One of my favorite lists of depressing ideas came out of the New York Times back in 2011 – Top 10 Reasons Small Businesses Fail. The lessons haven’t changed much over time. I would quibble with the order just a bit, though. The author lists “Poor accounting” at number four, whereas I’d have put it second behind “The math just doesn’t work.”
If your accounting system isn’t up to snuff, you’re not going to make money. If you don’t understand your costs, how much your time is actually worth, and how you should best invest in your business, don’t expect to be in business five years from now.
Conversely, if you do understand the financial foundation of your business, you’re going to be leagues ahead of the competition. If you want to make the move to a better, stronger system in 2017, here are a few of the trends that you should be on the lookout for.
1. Cloud adoption will continue to rise
While we’re unlikely to hit the 90 percent cloud adoption rate that’s been predicted for the UK, the US is certainly going to see more small businesses in the cloud. If you’re just wading into the accounting software space or if you’re planning to make a change in 2017, you should take a close look at the pros and cons of cloud-based accounting.
I prefer the cloud, myself. You’ve got better access to your data – as does your accountant – the software requires less upkeep on your end, and it’s a very secure system. On the downside, it’s a recurring cost and there are companies that make extracting your data less than straightforward, which can impact switching costs.
More providers than ever have cloud offerings, so you should be able to find something that fits your needs. A few of the more popular accounting software options – FreshBooks, Wave, andXero, for instance – are cloud-only.
2. Accounting software will decentralize
We’re used to accounting software packages being all-in-one collections of financial management. You can bill, generate reports, manage inventory, and run payroll all under one roof. I typically think of this as the ERP model. It creates a nicely unified view of your business, but it can be unwieldy at the same time.
In 2017, more businesses are going to offer decentralized offerings. Zenefits has made this move in the HR space with its Z2 offering. The platform doesn’t solve all of your HR problems. Instead, it focuses on core hiring and management issues, then offers a bucket of integrations to manage the less pressing issues.
Zenefit’s director of channel sales, Matt Plank, said, “A great trend that we’re seeing in the accounting space is not only using cloud apps as a point solution to solve a very real need for a business, but also leveraging several cloud apps that actually speak to each other and share information.”
I think accounting providers are going to start seeing the value in doubling down on double-entry accounting, generating more revenue with the partnerships they create with those integrations. It’s a win for the software vendors and a win for business owners, who will just buy the parts they need.
3. Workflow automation will take center stage
The main focus of the last few years in accounting has been that shift to the cloud. All we talk about is how we’re finally going to get away from an installed-base and catch up with the rest of the software world in the cloud. I think that’s going to continue, but I also think businesses are going to spend more time finding better ways to work across teams.
Accounting has always been a bugbear – no one opens a law firm to balance the books. To make accounting more accessible, accounting software is focusing on workflow systems. Take a picture of your receipt, and the software automagically reads it, turns it into data, enters it into your books, and assigns it to the proper account.
I imagine that more behind-the-scenes magic is going to make an appearance this year,. I think the bigger players, especially, will start to integrate some of this workflow management into their systems in an attempt to keep up with the underdogs.
4. Accountants are going to become consultants
In addition to changes in your software, you’re also going to be seeing changes in the accountant you work with. Don’t be afeared.
The most customer-facing change will be the way they bill your small business. Whereas you historically pay an accountant $X per hour, new plans will bill you for a set job. This gives your accountant more flexibility with their own time, gives you certainty in pricing, and allows your accountant to add in extra services that actually add value to your business.
Instead of just tax preparation, you can get a financial outlook on your next year along with recommendations on how to lower your next tax bill. Instead of just balancing the books for the month, you’ll get cash flow projections and inventory recommendations.
Accountants are going to “transform from number crunchers to trusted advisors,” Plank says. The rise of those workflow and cloud-based apps “reduces the time spent entering data in various applications and provides data integrity due to minimized human interaction.” That ends up being time that your accountant can spend making your business stronger.
5. Accounting will fight against commoditization
This last point may mark the biggest change in how you make your next accounting software purchase. With the rise of automation and software-managed accounting, the field has started to look a little same-ish. Everyone is offering similar tools, with similar success rates, and uptimes.
Software breaking into apps, the change in billing, the push to the cloud, and all the rest of this is just a push toward differentiation. The problem with a heavy shift to the diverse is that it creates too many options to make sense of.
Luckily, you’ve got two great options. First, you can check out the Capterra accounting software directory, read reviews from verified users, and search based on the features you need. Second, you can talk to your accountant to get their recommendation.
Plank says, “[People] who have spent their entire careers in accounting are now extremely well-versed in software applications and can do the vendor vetting for you.”
Find a trusted source to separate the wheat from the chaff.
2017 and beyond
All of these trends are going to continue for the next few years. Things will shift in importance and new trends will be added, but this is the landscape for the foreseeable future. If you want to end up on top of the pile, you need to get a handle on your finances. This can be your year.
Looking for Accounting software? Check out Capterra's list of the best Accounting software solutions.