In 2020, accounting will be about much more than crunching the numbers. Here are the biggest accounting challenges today and how to solve them.
It’s been almost two years since the passage of the Tax Cuts and Jobs Act (TJCA), which the American Enterprise Institute has called “the most significant upheaval of our tax code in decades.”
Heading into 2020, the IRS is still working on implementing the tax code reform, and accountants and business leaders are still determining the impact of the TCJA and the best strategies to maximize its benefits.
But navigating the Tax Cuts and Jobs Act is far from the only trial you’ll face in 2020.
All businesses will face similar accounting challenges in the coming year, and if you mishandle any of these challenges—by, say, missing a deduction at tax time, leaving your data vulnerable to hackers, or failing to use the right accounting software—your business will lose money. And if your business is losing money, your business is headed for failure.
By educating yourself and doing some prep work, you can minimize the risk these challenges pose to your business and gain a competitive advantage.
The 4 biggest accounting challenges today
Here are the four biggest accounting challenges facing businesses today, paired with actions you can take to ensure the success of your business in 2020.
1. Tax Cuts and Jobs Act implementation continues
The Tax Cuts and Jobs Act is shaping up to be the granddaddy of tax reforms, affecting everything from meals and entertainment expenses to depreciation. Unless you’re really, really into this kind of stuff, I wouldn’t recommend attempting to read the entire, arcane, 186-page document (though it is publicly accessible).
Here are some of the biggest takeaways of the Tax Cuts and Jobs Act for businesses:
- Entertainment expenses (e.g., sporting events, concerts) are no longer deductible, though business-related meals are.
- Bonus depreciation allows businesses to deduct 100% of the depreciation on business assets such as vehicles, computers, and other equipment right away for the next three years (through 2022).
- Many more small businesses (those with $25 million or less in annual gross receipts instead of the previous threshold of $5 million or less) are eligible to use the cash method of accounting, which is often simpler and cheaper than accrual accounting.
THE SOLUTION: Make sure you’re keeping your accounting software up to date every month so it can do the heavy lifting for you when it comes to new TCJA rates and deductions.
Read up on the Tax Cuts and Jobs Act and think of ways that your business can take advantage, such as cutting down on entertainment expenses, investing in new business equipment before the end of 2022, and offering paid family and medical leave to your employees.
Also—while it’s not directly related to the TCJA—don’t forget to factor virtual currencies into your tax preparation planning if your business or clients use them. As the IRS writes, “Virtual currency transactions are taxable by law just like transactions in any other property.”
2. Automation and AI are taking over more traditional accounting duties
Fear not, robots aren’t coming to take your job. But AI is becoming more and more capable of handling complex accounting duties such as collecting transactions and compiling them into financial statements and tax returns.
In fact, Gartner estimates that by implementing robotic process automation, an accounting team of 40 could save up to 25,000 hours of avoidable rework per year, freeing up time for higher value work such as analysis and forecasting while increasing engagement and reducing staff turnover.
On one hand, this is good news: Automation can take tedious work off your hefty to-do list. On the other hand, you need to know if your job is headed the way of the telephone switchboard operator.
THE SOLUTION: Consider automation taking over repeatable tasks (e.g., payroll, tax form preparation) as an opportunity for growth rather than a challenge.
Humans will still need to double-check the work done by automation, and the best accounting professionals will make themselves invaluable by evolving into more of an advisory role, helping their businesses properly implement new accounting automation technology as it becomes more capable and more complex.
Accounting automation is here to help you do your job more efficiently. Think about all the ways it can save you time so you can focus instead on non-repetitive, strategic tasks such as financial planning and analysis, or financial risk management.
3. Accountants need to diversify their skills
Yes, technology is reducing the need for traditional, rules-based accounting skills and increasing demand for financial analysis and strategy. But you can’t just roll out of bed one day and start doling out financial advice to your clients.
Unless you studied financial forecasting and risk analysis in college, you’re going to need to leverage some powerful analytics tools to help you provide useful information.
THE SOLUTION: Become as familiar as possible with the advanced features—like forecasting and analytics—offered by your accounting software so you’re better equipped to interpret and translate the increasingly deep data it provides into actionable advice.
To that end, here’s a guide from Accountex on the new QuickBooks features for 2020.
AccountingWEB suggests that accountants can get started on providing more strategic advice to their clients by simply conducting a survey of where their customers are struggling and what their business goals are, and then digging into the numbers to find insights on how they can get there.
4. Cybersecurity is becoming a bigger priority
Gartner estimates that information security spending will exceed $124 billion worldwide in 2019.
Accounting information (e.g., credit card information, bank account numbers, passwords) is an especially hot target for hackers because it can be high-value.
As a business leader and/or accounting professional, your responsibility to protect your data goes well beyond the walls of your own company’s data; it includes the data for all contacts in your system, including clients, employees, and service providers.
THE SOLUTION: Sage recommends that accounting professionals abide by the following guidelines to keep data as secure as possible:
- Always update your accounting software as soon as you get a notification to do so (these updates typically patch security vulnerabilities in addition to adding features).
- Restrict user access for specific data and systems to only those who are authorized.
- Remove data you no longer need (such as a tax return from five years ago or the financial information of a client you no longer work with).
- Move everything to the cloud. It may seem counterintuitive, but according to Gartner, the cloud is already significantly more secure than traditional data centers.
What are the biggest challenges you’ve faced as an accounting professional?
Heading into 2020, AI and cybersecurity will be on the minds of accounting professionals, but old challenges like long hours and constantly evolving tax laws aren’t going away, either.
Preparedness is key. If you know what you’re up against before it becomes an issue, you’ll have a head start on responding when it happens.
If you’ve faced these or other challenges, how have you managed them? Connect with me on Twitter @AndrewJosConrad so we can work on solutions together.
Capterra has a plethora of accounting and finance resources for business leaders, covering everything from budgeting to fraud prevention on our blog.
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