Fintech: Friend or Foe?

Helene Panzarino FinTech Relationship Professional discussed how fintech is changing accountancy.

September 2021

Nobody would argue against the statement that technology is transforming the way we all work, and the accountant’s role is not immune to the twists and turns of the tech revolution. Historically, the predominate role for accountants serving small and medium sized businesses (SMEs), for example, has been creating financial statements, helping them stay compliant with regulations and advising entrepreneurs how to be tax efficient in their business and personal affairs. There may also be an element of sounding board, ranting wall, and emo¬tional support, but let’s stick to the more professional points! This support may also include navigating the tax investment schemes, like SEIS and EIS, or making them aware of R&D tax credits, for example, but overall it’s the role of trusted and solid advisor that gets things done and also provides peace of mind.

n recent years this well-developed relationship has been somewhat interrupted by the arrival of a third wheel in the form of technology such as Cloud accounting software, usually Xero, Quickbooks et al, enabling SMEs to increase automa¬tion and reduce the time and cost spent on procedural tasks such as invoice management, cash management, budgeting and forecasting. The benefits of this automation are clear, human error is eliminated and the cost saving in manpower is immense. The appetite for automation can also be quantified, figures from Juniper research projected the growth of the automation market between 2018 and 2023 at 27.4% CAGR. To add to the interruption, these software providers are now increasingly partnering with financial technology firms (fin¬techs) and digital banks to bring more integration and reduce the heavy lifting in bookkeeping and reporting.

Indeed, almost all digital banks now offer integrated tools to help businesses manage their cash and reporting, with some banking platforms, such as Tide, rolling out auto sync features that connect to Xero, meaning small business owners now have real-time, accurate information and the tools auto sync, matches payments to invoices and helps chase up any over

due invoices. The FinTech Fluidly offers both credit control and automated cashflow forecasts powered by AI and delivered by APIs. A useful tool for SMEs that would have previously had limited if any real-time access to financial reporting, analysis, and forecasting. These cloud-based, on-tap solutions are usually cheap to acquire and can sometimes leave accountants on the side-lines pondering how they can make up revenue in their lost service models.

How is FinTech transforming the role of accountants – and how can accountants stay relevant in the FinTech world?

It is true that the automation of processes has reduced the amount of time an accountant needs to spend on traditional duties and services, but that does not mean they are redundant as trusted business advisors. Indeed, this revolution of financial services should be seen as an opportunity for accounting firms to focus on more value-add services, particularly for small businesses, who don’t have the people power they need as they grow. Access to real-time financial information and reporting allows business managers to take pre-emptive action or to react instantly to evolving situations. Real-time information gives rise to data analytics and predictive analysis services leading to better insights and decisions around foreasting, analysis, and resource management.

In the past, small businesses have managed budgeting and forecasting predominantly with Excel (or in a shoe box), and where they do have software processes these are often siloed across different technologies and consolidating the information is a manual process prone to error. Often, even when businesses can access better, more timely information there is limited employee knowledge and expertise in house to analyse and support better business thinking. Very frustrating all round.

Small and medium sized businesses rarely have the resources for full-time experienced business managers, data scientists or financial officers to effectively manage the information they now have access to, leading to a demand for both financial and operational business management expertise. This represents a very real and very valuable opportunity for accountancy practices of all sizes. Many are already taking steps to transition to a full-service consultancy model.

The availability of powerful tools for planning, forecasting and analysis means that accountants can take an increasingly strategic role in identifying threats and opportunities for their client’s businesses, and as such they will become more business partners with greater insight and input around pricing, costs, markets and future direction. Taking away some of the mechanics of the profession paves the way for professionals to really bring their expertise to the table. Equally, once the strategy and the plans begin to take shape, make no mistake that FinTechs of all types, peer to peer platforms, financing funds, digital banks, savings, wealth management and robo advisory platforms, and the rest, all welcome members of the accounting profession with open arms and referral/commission schemes, triggering additional revenue streams and the opportunity for new client acquisition.

Reasons to be cheerful

There are huge incentives for accountants to embrace the FinTech scene and to fully engage with new automating technology and create points of differentiation. Indeed, what looked like a FinTech foe is, in reality, a friend to help avoid the risk of becoming obsolete in the long run. FinTech presents accountants with a fantastic opportunity to bolster the services they offer and recognise the value and the power of integrated software, data, and artificial intelligence in the SME eco system.

Those that can navigate this brave new FinTech landscape, advise clients on the optimal stack of different solutions, and utilise them to deliver for their business will be the future’s turbo charged, best-in-class service providers.

Sources & References:

8/3/2021 How Fintech Is Transforming The Role Of Accountants minutehack.com/opinions/ how-fintech-is-transforming-the-role-of-accountants Banking Automation & Roboadvisors Statistics (juniperresearch.com) Accountants risk isolation from emerging fintech ecosystem, Edwin Abl, CMO at Modulr, (accountancyage.com/author/modulr) Date published July 31, 2019