Kimberley N. Ellison-Taylor, chairman of the AICPA, recently noted that technology tops her list of the most important trends shaping 2017 because it will drive so many of the profession’s opportunities and challenges in the year ahead. But how are accountants supposed to keep up with all of the technological trends?

Many accountants could make a full-time job out of simply trying to understand the various types of technology that can make their personal lives easier and their practices more profitable and secure. However, three technology trends are of particular interest to public accountants because of their potential to transform major aspects of the profession. These three trends are the progress of blockchain technology, the continued shift to the cloud, and advances in automation. Below are brief descriptions of each trend.

Progress of Blockchain Technology

Some industry experts believe that blockchain technology can be used to revolutionize accounting in several areas, but the term and some of its descriptions have left many people confused. One of the best explanations of what blockchain technology is comes from a startup that is developing blockchain technology for financial transactions. In an interview with The Wall Street Journal, Digital Asset Holdings CEO Blythe Masters described blockchain simply as a form of database architecture:

“You all know what databases are, you use them in your different businesses extensively. The thing about databases is they’re siloed and they’re generally centralized, and they’re owned and managed by someone who has unilateral editorial rights.

“So when multiple parties to a common transaction interact, they are inclined to keep their own separate records of their respective piece of a joint transaction, and that leads to tremendous inefficiencies. An enormous amount of time, particularly but not limited to financial services, is spent reconciling the differences between records kept in distinct databases that ultimately refer to the same transaction between two parties.

“Blockchain technology, or distributed ledger technology, is just a way of using the modern sciences of encryption to enable entities to share a common infrastructure for database retention.”

In other words, instead of companies keeping and then reconciling records of the same transaction in their separate, privately managed databases, or ledgers, both sides of the transaction are recorded simultaneously in a shared ledger.

Some in the accounting profession believe blockchain technology is currently at the height of the “hype cycle.” Though enthusiasm about this technology is high, experts do foresee several practical potential uses of blockchain technology in the profession. For example, this technology could help create completely traceable audit trails or ultimately automate the entire audit process. Other blockchain potential uses outlined have included authentication of transactions, tracking ownership of assets, and development of “smart contracts,” or computer programs that could pay an invoice after confirming that delivered goods have been received as promised and confirming that sufficient funds are available for payment.

Continued Shift to Cloud Computing

Erik Asgeirsson, president and CEO of CPA.com, has noted that the shift to cloud computing will continue to be among the important tech trends for accountants to watch. “We’re seeing broad pickup in cloud services and other emerging technologies,” Asgeirsson said in a recent news release describing results from a recent survey by CPA.com and the AICPA’s Private Companies Practice Section. “The next wave that leads to greater productivity and capabilities for advanced firms is fuller integration of these technologies and the elimination of bottlenecks in work processes.”

The 2016 National Management of an Accounting Practice survey found that the use of cloud services by CPA firms has grown since 2014, with 56 percent of all firms surveyed saying they use cloud-based software, up from 48 percent in 2014 and 29 percent in 2012. Asgeirsson noted that cloud computing has helped turn client accounting services into a high-margin, high-growth line of business for many firms. However, other research on cloud computing has identified the technology as even more pervasive across all industries. Some 90 percent of respondents in the Future of the Cloud Computing Survey reported they use the cloud in some way. The survey also found that software-as-a-service (SaaS) is the most popular cloud technology, with 7 in 10 companies indicating they use it in some way.

Cloud computing has implications for accounting firm growth. Research by Xero recently found that accounting and bookkeeping firms that are “all in” with the cloud (i.e., with the highest concentration of clients using cloud accounting software) have higher growth rates than firms that are not “all in.” Given that cloud computing makes it easier for staff to work from anywhere, it can also impact an accounting firms’ ability to recruit and retain staff. Jeff Phillips, CEO of Accountingfly, an online career center for accountants, recently told Accounting Today that job opportunities listed as “remote” see seven times more applicants than traditional in-house CPA positions.

Advances in Automation

While artificial intelligence and data analytics may provide huge opportunities for audit, tax and client accounting services in the future, a prerequisite to widespread use will be the continued automation of data inputs, according to Asgeirsson. In auditing, for example, there’s a lot of inefficiency in gathering the audit evidence. However, automating this process can generate complete data sets that analytics can be run on and ultimately, artificial intelligence can be applied to. Similarly, automating more of what is put into client accounting systems (such as expense reports), can pave the way for use of more sophisticated technologies for analysis.

For example, Sageworks’ Electronic Tax Return Reader allows accountants to quickly import business information, financials and real estate data from tax returns produced directly from a tax package. Thought leaders such as McKinsey & Co. expect certain activities that commonly occur in accounting firms, including data collection and data processing, will increasingly become automated. The firm estimates about 60 percent of all occupations could have 30 percent or more of their basic activities automated. As automation replaces these repetitive or routine tasks, employees will be able to spend more time on tasks that utilize abstract skills such as problem-solving, creativity and relationship-based persuasion.

For example, accountants using some software solutions can automatically import business information, financials and real estate data from tax returns produced by a tax package and then analyze the data. The accountant can then move on quickly to offering advice related to the findings.

Once a year, the AICPA and CPA.com jointly host an event called the Executive Roundtable. The invitation-only event occurs at the AICPA offices in New York City and, for two days, attendees enjoy a deep dose of accounting technology while they discuss innovation and changes that are facing the accounting profession.

Traditionally, 40 technology vendors attend, and each gets to make a presentation to the group discussing their product and services, and their vision for the future of accounting technology. Other attendees include consultants to the accounting profession, accountants in firms, members of accounting associations, members of the accounting press, and members of the AICPA and CPA.com.

One of the highlights of the event is a briefing by Barry Melancon, president and CEO of the AICPA. This year, Melancon shared insights on how the recent election results might affect the accounting profession and other predictions for the future of the profession.

“We really are in the change management business – change management for the profession,” Melancon stated. “We won’t recognize the vast majority of CPA firms and what they’re doing in five to 10 years.”

Change might be on the horizon, but traditionally accountants have a hard time changing themselves – not for lack of desire but their detail-oriented minds require lots of i-dotting and t-crossing before they move forward with any change. “We talk about disruption – but we all know the hardest thing to do is disrupt yourself,” said Melancon.

The AICPA leader discussed potential change in the form of workplace demographics (four generations in the workforce simultaneously!), cybersecurity (yes, companies should expect to be audited for their compliance in this area), and blockchain (nearly all major banks are already on board, studying and starting blockchain projects).

Melancon also discussed the recent presidential election and its potential impact on the accounting profession, from the way we communicate with our clients, to the expectation of tax reform and trade tariffs, to the potential for changing audit procedures. The actual election results formed the basis for a brief discussion on understanding our clients and business associates. “What many heard was that the intelligent people of this country didn’t vote for [President Donald] Trump. That is fake news and is not supported in the facts. Many people who were well meaning were making choices of a system that didn’t give us the best two possible choices. From a land mass perspective, the country overwhelmingly voted for Trump, or for change.”

Now that a new Congress is in session, speculation is that major tax reform is on the near horizon and that it will be significant. “You’re going to see 1986-level tax reform,” suggested Melancon, but he warned that we shouldn’t expect anything like simplification.

In particular, Melancon indicated that current discussions on Capitol Hill include not just changes in taxation based on where products are produced and sold, but also changes in accounting procedures. Imagine the tax and financial reporting implications of not being able to take a deduction for the cost of part of your product if it is produced in another country, and that’s just one example. To paraphrase Bette Davis, “Fasten your seatbelts, accountants, it’s going to be a bumpy ride.”

The number of changes facing the accounting profession will leave most practices radically altered in the near future, according to Barry Melancon, the president and CEO of the American Institute of CPAs.

Speaking at a gathering of technology vendors hosted by CPA.com and the institute, Melancon told attendees, “We are in a change management profession. The world requires changes in a quicker time frame than ever before.”

All those changes will have their affect: “We won’t recognize the vast majority of CPA firms in five or 10 years,” he predicted. “If all other businesses are going through major changes, who are we to think CPA firms won’t have to as well?”

Besides demographic, workforce-related and cultural changes that will reshape the profession, he cited developments like the cloud, blockchain technology, the move to integrated reporting, and cyber-security issues as likely to have a major impact – both for good and ill.

“Accountants work frequently in the ‘verification’ business – audit and attest and so on -- and blockchain is all about verification,” he explained, noting that 80 percent of banks plan to start blockchain projects this year.

In the near term, accountants should expect major disruptions in a core area, he warned: “Clearly audit is going to change dramatically -- it already is changing.”

While all these changes may sound scary, most come with complementary opportunities for forward-thinking professionals. “Ultimately, CPAs will be attesting to companies’ compliance with cyber-security standards,” Melancon said, while firms that explore blockchain early will be able to offer related services to clients.

With those possibilities available in the future – and developments like a recent uptick in the number of first-time takers of the CPA Exam – Melancon remains upbeat about the profession’s future, noting, “CPA firms remain the most profitable small businesses in America.”

Embracing tech

Speaking at the same Executive Roundtable, CPA.com president and CEO Erik Asgeirsson encouraged accountants to dive deep into technology and embrace its potential.

“You can try to compete with technology, to circle the wagons,” he said, “or you can ask how it will help you deliver higher value.”

He cited the enormous recent above-trend growth in technology-enabled client advisory services as a great example of the kind of higher-end offerings accountants can deliver. “CPAs should not be worried about H&R Block or TurboTax,” he warned, urging them to move up the value chain. “That’s not where you clients are.”

“The move to cloud has set the profession up to leverage even bigger changes from machine learning, artificial intelligence and other tools,” he added, noting that the profession spends $3-5 billion a year on technology.

Client accounting services (CAS) is becoming an important revenue category for public accounting firms of all sizes, with larger firms seeing it gain a significant slice of their revenue pie during the past two years, according to a survey from the AICPA Private Companies Practice Section (PCPS) and CPA.com, the Institute's marketing and technology subsidiary.

The percentage of net client fees provided by CAS, which includes outsourced finance and accounting services and other back-office support for clients, more than doubled for firms in the largest revenue segment tracked by the 2016 National Management of an Accounting Practice (MAP) Survey, initial results of which were released earlier this fall and showed top-line revenue growth among firms of all sizes.

Among firms with revenue of at least $10 million that offer virtual CFO and other client accounting services, CAS accounted for 9% of net client fees, up from 3.9% in the 2014 MAP survey. The CAS category also produced double-digit percentage gains in the next two largest MAP segments—firms with annual revenue of $5 million to $10 million and those with annual revenue of $1.5 million to $5 million.

"It's safe to say that nearly 10% of revenues in the profession are focused on client accounting," said Mark Koziel, CPA, CGMA, the AICPA's executive vice president—Firm Services, who discussed the survey results at the 2016 Digital CPA Conference in Las Vegas. "And depending on the size of the firm, it may be more or slightly less, but overall it's a strong category on its own. Tax and audit continue to be the number one and number two revenue categories, but client accounting demonstrates growing significance to the profession."

Among firms that offer CAS, the percentage that the category contributes to the top line ranged from 20% for the smallest firms (those with revenue of less than $200,000) to 8.5% for firms in the second-largest revenue segment.