In 2018, one of the ‘big four’ top accounting firms, KPMG, was fined over $3 million. This came after several failings were exposed during the firm’s handling of Ted Baker’s accounts between 2013 and 2014. ‘Misconduct of financial statements’ was just one of these failures. What are the accounting trends for 2024 that accountants face, and how have they adapted to new challenges? Read on to find out.
As COVID accelerated the move towards work-from-home, more and more companies developed remote working policies. This has been beneficial in cutting down commuter time, and giving employees a better work-life balance. As office costs have significantly decreased, many accountants have spent less time on month-end processes and could focus their skills elsewhere in the business.
However, remote working has also led to significant new security challenges, especially for accountants. In particular, accountants have struggled to verify their own identities when logging into systems remotely, or keeping their devices secure on public networks.
Twitter fell victim to this type of fraud when six of its staff sent their login and password information to fraudsters impersonating the company’s IT department. This led to the fraudsters accessing employee areas and tweeting from cryptocurrency scams from high-profile celebrity accounts, which generated approximately $180,000.
Solutions to this trend are to implement identity verification measures, such as two-factor authentication, which should enable companies to authenticate their employees remotely. Moreover, VPNs (virtual private networks) enable employees to secure their remote working, even when they’re connected to public wifi. This could be a particularly good solution for those working on sensitive company projects, like finances, or directly with third-party clients.
Businesses need to be aware of the risks of remote work and safeguard their processes with the right technology and software. Accounting teams can then be sure to work with the right information, records, and data, without any risk of mistakes in their tax returns or financial reporting.
Increased analytics and forecasting accuracy
Accountants are also reporting improvements in the way that analytical programs work. For example, not just in calculating expenses and revenue, but also in segmenting customers, delivering personalized recommendations, and other valuable insights. Analytical and reporting software are great assets for accounting teams and can help them handle their tasks faster and more efficiently.
We expect businesses to carry this trend through 2024 and the farther future, as technologies continue to evolve. By taking advantage of these developments, companies can benefit from more accurate forecasting and better budgeting, even with tighter internal controls.
For example, while we’re seeing a ton of layoffs here in the US, these tools could help businesses to be more thoughtful with their resources – ensuring spending is considered and sustainable. Moreover, analytics and forecasting tools can enable organizations to know more about the runway they have available, preventing unexpected changes and cash flow issues.
AI, machine learning and automation
With the explosion of ChatGPT onto the scene in 2023, AI has become a buzzword in almost every industry – including accounting. But industry experts won’t be surprised to know that machine learning, cloud, and automation services have been around for years. It’s been helping firms and financial services make their tasks more efficient and their analytics more detailed and accurate.
In 2023, it’s helping companies to accept new purchase methods, like instant payments, and automate many of the day-to-day tasks in business, saving time. For accounting professionals in particular, AI platforms can automate tasks like:
- Expense request approvals
- Two or three-way matching of invoices
- Transaction categorization with bookkeeping software (even for cash)
- New vendor onboarding
- Product sourcing
- Financial data analysis
- Pricing comparison between potential merchants
- Finding new accountancy talent in this competitive market
Trustpair’s account validation technology uses machine learning to validate third-party credentials. By automatically comparing invoice and contract details to robust international databases, Trustpair can block outgoing payments when suspicious discrepancies are found. This can help to prevent payment fraud as well as reduce time spent on essential processes. Our solution consistently checks third-party financial data, ensuring accounting teams work with the right numbers and information.
Increased data security
With the influx of cloud systems, many organizations are working with digital databases. In fact, 94% of accountants are now using cloud systems. But this puts their information at risk of breaches, hacks, and leaks. Hackers are now professionals who use cutting-edge technology and software. They’re organized and specialized and target specific employees who have access to the data they need.
For example, a Canadian accounting firm called Freshbooks was reported in January 2023 for leaving its AWS information public on the Internet. It meant that the sensitive information of more than 30 million users, from 160 countries, was available to any hacker that knew where to look.
Therefore, a huge focus for accountants is on data security, customers, and third parties against external access. We’re seeing a trend of financial departments updating their data privacy policies to include the four eyes principle and upgrading their firewalls to protect the data.
Moreover, new legal and financial software frameworks (like smart contracts through the blockchain) could help secure and decentralize a business’ third party relationships. Firms need to ramp up their defenses to avoid the often devastating effects of data breaches
Need for advisory solutions
The role of accountants has been slowly changing over the years, and 2023 really cemented the idea that accountants now sit in a more advisory role within their organizations. In fact, more than 60% of accountants now say that their clients expect more, including support with financial management.
Advisory solutions include the likes of:
- Wealth management advice
- Benefits to offset the cost of living crisis (such as paying a portion of employee energy bills when they work from home)
- Strategic bill paying to increase working capital
It’s clear that the role of the accountant will continue to evolve into 2024 and beyond, with more strategic decision-making required as computers take over the day-to-day calculations. Ensure processes lean into this by giving a platform to client feedback, and empowering your accountants to use their voices.
Compliance for tax changes
Two of the biggest tax changes involved an increase in the income tax rate and limits on deductions based on interest. But it was the Consolidated Appropriations Act (2022) that involved much more of an overhaul for accountants.
The Act enabled the IRS to access $275 million in new funding in order to modernize the tax system in the US. As such, accountants were required to ensure their processes would comply with updated systems. And – with more agents available – accountants would have to be ready for more frequent audits in the future.
Moreover, tax strategies in certain industries, like retirement planning, evolved as this act freed up funding.
Build ESG into accounting
Environment, social and governance (ESG) have been on the rise over the past few years. This has really culminated in recent years with the Biden administration passing the ESG Disclosure Simplification Act in 2021.
Overseen by the SEC, it requires publicly-traded companies to report on their impact on five different categories:
- ESG metrics
- Political spending
- Pay raises
- Climate disclosures
- Tax havens and offshoring
Although the act was passed in 2021, it started taking effect for larger companies in 2023, and smaller organizations will follow in 2024.
Higher security than before
With countless new threats in 2023, accountants (just like other functions) have been forced to step up their security game. Fraudsters are increasingly targeting finance professionals with the authority to make large payments – and fortunately, companies are catching on.
Services like Trustpair have come in more handy than ever before. By monitoring and validating the details of your third party in real-time, we can protect your company, even after employees have been duped. Social engineering attacks can wreak havoc on the business, both financially and with confidential information – so ensure you’re protected with Trustpair.
8 accounting trends summarized:
This year, accountants have seen huge updates in tax law and ESG which have changed their reporting requirements. The role of an accountant has evolved into more of an advisor, with senior decision-making capabilities – but this has put a security target on their backs. With AI, machine learning, and remote workplaces to consider, it’s likely that 2024 will continue to transform the work of accountancy.