It has been well documented that the accounting profession is in a state of transition. Moving from backwards looking, historic number crunchers, billing for time spent rather than value added, to real-time, cloud first, automated services. Realising tangible benefits to their clients by offering valuable business advice.
Tech-savvy millennials and older generations are who are adopting to the change are challenging accountants to offer more than just compliance work. The man down the pub has been replaced by infinitely knowledgeable internet (if you look in the right place!), meaning the entrepreneurs are better informed and equipped than ever.
21st Century Accounting Practices
Accounting practices are now falling largely into 4 groups. Which one is your firm in? Is that where you want it to be?
Traditional high street accounting practices, to whom small businesses and partnerships deliver a shoe box of receipts to annually (or quarterly if they’re VAT registered). The vast majority of their clients come to them because they needed to comply with legislation rather than because they were seeking business advice. Clients keep contact to a minimum as they know they’re being charged by the minute.
Like the manatee, they’re not quite extinct but they are defiantly on the endangered list. Many will have faced challenges with RTI and AE and will be looking at the upcoming MTD legislation and contemplating early retirement. Those who survive will be forced to lower their prices to compete for compliance work, or raise their advisory game to compete on quality.
These firms focus on maximum efficiency for a high number of relatively simple clients. They are typically offering fixed monthly fees via menu pricing. For example:
The challenges for these firms will be increasing the number of clients serviced by each staff member and enticing new business to their practice. Efficiency will be driven by strict processes and automating as many tasks as possible. For example, direct bank feeds, bulk VAT processing and paperless offices.
Also falling into this category are practices servicing niche sectors of the market, such as temporary workers. The clients differ in their needs, however the firms’ success by efficiency and sales is exactly the same.
The piranhas fight over the most competitive part of the market. To date, these firms have expanded by offering cheaper, focused, value based pricing, drawing clients away from traditional firms…eating the weaker fish. Once these disappear, the real battle begins! In an effort to remain competitive, prices will be driven down and processes pushed harder and harder.
Practices that have grown up in the cloud or firms where younger partners are replacing the older generation and have seen the changes coming. These firms don’t avoid compliance work, however they see it as a lead to where the real value is; business advice. Their entrepreneurial clients are looking to grow their business and are seeking advice on how to maximise their sales, reduce costs and improve cash flow and margins.
SME business owners trust their accountant more than anyone else for business advice and these enterprising firms are capitalising on this. They guide their clients on which software to use, collaborating in real time using online applications. Meetings can be held online; valuing their clients’ time. Communication is regular, rather than just at compliance deadlines.
These Dolphins are smart, eloquent, hard-working and collaborative. Their clients appreciate their knowledge and advice, treasuring value over cost. As these practices continue to evolve they will grow stronger and more profitable.
The Big 4
The leaders of the accountancy, consultancy and advisory world, these mega-corporations have long seen the value in nurturing entrepreneurs to become the business leaders of tomorrow. Successfully combing high value audit and taxation services that their rivals can only aspire to, with corporate finance, M&A and wealth planning work to bring in the big bucks. But they don’t rest on their laurels, as demonstrated by KPMGs new small business collaboration with Xero and Deloitte recently overtaking PWC as the world’s largest accountancy firm.
As mighty apex predators, these are the practices that have been at the top of the food chain for as long as anyone can remember, swallowing up smaller rivals along the way. Where they lead, others follow; in the accountancy world and related markets.
The accountancy world is evolving; big fish eating little fish and everyone looking for their own place in the financial ecosystem. A better understanding of where you fit will help equip you to see where you need to be to achieve you goals, and help you plan a way of getting there.
Octopus Blue will help you to become a firm of the future, with software consultancy and advisory services designed to ensure your practice is efficient as possible.
Contact firstname.lastname@example.org 07974 717713 to discuss further.