Technology-based solutions are changing the business sector quickly. However, CPA firms are experiencing the most significant changes as the current accounting environment evolves rapidly; whether it is technology-based, competition, cost-effective services, skilled professionals, changing laws, cyber security, or data privacy related changes.
Accounting firms must thoroughly prepare their clients’ tax returns while adhering to all applicable local laws and guidelines. Unfortunately, complying with tax laws and regulations is constantly changing, and finding qualified candidates becomes increasingly difficult for accounting professionals to stay on top as the best accounting service provider. Look at some of the current challenges accounting professionals face today.
10 Challenges CPAs and Accounting Firms Face during the Tax Season
Constantly Changing Tax Laws
The ever-changing tax regulations and compliance requirements provide the greatest difficulty for accounting businesses. Every year, tax and accounting rules become increasingly convoluted, making it harder for businesses to complete their work on time and accurately. If your company doesn’t follow the rules for reporting and compliance, it could face fines, penalties, and even more damage to its reputation.
Businesses can ensure they follow the ever-changing rules by using an automated tax processing and reporting solution. In addition, keep up-to-date on new tax laws and developments by reading industry publications, taking Continuing Professional Education (CPE) courses, and attending conferences and webinars.
Client Acquisition and Retention
For CPA firms in 2023, the most serious difficulties will be attracting and retaining clients for tax preparation services. As a result of the pandemic, several businesses were forced to lay off employees, reduce their operations, or go bankrupt. Now that company is growing again, it can be difficult to attract new customers while still satisfying existing ones.
New businesses only increase the level of competition already present. Accounting businesses can improve customer acquisition and retention with strategic advertising and website enhancement. They can also hold seminars offering advice on tax preparation and shift the focus of their content in that direction. Having cutting-edge equipment available is also helpful.
Cybersecurity and Data Management
In 2023, protecting the privacy of their client’s financial information will be the most pressing issue for CPA firms offering tax preparation services. All accounting services and client data are now digital and housed in the cloud, but accounting firms have maintained their work-from-home policy. As more and more people submit their tax returns, credit card information, and social security numbers online, CPAs have become a prime target for fraudsters.
Protect your clients by following industry standards. For example, if you want to ensure your business complies with privacy laws and that your software is secure, you should always use the most recent version.
Keeping up with Tax Policies
As the government improves tax regulations for the good of the people and tax preparation ratios continue to fluctuate, this is a reasonably frequent difficulty that CPA businesses must confront. To provide their customers with accurate tax returns, accountants must closely monitor the evolution of taxation rules. Accordingly, CPA firms should stay current on the latest changes in tax law, invest in software and resources to help with tax preparation and have a plan for dealing with audits.
However, it is difficult for accounting companies to keep up with the current tax developments and their other responsibilities. So again, outsourcing taxation services will be a perfect option for CPA firms since they have a staff of accountants that constantly watch the changing national and worldwide tax rules.
The Lack of Accounting Skills
Since there are more people who need good accountants than there are good accountants, there is a skills gap in the accounting field. This is especially valid in specialized areas like tax and auditing. In fact, 82.4% of hiring managers say it takes more work to find qualified accountants and financial workers. As the accounting industry grows, there needs to be more accountants who have the proper training. A skills shortage makes it hard for businesses of all sizes to find qualified people to fill open positions.
The issue’s primary causes are twofold. First off, the complexity of accounting and financial reporting obligations has dramatically increased in recent years. Because of this, performing the work has become more challenging for those who still need to gain a formal background in accounting. Second, there aren’t enough applicants with the required qualifications and expertise to fill the current demand.
Coping with Technology Efforts
Two-thirds of CPA tax preparation services are negatively affected by technological obstacles. It is highly challenging for CPAs to strike a balance between evolving technology and customer demands. Furthermore, technology is always becoming obsolete, making it extremely difficult for CPAs to find a solution to this issue. CPA businesses must keep up with evolving tax preparation technologies and teach their employees how to utilize the new tools.
Challenge of Different State Tax Rulers
Another challenge facing CPA firms is the increasing complexity of taxes. With 52 states, the USA is a fairly big country with various income and sales & use tax laws. Additionally, because the majority of businesses today engage in transactions involving multiple states, it is the obligation of accounting companies to adhere to local regulations before generating tax reports, which can be a challenging task.
Accounting firms find it extremely difficult to conduct tax preparation services when the client and the provider are from separate jurisdictions. With more people working from home and businesses operating online, the tax code has become more complicated. As a result, CPA firms will need to invest in software and resources to help them prepare taxes accurately and efficiently.
Pressure to Remain Cost-effective
Price reduction is one of the main issues CPA businesses encounter. It can be expensive to stay current with technology and challenging to maintain cost effectiveness while implementing new hardware and software. Offshore accounting services are the best solution for CPA firms to remain cost-effective.
Maintaining Accuracy and Quality
CPAs can maintain accuracy and quality by double-checking work, communicating with clients to ensure information is accurate, and being proactive about addressing any discovered errors. In addition, stay organized and efficient by investing in quality tax preparation software and utilizing project management tools to keep track of deadlines and client communications.
Protecting Client Data
Protect client data by investing in quality security measures, encrypting sensitive data, and establishing procedures for handling data breaches if they occur. Stay current with technology by investing in quality tax preparation software, automating tasks where possible, and utilizing online communication tools to stay in touch with clients.
Conclusion
Above listed issues faced by accounting firms can be resolved by outsourcing accounting services. Yes, CPA firms can minimize their staff’s workload or shortage during tax season, leverage the latest technology, and, most crucially, lower their overall business operational costs by outsourcing services. A single best solution that applies to all issues accounting professionals currently face.
Stacey Howard is a passionate blogger having 6 years of experience in accounting & bookkeeping. She has been working as an accountant in Cogneesol. Due to her passion, she has contributed significantly through her write-ups by sharing an informative article about multiple accounting industries.
