Accounting for the changing shape of opportunity

Businessman with the world in his hand

By Matt Barton, Technical Manager, Institute of Financial Accountants 

With the onset of digitisation and other emerging technologies alongside new sustainability and ESG reporting standards, it’s now time to ensure SMEs are working with an accountant who is fully prepared for the incoming changes and best placed to leverage opportunities.

Digitisation and AI

In the fullness of time, digitisation will free accountants from repetitive tasks and redirect existing resource into trusted adviser activities. Accountants will be able to further support clients with value-add services such as budgeting and costing, forecasting, strategic planning, investment appraisal, cashflow management and environmental analysis. Providing such a significant scope for differentiation benefits organisations including SMEs by helping to drive their business growth.

The other major advantage of digitisation is the opportunity to better interrogate data. Digital systems are typically cloud-based, offering real-time insights into business performance that can be shared between accountant and client. Proactive accountants can embrace this newly accessible pool of data to offer client-focused services, including data analysis, integrated reporting and flexible business modelling. They can be a genuine strategic partner to SMEs, not just doing their books and ensuring regulatory compliance, but helping push the business forward.

In terms of AI, undoubtedly there will be a place for it in the future of accountancy. We’re already seeing an increased demand for AI-based accounting software thanks to the sharp rise in digital payments. It’s also a powerful tool for analysing large data sets, which means we could see it facilitating analysis, identifying trends and patterns, and conducting risk assessments. Both Microsoft and Google are integrating their respective AI systems into their core products, meaning we will all be interacting with AI in our day-to-day roles, helping streamline processes across systems.

However, if we look at the bigger picture, we’re far away from this level of AI maturity, and fears that technology will replace the human element simply aren’t true; AI is poised to assist human decision making, rather than replace it entirely. Ultimately, what will always differentiate your accountant from AI is their position as trusted advisers, offering the human touch and being an indispensable strategic partner.

Sustainability and ESG

Climate change has shown that environmental issues are fundamental to an organisation’s survival, as businesses become increasingly accountable not just for their finances but for the sustainability of their operations. This is not just to ensure compliance but increasingly it is driving tomorrow’s prospects, as well as those over the next decade and beyond. Consumer demand for environmental sustainability is likely to outstrip government mandated action but both should, and will, drive business adoption of sustainable practices. Integrating sustainability within organisational strategy and risk awareness can lead SMEs to make better-informed decisions.

Environmental, social and governance (ESG) issues are growing concerns – and a major attraction – for investors, as businesses will increasingly be expected (even required) to measure and reduce their greenhouse gas emissions.

SMEs are perhaps more sceptical of the case for capturing environmental information, with some viewing it as an unnecessary use of time and money. However, for many SMEs, the potential benefits of environmental reporting include improved financial performance, cost reduction and risk management. Some businesses may be directly exposed to environmental risks if their operations are dependent on water supply, the growth of crops, the availability of scarce resources and so forth.

If there are no direct and obvious risks in the company’s manufacturing or service provision, it is almost certain that somewhere in its supply chain, there is an environmental risk at play – and all businesses are dealing with the direct and indirect costs of overreliance on volatile non-renewable fuels, exacerbated by the ongoing war in the Ukraine. Identifying, measuring, monitoring, and accounting for these risks are critical to assess an SME’s continued viability.

Accountants are well-placed to offer these insights and reporting. With their assurance skillset and experience in financial audit, and professional scepticism and judgement, they can deliver high-quality integrated reporting. Their qualifications and experience provide both an understanding of organisations of all types and sizes, and an ability to apply judgement and problem solving in complex situations. Not only that, but with appropriate knowledge of sustainability, more are supporting SMEs through the integration of ESG advisory services within their offerings – and doing so presents a high-value opportunity for accountants in practice to diversify their service offering and the value-add they provide their clients.