Digitization is as pervasive as anything else in the accounting realm. Gone is the time when technology was just a second thought, and accounting firms stayed glued to the conventional methods. With clients looking to boost their efficiency in terms of time and money, it is high time for the accounting industry to roll out the red carpet for tech-driven solutions.
And hence, enter finance and accounting tech start-ups.
Hot off the press, Docyte has raised $11.5 Mn in Series A funding for its AI-enabled accounting automation solution for small and medium-sized enterprises (SME).
Biller Genie, a cloud-driven accounts receivable automation start-up hailing from Miami, has closed a $3.5 Mn deal in a seed round.
Germany-based Vaayu has inked an $11.5 Mn seed funding round.
Bengaluru-headquartered Vyapar, a business accounting software, has fetched $30 Mn in a Series B round.
All these fundraisings happened during the first four months of 2022 alone. Clearly, these accounting tech start-ups see accounting, bookkeeping, and taxation as an untapped opportunity ripe for disruption. As such, they are forking out tons of money to bring tech-driven changes in these operations to automate them as much as possible.
So, does that mean that established accounting firms are likely to lose their thunder to these rookie accounting tech providers? Let’s check it out.
The Though Process
All accounting tech start-ups share similar elements, which significantly vary from several legacy accounting companies. For instance, they are considerably tech-enabled, offer scalable subscription pricing, and are hyper-process-centered.
Speaking in detail, these market newbies understand that accounting, bookkeeping, and taxation are a headache for small organizations. And accounting tech providers will move fast when they smell an underserved market out there.
While many accounting firms simply think about drafting financial statements or filing tax returns, these accounting tech start-ups focus on eliminating customers’ pain points. For instance, preparing a financial record does not require an accounting firm to be specifically tech-enabled, but providing smooth, automated services does.
These accounting tech start-ups recognize what truly itches businesses and go hard at solving those issues. But sadly, the accounting realm is not emulating the pattern, and therefore, companies showing hesitancy in embracing technologies will face a crippling blow going forward.
The Pricing Structure
Docyte’s basic plan starts at $299 a month for two users. Users can avail the Plus and Advanced plans at $499/month (5 user licenses) and $599/month (10 user licenses), respectively. Various accounting tech providers offer their services at prices in line with Docyte’s first three packages.
Competing at this price level and deriving a meaningful profit for many established accounting firms will be formidable. They definitely cannot compete with the basic or even the Plus package.
Accounting tech start-ups are developing the most automated yet the most comprehensive services available that will barely put a hole in customers’ pockets. Unfortunately, many legacy accounting firms are just not modeled for this sort of pricing structure. They are neither efficient nor have the necessary tech stack to automate and scale – a critical potential risk.
So, How Do Incumbents Compete with the New Players?
The answer is personalized service.
Accounting tech companies automate the entire experience and streamline operations at length. However, such transformation dilutes the human touch most clients expect to have with their accountants.
Hyper-personalized advisories can only stem from understanding clients, their behaviors, risk appetite, and goals. No one can automate this aspect. At least not in the near future.
By offering high-quality tailored services, traditional accountants will be delivering something their tech-driven counterparts cannot feasibly provide. And with the right tech suite, they can still offer their clients the much sought-after state-of-the-art experience.
Besides, super personalized offerings enable incumbents to go upstream, which is not the focused market of accounting tech start-ups, and ensure long-term client stickiness. As such, they do not have to lock horns with these tech providers when it comes to pricing.
It is not that new players cannot offer a truly personalized customer experience. They do. But that is not on their priority list.
Is Personalized Service the only Sure-fire Way?
Well, no. Accounting firms should find other ways to cut through the noise and avoid a head-to-head contest with these tech providers.
The gist of this piece is to underscore tectonic changes in finance and accounting. Now, the battle is not just the Big 4 and others but also tech start-ups with millions of funding who strive to offer an impeccable client experience with relatively more tech and marketing budgets.
Although new threats are cropping up, having the right strategy in place will help conventional accounting firms stay afloat in the future.
