2021: How the accountancy industry adapted to change and uncertainty

Rewinding back to 12 months ago, 2021 offered the hopeful prospect of getting back to business and a return to normality, with government pandemic support winding down, and a supposition that vaccination would gain the upper hand against Covid-19.

In truth, the year has for the most part been a continuation of 2020, made more challenging with a no-deal Brexit, supply chain issues, unique cashflow challenges, rising costs and staff shortages.

As the year is drawing to a close, there is a growing expectation that many of these temporary adaptations will now become embedded in long-term business operations. This has resulted in the changing face of many business practices and a pivoting of services in order to survive.

Post-Brexit

Despite such unprecedented obstacles, 2021 has given cause for optimism. Increased demand for the sector’s unique and solution-oriented advisory services has encouraged further growth.

Accountants have thrived, embracing ever more complex changes in legislation, and supporting businesses to survive and flourish during challenging periods.

One interesting development has been the strengthening of international connections as accountants overseas reach out to learn from UK best practice, and UK accountants and practices establish international offices or partnerships for the very first time.

Evidently, the UK’s exit from the EU has created necessary demand and opportunities for practice outside of its borders.

Digital tech

Digital transformation has continued, as the sector looks at ways to further embrace the digital shift and seize the opportunities that emerging technology presents.

Only a few years ago, new technology was being predicted by some as marking the beginning of the end for the sector, but more businesses are understanding how to leverage the potential of digital tools, and seeing how technology will support, rather than replace or constrain accountants. This is particularly true with technologies such as cloud-based data management, process automation, and advanced analytics, which are only adding value. For instance, automation is improving efficiencies, freeing agents to focus on strategic tasks requiring creativity and collaboration.

This digital shift is not just being seen through more and more services moving online, but also via knowledge sharing through conferences, board meetings and local meet-ups. There is an ever-growing appetite for smaller, more manageable chunks of practical advice and training, reflecting an increased need for real-world, up-to-date advice.

Legislation

As predicted, 2021 has been a year of huge legislative consultation and change. The Institute of Financial Accountants (IFA) has responded to 11 government consultations, spanning everything from economic crime and fraud to the role and effectiveness of Companies House, the role and effectiveness of HMRC, simplification of the tax system, reform of the basis period, and timely payments.

The IFA has also challenged government on the assumption that Professional Indemnity insurance will in any way raise standards of unqualified accountants.

Simultaneously, new legislation has also come into force, so accountants have had to tackle: Making Tax Digital 2, IR35 changes, post-Brexit sanctions and trading changes, and VAT reverse charges to name but a few.

Money laundering and fraud

One area the IFA consulted on was emerging threats to the sector, with money laundering running into the hundreds of billions of pounds every year.

According to The National Crime Agency (NCA), criminals’ strategies are constantly evolving, with The National Risk Assessment (NRA) of Money Laundering and Terrorist Financing warning that the risk that accountancy service providers could be used to facilitate money laundering is considered high.

The pandemic has only served to exacerbate the growing problem of fraud, and as it has shown no signs of abating throughout 2021, neither have the efforts of fraudsters in finding new ways of operating, with Furlough fraud an example of an ongoing risk factor.

The pandemic has led to an increase in the delivery of services via remote methods such as cloud accounting platforms, potentially placing practices at higher risk. There is also the expanding threat brought by Chinese underground banking, with the IFA urging accountants to regularly review their client and firm-wide risk assessments.

Climate change

As 2021’s door shuts and 2022’s opens, one thing now placed at the top of everyone’s agenda is tackling climate change, as businesses focus more on their impact on society and the environment, and the accountancy profession faces new demands to play its part. This also presents another opportunity for the sector, as accountants can be well-placed to help SMEs complete complex calculations and identify their business’s climate impact.

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