Digital transformation is essential for modern accounting firms. Most CPAs understand the business advantages of becoming more data-rich and automated. However, that’s not to say the whole process isn’t challenging.
The digital transformation journey is disruptive, and accountants are risk-averse — it’s far from a match made in heaven. For some CPAs, the leap to automation and a virtual working environment is too overwhelming, leading firms to stick to the safety offered by traditional processes.
In this article, we aim to shed light on the key challenges of digital transformation facing CPAs and provide insightful solutions to help you future-proof your firm.
When it comes to innovating, there’s no greater challenge than getting the whole team on board to make it a success.
Like many other sectors over the past couple of years, accounting firms have been forced to ramp up their digital transformation efforts to keep pace in a digital-first world. However, in an industry that is renowned for being risk-averse, CPAs often face resistance when trying to implement technological advancements in their firm.
Feelings of intimidation and suspicion can creep in when new, automated tools are introduced. “Will the software make me obsolete?” “It will probably make huge errors that I’ll have to fix down the line.” “It’s a waste of time.” These are common fears and doubts that arise, making implementing technology more challenging in a firm.
Digital transformation is only successful when everyone fully embraces it. So, it’s essential that leadership finds a way to eliminate employee pushback.
The simplest way to ensure your employees are open to change is to be transparent about your vision for your tech-driven firm. For example, highlight the benefits that new tech can bring to the table and explain how human resources fit into the equation to minimise any doubts about obsolescence.
If you have employees who are keen to implement new technology, leverage their enthusiasm to your benefit. Make them early adopters so that they can show other more hesitant team members how to use the software and help transform their attitude into one that’s more positive to change.
A lack of appropriate skills poses a significant problem for firms hoping to start their digital transformation journey. According to a 2020 survey by CaseWare, accountancy has a widening skill gap, with 62% of respondents (a mix of accounting and financial professionals) saying that the profession is experiencing a significant skills gap, up from 51% in 2016.
In particular, the accounting industry is suffering from a major knowledge gap in data analysis. In the past, data analytics was the domain of departments such as marketing and IT. Now, with many firms accelerating their digital transformation agenda, firms are eager to reap the rewards of data-driven decision-making.
However, the skills aren’t there to meet the demand. According to consultancy firm McKinsey, only 18% of companies believe they have the skills necessary to gather and use data insights effectively. This means firms will either fail to harness the full potential of data, or they will have to outsource the service to contractors, which can be costly.
Thankfully, there is a straightforward answer to the knowledge gap in accountancy: upskilling. Leadership within firms needs to assess their workforce to understand where the skill gaps need to be filled.
As accountants are expected to shift into roles of data analysts and business consultants, it’s vital to develop both technical (statistics, business knowledge) and soft skills (problem-solving, communication, critical thinking) to fill the gaps.
By empowering employees to take advantage of new learning opportunities and break out of legacy structures, the digital transformation journey will run more smoothly to build a future-fit firm.
Although technological advances continue to shape the future of accounting, some CPAs are now weighing up the benefits of digital transformation with the risks of fraud.
According to a report by SonicWall, global ransomware attacks rose by a staggering 62% between 2019 and 2020. The pandemic provided the perfect storm for cyber-criminals, as they were able to take advantage of the rapid (and mostly unplanned) shift to digital working environments.
It’s no wonder that CPAs are hesitant to make the switch and digitally transform their firm. Although it offers a wide range of benefits, the risks of fraud may be difficult for some to overcome.
As with anything, digital transformation in accounting comes with risks — in this case, fraud. However, the key to protecting your firm against cyber attacks is to be prepared.
Provide cybersecurity training to your team to help them recognise the tactics that fraudsters may use to gain access to private information (business email compromise, phishing). Then, make sure that there is a clear cybersecurity protocol in place, containing essentials like:
- Ensure all company-issued devices benefit from up-to-date antivirus software
- Require strong, frequently updated passwords
- Enable multi-factor authentication
By treating data with the care it deserves and taking an ongoing, proactive approach to cybersecurity, accounting firms can help prevent cyberthreats from hindering their digitalisation efforts.
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