EXPLORING THE EVOLUTION OF THE ACCOUNTANT

Colin Timmis, General Country Manager and professional accountant, Xero South Africa

To mark International Accounting day this year (10th of November), we took a moment to reflect on the ways that the profession is changing and celebrate everything accountants have been doing to support small businesses this year.

For a long time, accountants were considered bean-counters, which is essential, but they’ve become much more than just number-crunchers. They’re essential business partners and will be vital in guiding small businesses through the challenges ahead.

Our State of Accounting Research found that 97% of accountants believe that they can support economic growth. And our State of Small Business research found that 28% of businesses want their accountants to act as a full-on business consultant. This is an increase from the previous year, when it was just 11%.

Technology has been one of the key factors enabling this shift, allowing accountants to step away from manual and repetitive tasks. Our research found that 87% of accounting firms use at least some cloud technology, and many others have turned to automation. 33% plan to invest in new technologies over the next year.

Montaque Swanepoel, the founder and CEO of CFO360, says that “cloud technology has given our clients and us an advantage during the sudden forced remote working around the world. Already having real-time access from anywhere to your finances has made recently forced adjustments easier. In 2020 we found ourselves helping more new businesses migrate to the cloud than before. Being in the cloud as a business is no longer optional.”

While this model has proved successful for early adopters like CFO360, many businesses are still struggling. According to our research two-thirds of accounting firms struggle to hire talent with the right technology skills for future growth. And 46% say new technology is too complicated to adopt and implement in their organisations.

Here is how we can – and must – support accountants so they can guide small businesses.

Cultivating the right skillset

Our research found that 35% of accountants reported that their firm seeks candidates with cloud skills, and this number is bound to have increased due to Covid-19 and remote working. Cloud competence is no longer a new skill, and businesses will increasingly be seeking out advisors with these skills.

To support this shift, the industry needs a strong pipeline of technologically skilled accountants. It’s encouraging to see education providers stepping up to ensure that graduates are equipped with up to date skills. At Xero, for instance, we’ve established a programme called Xero Learn to support education providers in getting young accountants up to speed with cloud tech, so that they can show up to their first day on the job feeling confident.

Cultivating the right skills in the next generation of accountants, as well as among current advisors, is critical. We can’t rely entirely on the next generation – firms need to be upskilling teams to close this gap now. It’s positive, therefore, to see that 76% of firms are investing in training staff in new skills.

As Sasha Sanders, founder of Conscious Company, which assists organisations with culture, communication and storytelling, puts it: “The concept of a learning or growth mindset – those who want to learn new things, are open to more information and enthusiastic about expanding their skills – as opposed to a fixed mindset, is something more and more organisations are talking about.

“So training and upskilling people – or enabling them to gain broader and deeper expertise – is essential. And it’s critical to retaining talent. Employees – especially younger ones – actively seek employers who put a focus on learning and development, so it will be key for attracting new talent too.”

Preparing the accountants of today

The evolution of accounting is already well underway. Our pre-COVID-19 research found that 54% of firms believed they would manage both finances and business advice in the near future. And 38% even reported that offering advice on growth would be their accountants’ primary responsibility, while just 8% thought they would remain focused entirely on the numbers.

As Montaque puts it, “we have realised as accountants, our roles have started to shift in the last couple of years. Although the need for tax compliance, bookkeeping, and accounting is still necessary and always will be, for the small business owner, the need for strong business partners and business advisory has grown. With the right technology and the right advice, many business owners have capitalised on growth opportunities or adjusted to weather the storm. With some industries thriving and others struggling, the business advisory role, supported by the right technology, has never been more important.”

There are plenty of resources out there to help enable this shift, as well as technology partners and constant efforts by software-makers to make their offerings easier to use and more powerful. For instance, current accounting apps already tie into bank feeds, automating financial data capture. So simply updating to the latest apps will already save accountants’ time.

Getting through the challenges ahead

Accountants have already played a massive role in supporting their small business clients as they’ve had to adapt to survive. They are the unsung heroes of our ongoing recovery, and that’s why it’s so important to recognise them. But the industry will need the right support to weather this storm. The technology community and accounting bodies must work together to create the right support network for accountants and small businesses alike.

 

Source: https://www.accountancysa.org.za/integrated-thinking-joining-forces/

 

Taxes will increase as government needs extra R5bn in 2021/22

The government is projecting tax increases of R5bn in the next financial year as decreasing tax revenue and increasing debt to fund high spending bite.

This will be the first of R40bn in tax increases government seeks over the next four years.

It is also warning that SA could default on its sovereign debt repayments if urgent spending cuts – including a drastic reduction in the public sector wage bill – are not implemented immediately.

In its review of the medium-term adjusted budget, the National Treasury said it was working to contain public spending which has increased by 4.1% annually over the past decade.

It is also trying to stabilise debt, now at just under R4-trillion and which is projected to reach R5.5-trillion in 2025/26.

The tax revenue shortfall is now R312bn, worse than was initially projected.

The government needs to borrow R774bn in 2020/21, which is R342bn more than it did in the previously financial year as Covid relief interventions pushed the budget deficit to 15.7% of GDP.

It is also looking at increasing taxes. “To assist with fiscal consolidation, government has projected tax increases of R5bn in 2021/22.”

The Treasury did not immediately go into detail as to which taxes are likely to increase.

Spending cuts of R300bn over the next three years have been identified, mainly through a reduction in the public sector wage bill, cutting unnecessary spending by departments and reducing bailouts to state owned entities.

The state wants to shift spending from consumption to investment to boost economic growth. It is reducing allocations to defence, state security and home affairs, decreasing transfers to provinces and municipalities, and increasing spending on economic development.

If it sticks to expenditure targets, borrowing requirements will decrease to R602bn in 2021/22, translating to a reduced budget deficit of 10.1%. It projects a further decrease in borrowings in 2023/24, which will bring the budget deficit to a more manageable 7.3% of GDP.

The government is targeting a budget surplus in 2025/26. If these savings are not achieved, SA could default on its sovereign debt obligations.

“Without implementation of the proposed fiscal consolidation plans and higher economic growth, the probability of a debt default will increase over time,” the Treasury cautioned.

The biggest risk to overall financial health is failure to contain the spiralling public sector wage bill. The government is fighting it out in court with public sector unions over its refusal to implement the final leg of a costly wage agreement signed in 2018.

The government has proposed moderate wage increases for the remainder of the wage agreement, and a three-year freeze in public sector salaries thereafter.

“Narrowing the deficit and improving the composition of spending requires reductions in the growth of the wage bill, which accounts for about one-third of the consolidated budget. Salaries for civil servants have grown by about 40% in real terms over the past decade,” the Treasury noted.

High debt service costs also remain a threat to growth, and the fastest growing item of state expenditure, consuming 21 cents of every rand government spends. If the fiscal situation does not improve, South Africa could default on its debt.

“Failure to address the deterioration in the fiscal position could lead to a sovereign debt default, which would result in a reversal of many gains of the democratic era.”

In the special adjustment budget in June, Mboweni warned that SA risked a fiscal and sovereign debt crisis similar to those faced by Zimbabwe, Argentina and Greece, if things continued in the same way.

Economic growth will contract by 7.8% in 2020 but will rebound with GDP growth 3.3% in 2021/22, the Treasury has forecast. The economy will further grow at an average of 2.1% in the three years that follow.

The government is pinning its hopes on a rapid implementation of the economic recovery plan whose main focus is expanding electricity generation, building infrastructure, allocating high-demand spectrum, supporting industrial growth and local manufacturing, and ramping up employment.

 

Source: https://www.timeslive.co.za/politics/2020-10-28-taxes-will-increase-as-government-needs-extra-r5bn-in-202122/#:~:text=Finance%20minister%20Tito%20Mboweni%20during,Town%2C%20on%20October%2028%202020