It was only three years ago that Linkers CPA would arrange physical copies of each invoice to be painstakingly typed out, addressed and mailed to each of their clients. It was inefficient and used up time that could have been spent on other tasks, recalls Rex Leung FCPA (practising), Partner at the firm.
But ever since switching to a cloud platform to manage invoices, balance sheets and income statements, Leung and his firm’s staff have never looked back. “A lot of routine, clerical work has now been digitalized. This has helped to save so much time,” he says.
Of course, the changes are not unique to Leung’s practice or even just accounting firms. This report looks at how shifts to cloud services, remote working, outsourcing staff, expertise in data analytics and environmental, social and governance (ESG), and a greater focus on advisory services, have grown in importance over recent years – driven by the pandemic and ever-changing technology – and how they are expected to further shape the profession both in practice and in business this year and beyond.
Working in the cloud
In Hong Kong, 82 percent of businesses intend to keep long-term remote working options in place, according to a study conducted by Censuswide, an independent research agency, which surveyed 1,055 business decision-makers. The study also found that cloud solutions have made it possible for businesses to continue remote work, with 76 percent of businesses noting that they have sped up plans to move all data to a cloud-based model.
The switch to cloud accounting solutions, Leung says, has not only increased productivity, but made it possible for staff to continue working remotely yet efficiently. The general ease of use and convenience of cloud platforms has also made clients more receptive towards adoption, he adds. “Since more tasks are done via cloud platforms now, our clients’ administrative staff can easily scan receipts to the cloud, for example, for us to perform bank reconciliations. This bank data is automatically synchronized to the cloud,” he says.
Leung notes that the team used to visit their clients’ office and using software such as Microsoft Excel or other standalone software to finish off bookkeeping or month-end closing or vouching tasks. “Vouching, management accounts, income statements and balance sheets are now automatically updated in real-time,” he says, adding that the firm also uses DocuSign, a programme that allows organizations to manage electronic agreements and sign electronically on different devices. “Our staff have been very efficient in getting this work done for our clients, particularly for those not based in Hong Kong.”
Small and medium practices (SMPs) should make use of digital solutions not just for clients but also to attract employees. “There are now fewer accounting graduates entering the market and the profession,” Leung says. “So we have to think of relatively modern approaches to performing audits, or think out of the box to work smart in terms of running our practice.”
In addition to cloud accounting, companies have also increased their reliance on other cloud services to stay connected during the pandemic. Stephen Lo FCPA, Chief Financial Officer of Prenetics, a genetics and diagnostic health testing company, says shifting to cloud solutions has helped the company to continue working remotely and also expand.
“The growth of the company has been quite substantial – we’ve grown from 100 employees from the start of the pandemic to around 800 people today,” he says, noting that the company uses Amazon Web Services, a subsidiary of Amazon.com, Inc, which provides cloud computing platforms and application programming interfaces. “We use the cloud for back-end solutions. It provides us with scalability, data security, comfort, and ease of access,” Lo says. “We wouldn’t have been able to scale so quickly if not for these cloud solutions.”
“We have to think of relatively modern approaches to performing audits, or think out of the box to work smart in terms of running our practice.”
A demand for flexible and remote work is set to continue for both companies and firms this year. In October 2021, PwC in the United States announced that 40,000 professionals would be able to work virtually outside of the office. Up until the policy shift, the firm had planned to offer a hybrid work model, in which staff would have to work in the office a few days a week.
Because of the lack of personal touch that comes with remote work, companies should find ways to reinforce their corporate mission to employees and also make an effort to bond, even if this means catching up over a video call, Lo notes. “Employees also value working in a company with a great culture and with a strong team. It’s not just about the work itself or being able to work remotely, but whether there are lots of opportunities for growth within the company, and whether the company is doing something meaningful,” he says. “If the work being done at the company doesn’t echo its vision, it’s not going to work for them.” Staff who follow a hybrid work arrangement, Lo adds, should also schedule time to bond with colleagues at work or after work. “It can be hard to achieve this human touch through remote work,” he says. “I enjoy human interaction, and it’s important to have colleagues you can eat with or have drinks with after work.”
Kane Wu CPA, Co-founder of ThinkCol, an artificial intelligence (AI) consultancy, agrees that technology has allowed for business continuity and that remote work will continue to be a trend long after the pandemic subsides. “Through technology, we’ve been able to continue working with each other, despite not being able to meet in person,” he says. “Because of COVID, people have realized that with technology, it’s possible to get things done, especially those who work in professional services or accounting firms. As long as people are able to check off their checklists, I don’t see why we can’t work from home.”
“Through technology, we’ve been able to continue working with each other, despite not being able to meet in person.”
Seeking talent from afar
With companies around the world having seen that remote work really works, many are also now outsourcing staff or functions of the company or firm. Outsourcing staff, notes Sabrina Khan CPA, Chief Financial Officer of Aptorum Group Limited, a pharmaceutical company, is one way for companies to save on cost and resources. “We partially outsource functions in research and development to contract research organizations (CROs),” she says. “We outsource on a project-by-project basis. So after one project, we can hire another team or another CRO to work for us. So we don’t have to maintain this team full-time ourselves and don’t have to shoulder the costs long-term.”
She notes the company also outsourced an accounting team in the United Kingdom to help with tax matters. “We needed help understanding the U.K. tax system since we weren’t too familiar with it, so we outsourced our U.K. accounting function. This helped us to meet tax deadlines and meet regulatory requirements.”
Leung of Linkers CPA believes outsourcing staff will continue being a trend in the years to come. He notes that he has seen an uptick in their clients, comprised of small- and medium-sized listed companies and multinational corporations, looking to outsource their accounting, compliance and internal control functions to his firm. “Some clients have told us that it’s been difficult to hire or retain accountants,” he says, noting that reasons range from a lack of flexibility to wanting to cut costs. “This created opportunities for us to promote our outsourcing services, such as in finance and human resources. Clients view it as a good alternative when it comes to keeping the ball rolling and saving costs at the same time.”
To help his clients gain as much value as possible, Leung often suggests outsourcing the entire finance function to the firm. “We would propose to clients: if they choose to outsource the finance function, we’ll pull together a full team to serve them for the same price of hiring one full-time accountant,” he explains. “The CFO would help two to four hours a month; the financial controller would put in five to 10 hours; the finance manager would do 16 to 20 hours; and the accountant would work 40 hours, for example. This enables us to provide the highest quality of service at the best price for them. This kind of finance outsourcing is gaining popularity or is sought after by the market or clients, who have been very open to this idea.”
Providing insights from data
Wu says accountants who have skills in AI are also in increasingly great demand. “Both AI and machine learning will play a bigger role in accounting and auditing, for example, in anti-money laundering and detecting anomalies in a system. It will allow accountants to analyse transactions to predict the cash flow of a company to see how well or poorly they will perform in the future,” he elaborates. “We can also create models to see how certain crises will affect the company.”
Skills in data analytics will also help accountants to identify fraud within a company’s transactions. “With transaction data, you can use big data to analyse the amount of money paid as well as the names of people and organizations to see if there are any patterns or anomalies,” says Wu, adding that by using text data, one can create a visualization or map to better understand how companies have been using money to verify any claims.
With ESG reporting on the rise locally and globally, Wu says accountants with data analytics and AI expertise will be able to analyse ESG data. “We can use data analytics to visualize ESG data, see how well the company is doing, and compare their data with other companies,” he says.
Accountants will also be more relied on to guide companies towards meeting their sustainability goals. “A few years ago, listed companies were only meeting the minimum requirements as per the Listing Rules of the Hong Kong Exchanges and Clearing (HKEX) for their ESG reporting,” adds Leung, who says that the firm has been receiving more enquiries on ESG reporting since 2020, when the HKEX’s ESG reporting rules required listed companies to disclose significant climate-related issues that have impacted or are likely to impact the company.
Adding to advisory
Demand for ESG advisory will increase, Leung says, and notes that firms should start familiarizing themselves with the latest ESG reporting requirements. “The goal of achieving net zero by 2050 and meeting some interim targets by 2030 has created some awareness in the market,” he adds. “SMPs need to be aware of this and start preparing, especially if they advise listed companies.”
Lo of Prenetics agrees, pointing out that the reporting landscape for companies has transformed over the years. “In the past, a company’s worth was mainly measured by its financial statements – how much money they made, and what their expenses were. What people failed to consider was the ‘cost’ of their profit,” he explains. “And that cost was measured in monetary terms – expense items, depreciation, amortization – when there’d been a social and environmental cost all along.”
Demand for advisory, in general, has seen an increase over the past two years, adds Leung of Linkers CPA, with the trend likely to continue. “Because of this economic climate, a lot of our clients have been asking us to provide them with solutions,” he says, pointing out that the firm has been providing advisory for internal control, ESG reporting, and pre-initial public offering consulting.
“In the past, a company’s worth was mainly measured by its financial statements – how much money they made, and what their expenses were. What people failed to consider was the ‘cost’ of their profit.”
Getting in on the transactions
An ability to advise clients on cryptocurrency and monitor transactions taking place through a blockchain will also give accountants an edge. In September 2021, El Salvador became the first country to accept Bitcoin as legal tender, prompting businesses to accept the digital coins as payment wherever possible and millions of citizens to download the government’s new digital wallet app. The move, according to El Salvador’s law: a meaningful test for Bitcoin, a report by PwC issued in October 2021, is “the first domino to fall in broader global adoption.”
With global adoption of cryptocurrency increasing – over 880 percent in 2021 according to software company Chainalysis, Inc. – accountants have the opportunity to take advantage of a niche but growing market.
There is currently no specific accounting standard in relation to how cryptocurrency should be accounted for, leaving auditors to refer to applying existing standards. “Things aren’t so clear right now, and some people are very worried about it,” Khan of Aptorum says. “Accountants will need to be able to understand cryptocurrency and the accounting standards surrounding them, the rules and how they are created and regulated. This will provide more assurance to investors and greatly help the development of the industry as a whole.”
Expertise in cryptocurrency, blockchain and data analytics will indeed future-proof accountants, adds Wu. “More institutions are showing an interest in or getting into blockchain, so it’s important for accountants to understand how to analyse it,” he says. “A lot of people are now talking about on-chain analytics, which is data science and data analytics, but with blockchain. It’s one of the hottest fields right now.” Though on-chain analytics may seem complex at first, accountants can make use of its nature to look closely at transactions, notes Wu, who is starting a new on-chain analytics branch at his company to tap into rising demand from clients. “With blockchain, you can try to hide your money, but at the same time, there is transparency. All wallets are transparent; you can always see where money is going.”
Leung concurs, adding that his firm has been serving more clients who provide blockchain advisory or conduct transactions using cryptocurrency. “I suggest practitioners to familiarize themselves and do research on the matter, especially about its impact on audit,” he says.
One related area gaining interest among investors and clients, Leung adds, is non-fungible tokens (NFTs), a non-interchangeable unit of data stored on a blockchain that provides a public certificate of authenticity or proof of ownership of photos, videos, and audio recordings. “This ‘NFT wave’ is on its way,” he says. “By doing more research on new topics such as NFTs, practitioners will be able to seize opportunities and find new ways to help their clients.”
Lo adds that because the fundamental technology used to drive NFTs is blockchain, the market has grown rapidly in recent years. “By understanding these underlying trends and transformation surrounding blockchain and providing insight, accountants are able to steer organizations.”
“Accountants will need to be able to understand cryptocurrency and the accounting standards surrounding them, the rules and how they are created and regulated.”
Looking ahead, it is up to accountants to find ways to increase efficiency within their organizations, and help lead digital transformation. “It’s important that we continue growing with and working with our clients, especially in this current economic environment,” says Leung. “Knowing how to drive efficiency will be most important this year. Also, knowing how to retain talent. This is key to delivering services of a high quality to our clients.”
In order to maximize productivity and effectiveness, accountants must step away from traditional and manual methods, says Wu. “There is just more and more data to go through nowadays. The sizes are huge; there could be hundreds of gigabytes, and you can’t just analyse this amount of data using old methods. It’s important to understand data analytics, the tools available, and how to use them in business.”
Ultimately, accountants have to start viewing themselves as transformation leaders, highlights Lo. “Accountants need to ensure they are continuously transforming themselves, the team, and fundamentally, the organization. This is because transformation is difficult, and it will continue to remain a challenge, given the pace of change that’s happening,” he says.
Though it can be easy to get caught in a day-to-day work routine, Lo advises accountants to take a step back, and try to look at the bigger picture of their organization. “When I was a junior accountant, I was only focused on finishing my work as soon and as quickly as possible. But I later realized that it would’ve been more beneficial if I’d taken a step back and found ways to provide insight to my supervisors.”
This, he says, will be key for accountants to add value in whichever field they choose to specialize in. “I should’ve asked myself ‘what kind of insights can I get out of this?’ or ‘is this something I can automate?’ or ‘what tasks can I do differently in order to free up my time and spend time doing more analytical work to provide business insight?’ This is something that will become increasingly important, especially as the pace of digital disruption increases.”
In Hong Kong, 82 percent of businesses intend to keep long-term remote working options in place, according to a study conducted by Censuswide, an independent research agency, which surveyed 1,055 business decision-makers.