Undoubtedly, technological evolutions are streamlining business practices. From automating marketing practices to creating a collaborative workplace – the wonders of technology are no surprise to anyone. However, with diverse models and global outreach, business infrastructure is becoming quite complicated, especially from a financial perspective. While some businesses are struggling to come out from the financial crisis brought by Covid-19, others have to cope with fluctuating demand.
Similarly, the increasing current account balance is hurting the balance of payments. As a result, businesses have to cough up money on import duties, tariffs, and quotas. In addition to exploring cost-cutting methods, companies have to invest in savvy tools to maintain strong financial standing. So, why not automate your accounts department? In 2021, entrepreneurs would witness an upsurge in accounting software, cloud-based technologies, digital banking, and much more.
Accounting Trends in 2021
Thus, it is time to leave old-school manual bookkeeping practices and welcome modern accounting protocols. It eliminates chances of miscalculations and human errors while letting you make adjustments in case of market fluctuations. However, if you are unaware of the latest evolutions in accountancy, have a look below. Here we are unfolding five upcoming accounting trends for 2021.
Rise of Accounting Software Solutions
Previously, the finance world was operating on international accounting standards (IAS) but not anymore. Now, companies have to comply with the International Financial Reporting Standards (IFRS) with evolving times. In addition to ensuring compliance, you can calculate tax returns, create financial statements, and even forecast financial models.
Moreover, these tools can also handle your billings and payments. You can create the customer’s receipt and supplier’s payment account to schedule timely payments, closing doors for cashflow problems. However, if you are not acquainted with the latest accountancy evolutions, opt for an online accounting masters to learn the ropes. It would familiarize you with business intelligence, automated accounting systems, and business law for accountants.
The emergence of Blockchain in Finance
Have you heard of blockchain technologies? With spiking banking regulations and cross-country laws, making payments has become troublesome for companies. As a result, organizations are turning to blockchain technologies. It uses a network of independent computers to share, record, and synchronize accounting transactions. It strings together a traceable and transparent chain of events into the database to ensure credibility.
Since there is no financial intermediary in the middle, you can deposit and receive money globally without additional charges. At the same time, you can use smart contracts to break down administrative barriers. Moreover, the accounting sector can track assets’ ownership, conduct in-depth audits, and improve historic event’s traceability. Believe it or not, but this cutting-edge technology holds the power to change the face of accountancy fundamentally.
Invest in Enterprise Risk Management (ERM)
One thing the pandemic has taught all entrepreneurs is that crisis can emerge from anywhere. Therefore, companies have to take a more proactive approach to manage risk, and here, ERM software can come in handy. It educates business owners about the risk organization is facing and offers ways to address them strategically. If there are frequent currency fluctuations in the economy, the software will alert you for substantial market risk. Similarly, if your company is heavily relying on credit sales, it would try to curb credit risk.
Furthermore, ERM will help you comply with regulatory, legal, and accounting reporting requirements. It develops a risk architecture, documents all risk management procedures and protocols to mitigate risk. It can also prepare a risk plan for natural disasters and economic uncertainties to keep the business procedures in-place. Thus, every company should have an ERM framework in 2021 to ensure business survival and success.
Cloud-Based Accounting Technologies
Unsurprisingly, storing confidential financial information has always been troublesome for companies. After all, you never know who barges into the ancient storage and steals sensitive data. Thus, instead of putting the company at the risk of data breaches, entrepreneurs turn to cloud-based accounting technologies. It uses encrypted servers to keep all confidential data safe and sound. Likewise, it offers multiple backup options to avoid data loss under any circumstances.
Moreover, you can also manage massive datasets to double down on comprehensive financial reporting and data analytics. These servers also enable data sharing, which means if an employee gets stuck somewhere, they can seek help from colleagues. Likewise, if they need additional data old records, everything will be a click away. Besides this, you can access your accounts and critical financial figures anytime, anywhere with cloud accounting.
Data Analytics
In this digital era, organizations are generating tons of data every minute. So, why not use this data to gain some financial insights? Data analytics can process and transform raw data into structured information, helping you identify trends in financial markets. You can look into operational inefficiencies, develop forecasted cashflows accurately, and track client’s progress. Suppose your client is on the verge of bankruptcy due to declining share prices. In that case, analytics will help file for provisions beforehand.
In addition to reducing the risk of losses, it helps with decision-making. Analytics can anticipate changing marketing conditions based on previous trends, allowing you to deal with uncertainties. Do you know how? As the third layer of Covid-19 has hit different countries, investment activities are likely to decrease since no one invests in a volatile market. Based on this information, analytical tools can unfold changes in interest rates, oil prices, risk on financial securities, etc.
Final Thoughts
Finance managers and accountants spent an entire year addressing financial challenges because of the global pandemic. Hopefully, things are likely to take a positive turn in 2021. Entrepreneurs would be executing automated accounting strategies to position their organization for profitability and growth. They are investing in systematized tools to navigate the climate and prepare for the potential financial crisis. After all, having up-to-date technologies and software ensure effective money management, business efficiency, and profitability.
