners will need to concentrate their efforts on value added services. This should come as a huge relief to CPA practitioners because low level accounting services like check entry and payroll compliance pale in comparison to the potential revenue from higher level accounting services. Value added services like tax planning, cash flow management and other advisory services will outpace the revenue from traditional bookkeeping services.
With the increased use of cloud based accounting software, CPA practitioners would be wise to follow current trends to keep up with client needs. Clients are demanding higher level services of their CPAs and are outsourcing more lower level accounting work to lower priced channels. The focus of future practitioners should be on business advisory services primarily based on the efficient and effective use of cloud based accounting software.