The Modern Accountant | What Did WHSmith’s £30m Accounting Error Teach Us?

Plus: Deepfakes are here — can your finance team spot them?

Author

Rafe Houston
August 27, 2025

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FINANCIAL COMPLIANCE

WH Smith’s £30m accounting error in its North American division is a potent reminder of how mismanaging revenue recognition can wreak havoc—not just on profits, but on investor confidence and share price. Supplier income, which should have been accounted for in the following financial year, was instead recognised early, leading to inflated profit headlines and a dramatic 40% share price fall, wiping out £550m in value overnight.

This isn’t just a WH Smith story; it echoes past scandals like Tesco’s and exposes a widespread industry struggle with complex revenue accounting. Many companies persist with error-prone spreadsheets and manual journals, making them vulnerable to costly mistakes. Automation and robust financial systems have never been more crucial—not only to ensure accurate balance sheets but also to protect jobs and reputations in an increasingly scrutinised sector.

ACCOUNTING TECHNOLOGY TRENDS

AI and automation are no longer simply buzzwords—accounting firms are actively embedding these technologies into their daily workflows, with 46% of accountants using AI every day and 95% harnessing automation for tasks like payroll. The knock-on effect is dramatic: firms report higher productivity, less stress, and greater accuracy, allowing them to shift away from compliance and dedicate more time to lucrative advisory services. With 79% expecting strategic advisory to grow and most accountants agreeing that this will drive higher revenue and stronger client relationships, the profession is firmly in the midst of a tech-driven transformation.

However, the march towards automation comes with its own hurdles. Managing an overload of digital tools is now a real pain point, with tech integration and staff training emerging as critical issues—80% struggle to hire tech-savvy talent, and standardisation remains patchy. For those who can adapt, including by outsourcing routine work and keeping ahead of clients' digital expectations, there’s a clear path to remaining competitive in a rapidly evolving marketplace.

CYBERSECURITY THREATS

Deepfake technology is no longer an idle curiosity—it’s a real and urgent threat to finance and accountancy. Fraudsters can use hyper-realistic AI-generated videos, audio, and documents to impersonate executives or manipulate records, putting companies at risk of monetary loss, regulatory penalties, and reputational harm. Maintaining trust in business relationships demands vigilance and proactive strategies, such as scrutinising media for inconsistencies, verifying documents with electronic tools, and cross-referencing communication history.

Firms aren’t powerless. Investing in advanced AI-based detection software, robust cybersecurity protocols like multi-factor authentication, and regular employee training creates strong defences. The effort required to keep pace with deepfake threats is well worth it—far more cost-effective than repairing the damage caused by a successful attack. Ultimately, success lies in combining technology with human diligence to outsmart increasingly sophisticated fraud.

FINANCE TECHNOLOGY

AI is reshaping how finance professionals use Excel, with tools like Microsoft Copilot and external models such as ChatGPT making it faster and simpler to automate tasks, craft formulas, and build charts—even for those new to spreadsheets. While integrated solutions like Copilot offer reassuring data security, uploading sensitive financial information to external platforms poses considerable privacy and compliance risks, so vigilance is crucial.

TAX POLICY EVOLUTION

VAT rules for further-education colleges are anything but straightforward, especially with government funding agency grants in the mix. Historically, HMRC has viewed these grants as non-business, meaning no VAT recovery, but recent tribunal rulings challenge this view. Landmark cases involving Derby College and Cornwall College, building on Colchester Institute Corporation’s earlier legal journey, suggest that certain grants might actually be “consideration” for supplies, fundamentally shifting the VAT landscape for colleges. The legal dispute is now destined for the Court of Appeal in 2026, leaving colleges in a limbo of uncertainty.

For finance professionals in the education sector, staying alert is essential—VAT treatment could flip depending on whether grants are treated as payment for services, and the handling of historic tax claims (think Lennartz adjustments) remains contentious. The sector needs clarification, as inconsistent positions risk colleges unexpectedly losing relief or facing new tax liabilities. In short, it’s a back-to-school moment for VAT, and everyone involved needs to keep their pens—and minds—sharpened.