This month, digitalisation will finally start to course through HMRC’s veins when Making Tax Digital VAT launches.
MTD is long overdue and has taken a huge amount of technical expertise and persuasion to make it happen. The accounting industry is being dragged into the 21st century. We will witness a watershed moment for accounting as firms battle to survive.
Why? It’s fair to say that the accounting industry has been at the trailing edge of digitalisation. And as a result of this latency, many practices are coming into MTD kicking and screaming. They are simply not ready to move into a fully automated and digital world.
A lot of this relates to fear. Fear of the unknown and a fear that this time computers will take their jobs.
But much also relates to skill. We are an industry that is full of functional specialists. People who know their way round a spreadsheet blindfolded. They are not traditionally tech-savvy and therefore digitalisation is an alien concept. Excel is a far cry from software that uses artificial intelligence.
However, it doesn’t matter if you look at law, home sales, medical services, even how we order a take out, everything is being digitalised. It is unavoidable and essential if we are to grow our economy.
Practice leaders will therefore be under huge pressure to change years of ingrained manual process. This is where digitalisation of accounts and digital record keeping will hit most traditional firms hardest. It’s a case of adapt or die. Clients will vote with their feet and many have already started.
For those firms that do decide to bite the bullet, change their vision and grab the digital bull by the horns, skill will become a major hurdle to success.
Finding someone with domain knowledge in accountancy, and skills in digital transformation is near impossible. In the ten years we’ve been operating it’s hard to recall ever seeing a CV that included both functional specialism and digital transformation.
There is the option to find people with digital transformation skills and then teach them the domain knowledge. Yet we’ve found that firstly, not everyone wants to become an accountant, and secondly, when you're competing to recruit against every sort of digital business it soon becomes hugely costly and time-consuming to get someone to the point where they are delivering real value for clients.
When you’re a taking a major shift in strategy this isn’t time you can afford. It’s also costly and takes a lot of faith to believe there will be a return on the investment, especially if it is uncharted waters.
So to get around this challenge, firms will be forced to improve the skills of accountants. This means taking experts and investing in their understanding of technology and how the industry will evolve as a result of its adoption. The end-game is the democratisation of digital transformation: everyone, at every level of the organisation, is empowered and capable of using technology to improve key processes and experiences. It shouldn't just be the preserve of the technology teams.
Careful planning and leadership
But it’s not for the feint hearted, especially if you have no real digital foundation upon which to build. It is a complex and long journey mostly because it requires mindset changes. Some accountants take to it naturally, others are wary of it and see it as a risk to their job, and some just won’t cope at all.
Digitalisation therefore takes careful planning and leadership. How people respond comes down to how you sell the story and their role in the future. If you manage it right, then you will soon find people change their outlook and see that technology will improve their career prospects not curtail them.
Ultimately, it's about inclusion, everyone has a say in developing the strategy, and empowering people. And if you read the case studies from lots of other industries like insurance or banking, through to taxi services, it’s all about how people use technology as much as it is about the technology they use.
That said, the technology you adopt will be pivotal to success. You have to be ready to invest in new platforms and tools to harness skills and energy.
With that comes some brave decisions for the management team. You have to give people the space to get on and break down large problems, and as such be ready to push decision-making power down into the organisation.
But as we have found it is worth the risk. Automating process does deliver an improved customer service and with the right technology roadmap will ensure you are ready to turn on digital services when HMRC decides to adopt them.
For the industry, the future is now all about anticipating what HMRC will do, looking at other markets to see how technology could be applied to accounting, and harnessing skill to make it happen.
Digitalisation is exciting, and will bring so many benefits to individual tax payers and the country as a whole. We will be richer in more ways than one and that surely is a thing to embrace and not resist.
James Poyser, CEO and co-founder, inniAccounts
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