CHANGING GEARS TOMEET THE FUTUREMeasuring Technology Adoption in theAccountancy Profession

Taking Stock of the RaceIntroduction

On the dashboard

Public Accounting Firms

• About1outof2firmsusepracticemanagementsystemfirm-wide.Thetop3servicesprovidedareStatutoryAudit,CompilationandTaxation–however,majoritydonotuseanysoftware/systemforanyoftheseservices.

• Billingandtimesheetarethemainfunctionsusingtechnology.

• Software/systems are similar toAccounting and FinanceDepartment in beingoff-the-shelf and accessible on-premise.Onaverage,firmshavebeenusingthemfor3.2years(excludingupgrades).Althoughthekeyreasonforpurchasingsoftwarewasfitforpurpose,anumberoffirmsarenotsatisfiedwithperformanceoftheircurrentsoftware.Generatingtimesavingisthemostimportantwhenusingasoftware/systemwithanaverageof22%annualimprovementseen.

• Trainingiskeyandthemosteffectiveactiontakenbyfirmstonurturecompetencyinusingsoftware/systems.Akeychallengewhenusingthemisignoranceoftheirfullfeatures.Whilecostsseemsbekeyreasonfornotusingsoftware/systemswithinfirmsacrossmajorityoffunctions,lackofsuitablechoiceiswhytheyarenotusedforliquidation&receivershipmanagementandrestructuring,valuation&forensic.Keymotivationforfutureadoptionisfitforpurpose.

Accounting and Finance Departments

• 4outof5membersuseatleast1technology/softwarefordailyoperations,84%ofthemforprocessingtransactions.1outof3donotuseanysoftware/systemforcomplianceandcontrolandplanningandanalysis,possiblyduetogreaterneedforhumaninterpretation.

• Most software are custom-developedandonly accessibleon-premisepossiblydue to theamountof sensitive informationstored.Generatingtimesavingismostimportanttomembers,withatleast15%ofannualimprovementseen.Averagelengthofuseis6.2years(excludingupgrades)andkeyreasonsforselectionareeaseofuseandfitforpurpose.Software/systemsarenotchangedfrequentlyunlessrequiredbyacompany’sheadquartersasitinvolvesasubstantialamountoftimeandmoney.

• Trainingiskeyandthemosteffectiveactiontakenbycompaniestonurturecompetencyinusingtheirsoftware/system.Amajorchallengecompaniesfaceisignoranceofthefullfeaturesofasoftware,resultinginunderutilisationandpoornavigation.

• Majorityof respondents (86%)areawareofgovernment schemes toencourage technologyadoption,mainly IRASPIC.67%oftheseusetheIRASPICscheme,while30%donotuseany.Respondentsfeltthatfundingquantumisthekeyareatoimproveon.

• Costsappeartobekeyreasonforcompaniesnotadoptingtheuseofsoftware/systemwithinacrossthe3functions.Lackofmanagementsupportandresourcecommitmentseemtoalsoplayastrongrole.Keymotivationforfutureadoptionisbetterpricingandfitforpurpose.

Highlights and Snapshots

Shift in paradigmWiththeemergenceofnewtechnologiesandrisingcompetition,regulationsandclientexpectations,theaccountancylandscape is rapidlyevolving.Thechallengeofachievingmorewith lessand the increasingcomplexityoffinancerolescallforaparadigmshiftawayfromtheprofession’scurrentnumber-crunchingnormandmovetowardsamorestrategicandanalyticalrole.Hence,itiscrucialfororganisationstostartembracingdigitaltransformationtoimproveefficiency,staycompetitiveandsustaingrowth.

Current SituationCurrentstatisticsdemonstratethatasasector,accountancystilllagsbehindinharnessingtechnologyacrossalmostallofitsmajorfunctions.TheInstitute,asthenationalaccountancybody,withthesupportofSAGESingapore,launchedtheTechnologyAdoptionSurveyandcollecteddatafrom129respondentsfromtheaccountingandfinancefunctionsaswellaspublicaccountingfirms.FocusgroupswereorganisedinMayandJune2016tovalidatetheresults.Thisreport,whichhighlightsthekeyfindingsofthestudy,aimstonotonlyassessthecurrenttechnologyadoptionrate,butalsotheproductivitygainsthathavebeenbroughtabout inordertoencouragefirmstoadoptbestpracticesfrompeers.The Institute,throughourvarious initiatives,willsupportfirmsastheynavigatetheirwayonthe journeytowardshigherproductivity.

Taking Stock of the Race- Introduction

The State of the Race- Technology Adoption Rate of Accountancy Sector

Gaining Power- Productivity Gains from Adopting Technology

Putting on the Brakes- Reasons for Not Adopting Technology

Stepping on the Pedal- Awareness of Government Schemes

Who’s on the Grid- Respondents’ Profile

Visualising the Next Lap

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Of those that adopt technology,majoritypreferon-premisesoftware/systemsascomparedtocloud.Ithasbeen discovered that this is largelyduetoconfidentialityofthedatathatresidesinthesesoftware/systems.

Cloud Systems

Both PAF andA&F report clear andmeasureable productivity gains as a result of adopting technology,with thegenerationoftimesavingbeingthebiggestgainoverallforbothsegments.

Although67% of PAFinSingaporeadoptatleast1software/technologyintheirdailyoperations,mostofthis67%iscontributedby firms which have adopted practicemanagement systems. Judging from ourdata,onlyapproximately18% of PAFarecurrentlyusinganyformofauditsoftware.This also coincides with the results fromthe ISCA audit manual survey conductedin October 2016, which indicates about15% of PAFareusingauditsoftware.

Although transactionprocessing yields thehighestpercentageof timeandcostsavings,itdoesnotdemonstrateanydirectimpactontherevenueofacompany.In comparison, planning and analysis which include tasks like forecasting andbudgeting,havethehighest%increaseinrevenue.

Thisaffirmsthataccountantsshouldbedoingmorethanjustcrunchingnumbersviatransactionprocessing.Instead,theyshouldbeperforminghighervaluetaskslikeplanningandanalysisfortheircompany,whichwouldinturnleadtoahigherincreaseinrevenue.

Transaction Processing

Compliance and Control

Planning and Analysis

AverageImprovement

Time Saving 21.7% 16.1% 15.8% 17.9%

Cost Savings 14.7% 11.2% 10.6% 12.2%

Increased Revenue

5.1% 6.7% 8.1% 6.6%

Cloud On-premise

18% 12% 7%

22% 18% 12%

36% 64%

PublicAccountingFirms(PAF)

PublicAccountingFirms(PAF)

The State of the RaceTechnology Adoption Rate of Accountancy Sector

Public Accounting Firms (PAF)

Accounting & Finance Departments (A&F)

Gaining PowerProductivity Gains from Adopting Technology

TimeSavings CostSavings IncreasedRevenue

21.7%Greatesttimesavingsintransactionprocessing

14.7%Highestsavingsin

transactionprocessing

8.1%Greatestrevenueincreaseinplanningandanalysis

33% 67%

Other systems used by PAF include

AuditAnalytics

CorporateSecretary

Accounting&FinanceDepartments(A&F)

Accounting&FinanceDepartments(A&F)

Tax

TAX

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Currently,only67% of public and accounting firms (PAF) in Singapore adopt at least 1software/technology in their daily operations.This 67% is mostly contributed by usersof practice management systems, with45%of public accounting firms indicateduseof suchsystemsfirm-wide.On theotherhand, 81% of Accounting and Finance Departments (A&F)adoptatleast1software/technologyfortheirday-to-dayoperations.

67%PublicAccountingFirms(PAF)

1theirdaytodayoperations

45%practicemanagementsystems

technology/softwarefor

Technology Adoption Rate

81%Accounting&FinanceDepartments(A&F)

Public Accounting Firms (PAF)

Putting on the Brakes - Why?Reasons for Not Adopting Technology

Despitemanybenefitsof incorporating technology intodaily operations andprocesses toboostproductivity andrevenue,theadoptionrateintheaccountancysectorisstillslowtorise.

Herearethetop3reasonsforthelaginsoftware/systemsadoptionfortherespectivesegments:

Accounting & Finance Departments (A&F)

Lackofmanagementsupport

Financialcosts

Lackofknowledge

Public Accounting Firms (PAF)

Lackofknowledge

Financialcosts

Lackofsuitablesoftware

Stepping on the pedalAwareness of Government Schemes

Withsomuch for theaccountancy sector togain fromtechnologyadoption, ISCAhasbeenhelping to raise theawarenessofthevariousgovernmentschemesavailablehelpingfirmsdoso.

Current Awareness Level of Government Efforts to Help the Sector

0504

IRAS Productivity

and Innovation Credit (PIC)

SPRING Capability

Development Grant (CDG)

SPRING Innovation

and Capability Voucher (ICV)

IDA Enhanced

iSPRINT

IDA iSPRINT

Others

None

90% 50% 28% 42% 2%8%58%

IRAS Productivity

and Innovation Credit (PIC)

SPRING Capability

Development Grant (CDG)

SPRING Innovation

and Capability Voucher (ICV)

IDA Enhanced

iSPRINT

IDA iSPRINT

Others

None

22% 85% 18% 9% 7%2%0%

AWARENESS OF GOVERNMENT SCHEMES IN TECHNOLOGY ADOPTION

GOVERNMENT SCHEMES USED CURRENTLY

Possible Areas of Improvement to Encourage Higher Technology Adoption

Public Accounting Firms (PAF)

Accounting & Finance Departments (A&F)

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Accounting & Finance Departments (A&F)

71%

57%

55%

Funding quantum

Eligibility criteria

Ease of claiming process

76%

75%

65%

Funding quantum

Eligibility criteria

Ease of claiming process

IRAS Productivity

and Innovation Credit (PIC)

SPRING Capability

Development Grant (CDG)

SPRING Innovation and Capability Voucher (ICV)

IDA Enhanced

iSPRINT

IDA iSPRINT

None

84% 30% 29% 17% 9% 14% 67% 8% 10% 0% 0% 30%

IRAS Productivity

and Innovation Credit (PIC)

SPRING Capability

Development Grant (CDG)

SPRING Innovation and Capability Voucher (ICV)

IDA Enhanced

iSPRINT

IDA iSPRINT

None

AWARENESS OF GOVERNMENT SCHEMES IN TECHNOLOGY ADOPTION

GOVERNMENT SCHEMES USED CURRENTLY

Visualising the Next Lap

WHY? The rapid advancement of technology has brought about a shift in the current business environment, altering markets, value networks and clients’ expectations. These changes, albeit posing multiple challenges to the accountancy sector, also bring along many opportunities and possibilities. Hence, there is no doubt that technology would be at the heart of the accountancy sector in the near future.

WHAT? As highlighted in the ISCA-ICAEW June 2016 report, “Our Future Together”, digitalisation of accounting information in the last two decades has changed and improved how accountants work. The advancement of technology has freed accountants from the

drudgery of menial and mundane tasks, enabling them to perform more meaningful work such as analysing and advising enterprises on the financial implications and

impact of various business decisions. Technology is a major driver of change in business processes and models in today’s business world. Although we do not

anticipate robots fully replacing judgment in accountants in the next 5 to 10 years, the advent of machine learning and cognitive computing is slowly

pushing the realm of artificial intelligence into the accountancy world. Businesses should ride the digital wave to avoid being disrupted. Due to

improved data connectivity and access, technologies like blockchain, predictive analytics, cloud systems, drones, could eventually render

the roles of bookkeepers redundant, as accounting information can now be captured and authenticated via technology.

HOW? Although globalisation and technological changes will lead

to job disruption in various roles, it is also an opportunity for redevelopment of the accountancy sector, whereby

menial work can be replaced with higher value-added services. This would effectively help accountants move

up the value chain and motivate them to keep up with the technological race. Therefore, it is crucial

for the accountancy sector to adopt an open mind and learn to embrace technology, as it is

the future not only of the profession, but of all businesses.

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WHO’S ON THE GRIDRespondents’ Profile

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1-5

6%

6-10

7%

Morethan 500

7%

11-20

3%

21-30

10%

31-50

13%

51-100

16%

101-200

17%

201-500

1-5

36%13%

11-20

10%

21-30

1%

31-40

1%

41-50

24%

6-10

15%

Morethen 50

21%

FULL-TIME EMPLOYEESIN PAF

FULL-TIME EMPLOYEESIN A&F

1-5

23%

6-10

17%

11-20

20%

21-30

10%

31-50

17%

51-100

7%

201-500

1-5 6-10 11-20 21-30

31-50

51-100

101-200

6%

40% 19% 15% 10% 8% 3% 5%

IT TEAM STRUCTURE IN SINGAPORE

PAF A&F

42%Both 31%

In-houseIT team

27%Outsourced

IT team

10%Both

25%In-houseIT team

65%Outsourced

IT team

AUDIT STAFF IN SINGAPORE FULL-TIME EMPLOYEES IN

A&F IN SINGAPORE

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PAF A&F

PROPORTION OF REVENUE IN IT BUDGET

PAF A&F

ANNUAL TURNOVER

PROPORTION OF IT SPENDING - OPERATIONAL VS CAPITAL EXPENDITURE

PAF A&F

1%21-30%

9%Less than 1%

80%1-10%10%

11-20%

Average: 5.3%

10%11-20%

2%Less than 1%

88%1-10%

Average: 6.0%

23%>1-5

18%>5-10

35%>10-50

5%>50-100

5%>100-500

2%>500-1000

2%>1000-1500 4%

1 and below10%

1 and below

14%>10-50

7%>50-100

19%>100-500

13%>500-1000

6%>1000-1500

6%>1500-2000

21%>2000-3000

7%>1-5

3%>5-10

in SGD Hundred Thousand

1-10%

11-20%

21-30%

31-40%

41-50%

51-60%

61-70%

71-80%

81-90%

91-100%

50%48%

15%

13%

2%

0%

8%

3%

7%

2%

8%

5%

5%

10%

2%

5%

15%

2%

Average Operational Expenditure

22.5%

Average CapitalExpenditure

29.8%

1-10%

11-20%

21-30%

31-40%

41-50%

51-60%

61-70%

71-80%

81-90%

91-100%

43%37%

12%

11%

4%

20%

3%

3%

3%

10%

3%

3%

20%

3%

9%

7%7%

1%

1%

Average Operational Expenditure

31.6%

Average CapitalExpenditure

30.5%

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Audit Partners Non-Audit Partners

NUMBER OF PARTNERS (PAF)

Lessthan1

10%

1-10

85%

11-20

3%

Less than1

40%

1-10

58%

11-20

2%

41-50

2%

About ISCA

About SAGE

TheInstituteofSingaporeCharteredAccountants(ISCA)isthenationalaccountancybodyofSingapore.ISCA’svisionis tobeaglobally recognisedprofessionalaccountancybody,bringingvalue toourmembers, theprofessionandthewidercommunity.Thereareover30,000 ISCAmembersmakingtheir stride inbusinessesacross industries inSingaporeandaroundtheworld.

Establishedin1963,ISCAisanadvocateoftheinterestsoftheprofession.PossessingaGlobalMindset,withAsianInsights, ISCA leverages its regional expertise, knowledge, and networkswith diverse stakeholders to contributetowardsSingapore’stransformationintoaglobalaccountancyhub.

ISCA is theAdministratorof theSingaporeQPand theDesignatedEntity toconfer theCharteredAccountantofSingapore-CA(Singapore)-designation.

ISCAisanAssociateofCharteredAccountantsWorldwide–supporting,developingandpromotingover620,000CharteredAccountantsinmorethan200countriesaroundtheworld.

Formoreinformation,visitwww.isca.org.sg.

Sageisthemarketleaderforintegratedaccounting,payrollandpaymentsystems,supportingtheambitionoftheworld’s entrepreneurs. Sagebeganas a small business in theUK30 years agoandover13,000 colleaguesnowsupportmillionsofentrepreneursacross23countriesastheypowertheglobaleconomy.Wereinventandsimplifybusiness accounting through brilliant technology,workingwith a thriving community of entrepreneurs, businessowners,tradespeople,accountants,partnersanddevelopers.AndasaFTSE100business,weareactiveinsupportingourlocalcommunitiesandinvestinmakingarealdifferencethroughthephilanthropyoftheSageFoundation.

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Acknowledgements

ISCA Industry Support

MsFannKor–DeputyDirector,QualityAssurance&IndustrySupport

MsJoelleLoy–Manager,SMPDevelopment

MsSharonTanBaoru–Executive,SMPDevelopment

Sage Software Pte Ltd

MsSeeAiLing-MarketingDirector,Asia

MsReginaTan-MarketingExecutive

Taylor Nelson Singapore

MsAureliaLeopold-Director,FinanceandBanking

MsRuchikaTalwar-SeniorManager,QualitativeResearch,

MsNabilah-SeniorClientServiceExecutive,QuantitativeResearch

INSTITUTE OF SINGAPORE CHARTERED ACCOUNTANTS

60CecilStreet,ISCAHouseSingapore049709

Tel:+6567498060Fax:+6567498061Email:isca@isca.org.sg

www.isca.org.sg