Accountants are always looking for ways to help clients manage their finances, prepare their taxes, handle IRS letters, and keep their private data secure. Here are the latest trends accountants are embracing in 2019:
1. Accounting firms are outsourcing tax return preparation
Outsourcing tax return preparation can improve efficiency and profitability by freeing up personnel resources. With resources freed up, an accounting firm has more time to build and maintain client relationships. Building strong relationships is the foundation for success and should be the primary focus for every accounting firm.
Hiring an outsourcing company is especially useful during the busy season when a firm may not have the time or resources to complete returns on time. Rushing to get through a stack of returns can result in errors, and accounting firms can’t afford to make tax mistakes.
Taxfyle is a network of licensed tax professionals ready to do the hard work for firms who need help. Quotes are provided up front, and everything is done online. Taxfyle’s database maintains SOC 2 compliant controls with data security – all data is encrypted at rest and in transit.
2. Bots are becoming bookkeepers
In 2019, machine learning is behind most technological advances, and bookkeeping is no exception. Today, accounting firms are using bots to automate the mundane tasks of bookkeeping and give CPAs more time to play the role of advisor. One tool promising to make bookkeeping easier is Botkeeper.
Botkeeper combines AI and machine learning with skilled outsourced accountants to automate and verify a significant portion of bookkeeping work. According to Blake Oliver, who interviewed the company’s CEO, Botkeeper is a machine learning algorithm that:
- Receives transaction data from a third-party OCR service or bank feeds
- Determines what type of transaction it is
- Determines what application to enter the transaction into (QuickBooks, Bill.com, etc.)
- Creates the transaction and codes it to the appropriate account by line item, based on a combination of the company’s own transaction history and the transaction history of all companies in the Botkeeper database.
Although Botkeeper offers some bookkeeping convenience and has the potential to outsource more complex functions, it won’t replace a human bookkeeper entirely. Botkeeper can’t prepare bank reconciliations, month-end accruals or deferrals, and it can’t pay bills or project cash flow.
3. Artificial intelligence is coming to accounting
Artificial intelligence is one of the hottest trends in finance, and although it’s not quite on par with depictions in movies, it’s getting there. According to Accounting Today, AI is positioned to increase the efficiency of accounting and transform the entire industry. An accounting firm can’t afford to make mistakes, but humans are prone to error. Some accountants make fewer mistakes than others, but mistakes are unavoidable.
Human error is the result of biological limitations. Those limitations vary between people, but nobody is perfect and mistakes happen. For an accountant, mistakes have dire consequences for the client. The human brain is limited in how it can organize and parse data, but machines can do it better once they’re trained to recognize the patterns. Using AI to improve accuracy in accounting is only going to help the industry.
4. Improved security efforts via encryption
Cybercriminals target accounting firms because they handle personal data including names, addresses, birth dates, social security numbers, bank account numbers, and financial information. The various software programs CPAs use to manage a client’s finances are vulnerable to attack when the data isn’t encrypted.
Firms outsourcing tasks of any kind need to make sure their clients’ data is being encrypted from end-to-end. Thankfully, as companies become aware of the problem (and solution), they’re implementing high security measures, including encryption, into their software.
Data security is non-negotiable
In 2019, following data security protocols is more important than ever. There has been a steady rise in data breaches over the last decade, and in 2017, there were 1,579 data breaches reported. The average data breach costs a company $3.86 million. This article from Digital Guardian will give you an idea of how big the problem is. Many industries are bound by strict regulations governing how they can store and transmit sensitive data. For example, the EU Parliament approved the General Data Protection Regulation (GDPR) on April 14, 2016 and gave organizations until May 25, 2018 to comply. GDPR regulations are strict and are intended to protect the data privacy of all EU citizens. GDPR applies to all organizations that do business with or monitor the behavior of EU citizens. Accounting firms with EU clients must comply with GDPR regulations or face fines.
Firms can still get in trouble for outsourcing tasks to companies that don’t comply with GDPR. U.S.-based firms that only deal with U.S. clients are also required to follow strict state and federal data protection regulations. You can’t prevent every data breach, but encrypting data will mitigate the damage, should a data breach occur. Encrypting data at rest and in transit ensures it can’t be read when it’s stolen. Make sure the company you outsource work to has strong data security systems in place.
5. Multi-factor authentication
You’re probably familiar with two-factor authentication on social media. It’s the system that sends a code to your phone that you must use to log into your account after entering your password. Multi-factor authentication, which can involve more than two steps, is currently being integrated into accounting systems.
In February 2019, Thomson Reuters was recognized by Accounting Today for producing a new security tool called Authenticator Display Cards. These cards generate a one-time-use code that allows users to access their account. The code must be used in combination with the account password. However, the authentication process isn’t limited to two steps. The cards add an additional layer of protection against unauthorized people gaining access to a person’s account. The codes can’t be retrieved unless the physical card is in a person’s possession. Any accounting firm that hasn’t enabled two-factor authentication for their uses should do so as soon as possible. It’s relatively easy for a programmer to add a second authentication step to the login process.
6. Cloud computing
Nobody can get away from cloud computing in 2019, including accountants. Cloud computing is more than a bunch of servers connected together. It’s a powerful system that shares resources that can scale on-demand as you need it. For example, when using cloud-based accounting software, you won’t generally experience slowness or downtime when others are accessing the application because the load is distributed among multiple servers.
Cloud computing can reduce costs because businesses only pay for the resources they use. A business no longer needs to buy the biggest plan just to make sure they’re covered during times of heavy use.
Getting connected to the cloud is no longer an option. To learn more about making the transition, the 2019 Accounting and Finance Show in Los Angeles, California (July 23-24) will be hosting a session titled “managing the evolution of legacy accounting applications in a cloud connected world.”
Is your client data secure?
There are many reasons to outsource your accounting tasks. The most obvious benefit is to free up your time, but the most important reason is for security. For example, say your clients’ tax return data isn’t encrypted on your servers. You don’t want your clients to be vulnerable if there’s a data breach, but you can’t afford to install the software that would encrypt the data at rest. That’s where Taxfyle comes in.
If your firm can’t meet end-to-end encryption standards, you can get the same benefits (and be in compliance) by outsourcing your tasks to Taxfyle. Contact us today to request a demo and see how Taxfyle can help.