It’s no secret that 2018 has been an active year within the accounting and finance industries. With all of the rapid changes and trends evolving, there’s a convergence of different elements that deserve some dissection. For one, the cloud-based technology has been in the forefront of large public companies this year. Next, the regulatory environment became a topic of discussion because of the new accounting pronouncements and a renewed strategy at the Securities and Exchange Commission (SEC). Meanwhile, the market has experienced a high-level of confidence resulting in a number of mergers, acquisitions and divestitures.
How have these matters shaped the evolving accounting and finance functions?
Let us look at these elements more closely below.
Accounting & Finance Not Immune to Technological Advances
Believe it or not, recent technological advances have made a significant impact on accounting, auditing and finance functions. The real question is … how much? Those challenged with several factors when closing the books and reporting, often wish for a better technological infrastructure. Yet many make do with their existing, manual processes.
In the finance space, often times decentralized businesses are the most challenged with assessing operational and financial metrics at the product and plant levels, understandably.
In fact, I recently wrote about the importance of having consistent processes and data before relying on any technological innovations. Many large public companies struggle with keeping their data and processes clean and concise. To resolve such issues, it’s common for companies to migrate their Enterprise Resource Planning (ERP) systems to cloud-based platforms. This is only one of the many audit innovations and cybersecurity protocols that are in the forefront, but it remains extremely valuable.
(The New Normal) Regulatory environment, including New Accounting Pronouncements
There’s been no shortage of new accounting pronouncements to adopt in 2018. One of the most crucial adoptions fell under Accounting Standards Codification (ASC) 606 for Revenue Recognition. A majority of public companies have adopted the guidance, and now it’s time for the private companies to do the same. While the reporting requirements for private companies are minimal, the underlying effort behind updating processes and systems can still be significant and require additional resources. When we view the pronouncement and the underlying risk of revenue being overstated, the exposure can be high for any organization, regardless of size.
This brings me to the ASC 842, which is the new Lease Accounting pronouncement, expected to be adopted by most public companies starting in 2019.
Back in the day, professionals went about this process by compiling information on operating leases and payments, utilizing an Excel-based schedule from them and filling in the footnotes. Meanwhile, business unit representatives would leave the documents to collect dust until they’re needed again.
With this new pronouncement, those leases must be pulled out and dusted off! It’s a monumental task for some companies to compile the underlying information and convince the auditors of the lease population completion. On the other hand, there are many challenges with the leasing software available in the market. While some versions have great functionality for basic leases, they offer very little for unique situations, such as embedded leases. The adjustments needed to compensate for these challenges have caused companies to spend additional time in the latter part of the year honing their lease management and even contract management processes.
Market Activity and Trends See Spikes
According to the Brilliant Q4 2018 Hiring Forecast, 48 percent of businesses have reported open accounting and finance opportunities in the greater Chicago and south Florida markets, which is an 11 percent increase from last quarter. Needless to say, the current job market is hot!
But what causes this booming market? For starters, the recent Tax Act and regulatory changes have caused companies to make more investments, such as acquisitions and divestitures. On top of this, the technology and regulatory changes previously mentioned have also made a huge impact. At large companies, for example, SAP and Oracle cloud based platforms have taken hold in accounting and finance functions. The cloud-exclusive ERP platforms, such as Workday have also seen a significant growth. When combined with changes in accounting pronouncements, this activity has caused the labor market in accounting and finance to tighten significantly. Hiring managers can no longer afford long gaps between screening, interviewing and hiring.
Future Outlook of Hiring
Overall, we know that the price of labor has inevitably gone up, as the market has tightened. In Q1 2019, it has been forecasted that high performers will choose to be stationary in their positions, so they do not “burn a bridge” during busy season or miss out on their expected bonuses. As hiring managers compete with others for the few available candidates, they will need to move even more swiftly through human resource barriers to onboard candidates quickly. Whether it’s confirming approvals early or reducing the time in between interviews and feedback, it’s important to strive for overall effectiveness.
On the other hand, it’s also important for candidates to be as transparent as possible with recruiters or hiring managers. If they fail to disclose that they have opportunities pending, there will inevitably be confusion which can impair a candidate’s marketability, in and outside of that given opportunity. Industry hiring managers may know each other and “back-door references” are still quite common. I look forward to monitoring these trends closely in the upcoming year.
What are your thoughts on all of the occurrences that affected the accounting and finance professions this past year? Comment below and let us know.