O'Connor: using fintech to increase practice profitability

Advances in fintech could transform the accounting profession if firms leverage the technology to help growth their practices and offer extended services to their smaller clients, explains Sam O’Connor ACA, co-founder & CEO of smart banking app Coconut

Since qualifying as a chartered accountant in 2011, there have been many Armageddon-type scenarios, predicting the death of accounting due to algorithms and apps. As the CEO of a smart banking and accounting business for self-employed business owners, you may be surprised to hear that I think humans will always be integral to accounting.

In many cases the predictions about how sophisticated technology will become are over-hyped and miss a key point - recreating the peace of mind and expert advice that an experienced accountant provides to business owners will probably never be achieved in computer code.

That said, new tech has massive capacity to unlock bigger revenue streams and grow profit by removing manual work and reaching new customers.

Growing pains of manual work

Cloud accounting packages have delivered their share of innovation over the last 10 years, but there are still elements of work that cause major inefficiencies for accountants. This is particularly acute when it comes to working with self-employed business clients.

Self-employed business owners - sole traders, one person and owner-managed limited companies with fewer than 10 employees – is a segment of the market is where there is a big opportunity for accountants.

There are around five million of them in the UK and they make up 87% of the growth in SMEs since 2000. Technology has created some incredible advances in how people find and do work, but the tools to manage finances for this group and their accountants have not kept up.

Self-employed businesses tend to have simple requirements and should be very profitable. However, there are some areas that tend to take up a lot of time including:

●             setting them up with a business bank account;

●             onboarding them quickly;

●             emailing requests for information;

●             asking questions about transactions; and

●             manual data entry to stay on top of bookkeeping.

There has been a proliferation of tools that are designed to help remove some of this manual work, like receipt apps, invoicing platforms and cloud accounting packages. But, for the smallest clients these solutions are unnecessarily complicated and it is sometimes hard to get the client using them.

Personal touch

Accountants provide something that computers are a long way from replicating: peace of mind. Having a human to talk to, someone who understands how you are feeling, has experience built over many years and professional judgment, gives customers ultimate reassurance. It is no wonder that accountants have increasingly become the go-to business adviser, not just the bookkeeper.

But the work clients really value is advice and value-added services, not the manual work. Helping them to make sure they have the right setup, navigate the tax system, get ready for Making Tax Digital (MTD) and save money on their tax bill. On top of this, tips and insights into how to take their business to the next level or manage their cash flow are important.

So how can an accountant remove the manual work that clients do not value in favour of providing quality advice, remain efficient and grow their client base?

Developments in fintech

There are a number of developments in financial technology that are showing promise for accountants. Smart banking is one of these, enabling businesses to open a business current account quickly and get access to real-time payments data that helps with bookkeeping. Another interesting area is Open Banking that will open up banking transactions to third-party apps.

A lot of work is created by putting off the bookkeeping until it absolutely has to be done. In a recent Coconut survey, a fifth of sole traders and small business owner respondents said they felt doing their bookkeeping would distract them from their day-to-day business.

This is not just the case with tax returns, it is the case every day. Coconut, for example, offers a business current account that customers can open in a few minutes from the app with a Mastercard sent out to the account holder. All expenditure through the system is allocated to defined categories, developed through machine learning and understanding payment profiles, which the customer can change with helpful guidance about the tax rules. Educating the client increases the chances that the treatment is right when it comes to the accountant seeing it. And if you, or the client, change the category, the technology learns so that accuracy improves. Another service is the recently launched Accountant Portal. This offers accountants a real-time view of customers’ transactions and bookkeeping information.

Ecosystem of efficiency

Accountants provide a very valuable service and the core of this is the advice and reassurance given to clients. But as we move towards MTD and IR35 offpayroll regulations for the private sector, and with more and more fragmented propositions, either practices will use technology to their advantage, to provide a seamless, effortless offering to clients, or be caught out with lower profitability through greater manual work.

I’m incredibly excited about what some of this breakthrough tech is going to do for accountants and their clients. As more people choose entrepreneurship over employment, technology will play a critical role in making sure they unlock the value that accountants bring to a business while enabling accountants to service more clients, more efficiently, and in turn increase their own profits.

About the author

Sam O’Connor ACA is co-founder & CEO, Coconut

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