The Virtual Accounting In Malta

Published Date: 02 Nov 2017

A few years back there was no internet, email, telecommuting or smartphones thus businesses had to communicate either by phone or else face-to-face. Nowadays, as a result of technology innovations and reduction in prices; laptops, tablets, smartphones and so on are in the hands of owners and employees in order to communicate promptly through emails and the internet. (Kooser, n.d.) Thus with the help of information and communication technologies, businesses can change their workplace practice to teleworking.

There is no common definition for the word ‘Teleworking’, however Nilles (1998, p.1) states that teleworking is;

"ANY form of substitution of information technologies (such as telecommunications and computers) for work-related travel; moving the work to the workers instead of moving the workers to work".

In fact, by teleworking both organisational flexibility and employee flexibility can be improved simultaneously (Martı´Nez-Sa´Nchez, A. et al., 2008). However, it depends on the nature of the business because not every job is suitable for teleworking, for example, a delivery man cannot work as a teleworker (Nilles, 1998).

On the other hand accounting services can be offered through teleworking because an accountant is a person who "works with other individuals and corporations to ensure that business records are accurately kept and all payroll and taxes are properly paid." (Melone, 2011) Therefore "with a telephone, email account and computer, an accounting professional can establish a home office" (Melone, 2011) and start offering his or her accounting services through information and communication technologies without the need to meet the client. This is called accounting by telework, which is known as ‘Virtual Accounting’.

Virtual accounting is a work arrangement concept whereby the accountancy sole practitioners and accountancy firm’s employees perform work for their clients from a remote location (i.e. either from home or from the company’s office) via information and communication technologies without having to go to their clients’ offices. Thus basically it has the same definition as ‘teleworking’ but ‘virtual accounting’ is used only by accountancy sole practitioners and accountancy firms to describe their services.

According to Nilles (1998) there are four flavours (forms) of teleworking:

Chocolate - Home-Based Telecommuting that is setting up a home office.

Vanilla – Satellite Telework Centres, where "all of the centre’s employees work there because they live closer to that facility than to their regular or principal office, regardless of what their jobs are" (Nilles, 1998, p.13)

Chocolate Chip – Local Telework Centres. This is similar to satellite telework centres. The only difference "is that the building may house employees from several different organisations." (Nilles, 1998, p.13)

Tutti Frutti – Combinations i.e. having a combination of all the above systems.

In fact, although the most common type of teleworking is home-based telecommuting, for an accountant or an accountancy firm to start offering virtual accounting services does not mean that they have to give up their main office and work entirely from home. Quite the opposite they can still retain their main offices and work from there. The significant point in virtual accounting is that they communicate with their clients, sending documents and their work via information and communication technologies. However, there is also the possibility for an accountancy firm to set up a virtual office. "For some practitioners, the virtual office involves managing full-time and part-time staff who themselves are working in a remote location." (Dennis, 1998, p.8) Meaning that, the firm’s employees will perform their work from their own home. In fact "some practices continue to rent small office facilities where firm members can meet clients, receive mail or rely on temporary administrative staff." (Dennis, 1998, p.8)

By offering virtual accounting services, one can benefit from a number of advantages. For example it can enhance the life/work balance of accountants (Borg, 2009). In fact this is clearly shown in the research carried out by Dennis (1997) where Sarah Henderson of Ed Johnson & Associates stated that accounting work requires long hours; therefore by working at home one can work without detaching from his or her family. Moreover when an accountancy firm applies the concept of virtual office, it will also benefit from cost savings for example in the first case study carried out by Dennis (1997), a sole practitioner saved $1,300 per month on firm’s lease costs after started renting out a smaller office.

Furthermore, the benefits are not only for the employer or corporate entity or for the employee, but even the client and the environment will benefit from virtual accounting. If the employer reduces his or her overheads, for example through improved productivity, then he or she is going to reduce the price of his or her service. In that case the client is going to benefit as well. On the other hand if an accountant is going to work from his or her home, he or she does not have to travel to the office, therefore there will be less fuel emissions, which is better for the environment (Fenech Adami, M.,2010).

Nevertheless, there are various drawbacks, when offering virtual accounting. One of its main problems is security because an accountant’s "home will be less secure than a company office, both in regards to burglar protection as well as the presence of authorised visitors" (Reid, 1994. P.8). Additionally, accounting involves a lot of sensitive information in fact confidentiality is another drawback of virtual accounting because data can be read, potentially modified or lost, while it is in transit (Itl.nist.gov).  Both computer security and confidentiality issues also apply to accountancy firms, however with today’s technology advances; there are various safeguards which one can implement, such as encryptions and firewalls.

There are various companies overseas, offering virtual accounting like Virtual Bean Counter Inc. in United States of America and Virtual Accounting & Taxation Services (VATS) in England. These companies apart from the preparation of the financial statements, they offer a wide range of services including the preparation of bank accounts reconciliations, bookkeeping services, payroll, VAT and corporation tax return, budgeting and so forth (Virtual Accounts & Tax Services, n.d.) without meeting the client physically because they communicate with their clients through information and communication technologies. (Figure 1 in the appendix illustrates the process adopted by Virtual Bean Counters Inc.) In fact this is another opportunity, how an audit or an accountancy company can provide its bookkeeping and accounting services, especially to the Small Medium Enterprises (SMEs) who used to outsource these services.

Despite all these advantages and this literature, according to the survey carried out by Annalise Borg (2009) in her dissertation, 69% of the respondents are not aware of any virtual accountants in Malta. However, her analysis also concluded that "Maltese accountants agree that the [accountancy] firm of tomorrow should be a virtual one" (Borg, 2009, p.55).

One can mention for example that the main issue for not providing virtual accounting services locally is because Malta is geographically small. Thus it is more practicable to go to the client’s office rather than spending a lot of money on technology safeguards to offer virtual accounting. However virtual accounting might be a good idea for those accountants who offer their services to Gozo businesses or wish to extend their services to foreign businesses.

3. Rationale for Research

At the moment, in Malta, there is a lot of awareness on increasing the rate of employment especially to increase the number of women in the workplace. Thus I believe that if virtual accounting is offered in Malta, it will create a new job opportunity for both women and disabled people.

Moreover, there is also a lot of awareness on the environment. Therefore virtual accounting can be the key to make the accountancy profession more environmentally friendly, for example through paperless offices since the work of the accountant is sent also to the client via information and communication technologies.

Additionally, both sole practitioners and accountancy firms need to adhere to technology developments because otherwise they will not be flexible to achieve customers’ satisfaction and compete with global competition. Flexibility is the mechanism that facilitates quick responses, which nowadays many clients need, and this can be improved through the use of information and communication technologies.

Thus, it would be interesting to study in depth the issues which are keeping Maltese warrant holders from operating as virtual professionals.

4. The Objectives of the Study

The objectives of this research study are the following:

To establish to which extent, teleworking is being used for accounting purposes at the present time. In a sense, whether or not accountants are using emails, telephones, faxing and more so over, to communicate with their clients at the moment and for what purposes.

To investigate the issues which are keeping Maltese accountants from operating as virtual professionals.

To explore to which extent, businesses are prepared to appoint a virtual accountant.

To draw conclusions about the possibility that in the near future, virtual accounting will be offered in Malta.

Limitation of scope:

This study will be limited to accounting services only since it is not practicable to carry out the job of auditing, taxation and advisory entirely by telework.

Due to lack of literature on virtual accounting, books and journals related to teleworking would be used in order to do the literature review.

Due to lack of time to carry out this study, a sample of different types of businesses which operate in Malta and Gozo, is going to be selected in order to investigate their view on virtual accounting.

5. Research Methodology

In order to be able to meet the above objectives, primary research would be conducted by adopting a quantitative research because large populations need to be targeted.

An online survey website will be used to distribute a questionnaire to the Malta Institute of Accountancy’s sole practitioners, audit and accountancy firms, whose contact details are publicly available on MIA’s website. The questionnaire will include a mixture of close and open ended questions in order to obtain information to achieve the first and the second objective.

Another online questionnaire will be distributed to different types of businesses, which operate in Malta and Gozo, in order to gather information on whether they are interested to acquire virtual accounting services. In fact, this questionnaire will also include a mixture of close and open ended questions. Since in Malta and Gozo we have a large number of businesses, a sample will be chosen.

Additionally secondary research is going to be conducted through books, internet and journals related with the subject matter.

6. Support

Since it is a quantitative study, no support is needed since the contact details of the participants, both accountants and businesses are publicly available.