The Slow Death of “Ticking & Bashing”
In 2017 and beyond there is and will continue to be a huge range of challenges facing small accounting firms. If you scan the forums and articles via IFAC, ICAEW, ICAS and ACCA it is clear that a lot of traditional issues are still dominating the day to day concerns of these firms.
In no particular order the highest level concerns tend to be;
- Retaining existing clients and attracting new ones into the business.
- Pressure to lower fees
- Hiring issues and ensuring a robust succession plan is in place.
- Spiralling costs associated with staffing levels.
- Ensuring that alongside delivery they are keeping up with new practices, trends and regulations.
Whilst none of these concerns are particularly new there is one issue that will completely change the entire face of the profession by 2020 and that is the rapid growth of accounting technology.
Technological disruption's not new
Many accountants of a certain vintage will be able to regale their younger counterparts with stories of how technology has completely changed the profession from the 1950s through to today.
I have heard several amusing anecdotes about manual bookkeeping, manual ledgers and the implications of one mistake on the entire outlook of a set of accounts. It is a way of working that will be completely alien to the modern accountant but I am reliably informed that accountants who worked through this process were better back then because they knew the entire process of accounting inside and out.
In these days of yore a lightly leaded pencil, rubber and ruler were the tools of the accountant. From the late 70s onwards it was calculators and computers that revolutionised the profession in a technological sense. Today it is cloud based accounting technology, data analytics tools and combinations of these that provide a real-time insight into how business is performing. All very exciting developments and as ever there are both opportunities and threats that come with these advances.
So What Are The Threats Posed By Technology?
If we take each of these top concerns in turn is becomes clear that technology itself is driving a lot of these concerns.
Retaining existing clients and attracting new ones into the business.
- In the good old days for a client to change accounting provider would involve moving manual systems, hardware, software and other platforms over to the new service. Very time consuming and in many cases not worth it, so it made changing providers a quite prohibitive activity. These days this information can be transferred at the click of a button.
- Attracting new clients was often via word of mouth, advertising or other activities in business promotion, in many ways this has not changed and an argument could be made to say that digital has improved these routes to the potential customer base. The issue here is standing out from the competition, does the online digital content make you seem like a more attractive proposition to a potential customer or is it more of the same?
Pressure to lower fees
- So now that you have lower staff numbers, less of a reliance on infrastructure and better access to cheaper ways of operating that should reflect in the rates you charge?
- Equally, if the same service can be procured from AN Other LLP at a cheaper rate then surely you should lower your fees to be competitive?
Hiring issues and ensuring a robust succession plan is in place
- You are able now to advertise online, drive traffic to your vacancies and to get your pick of what the market has to offer, right? Only if you stand out from your competition. Equally these channels have accelerated the brain-drain phenomenon where accountants leave the profession to enjoy a career in industry.
- Are your staff multi-skilled? These days being a good accountant is simply not good enough, your staff need to have a strong ability in using these technologies to offer the right advisory service to the client base.
Spiralling costs associated with staffing levels
- Whilst your reliance on sheer numbers will drop at a very basic level people have access to reams of data from salary surveys to online job boards and postings, it is easier than ever for employees to demand a higher level salary to reflect the current market. No bad thing for a fairer work/life balance but it can drive up the costs for your business quite significantly.
- Taking the previous point about multi-skilling, if you have a staff member who is a strong accountant with good advisory skills but has this in combination with solid technology abilities then this person is likely to be making a very significant contribution to your business.
Ensuring that alongside delivery they are keeping up with new practices, trends and regulations
- This is a very interesting one, as automated compliance activities and underlying software/technology that improves this will surely limit the impact on the modern firms to keep as up to date as before? HOWEVER, the biggest threat here is the rise of DIY accounting, if they can deliver their own compliance activity then why should they use you?
- In UK law there is nothing to stop someone styling themselves as an accountant, I could do it tomorrow. Launch a website, call myself an accountant and use something like Xero or Quickbooks to do the actual work for me. Of course my advisory skills would be extremely questionable but it does mean that there is increased competition from un-qualified accounting practices.
So That’s The Downside, What Is the Upside?
Technological advances are intended to do several things; save time and money, improve and speed up processes but also fundamentally to help you to improve the services that you deliver to clients. In that respect by 2020 your skills as an accountant are vitally important as a business advisor if not as a compliance specialist.
“Ticking & Bashing” as one of my clients gleefully calls it will become less of a focus area as this is the aspect of accounting that this new technology is targeting. What it can never fully replace is the advisory aspect of the service you deliver.
To be competitive in the market today and to future proof for this new technological age there are a few things that small accounting firms can do to ensure they retain and grow market share. I am not an expert by any means but these strike me as the “low-hanging fruit” to go after;
Automate compliance: Embrace these new technological advances, they are a threat but they are also an opportunity. Your staffing levels will drop in terms of sheer numbers but the staff members you keep will be true business advisors who add value to your client base. In that respect you will be offering your clients a service that they simply cannot live without.
In this Utopian ideal I have, 20% of your time will spent on the compliance and accounts preparation aspect freeing up 80% for business advisory activities and (dare I say it) business development activities. How achievable this is will depend on the pace and availability of these advances but all the trends point to this balance as the future of the profession.
This technology will help you to manage a larger client base in the nitty gritty activities so economy of scale becomes an achieveable ideal.
Be mindful of your digital footprint: What does your website, content and digital output say about you as a business? With the right digital marketing strategy and the people to bring this to life you can stand-out from the competition and realise a growing market share.
You might even see yourself as a specialist in a particular field or industry? This type of approach will help that message to become louder and clearer to the clients you wish to do business with.
Be a financial technology expert: Having multi-skilled employees who can advise fee-paying clients on the best ways to optimise and use technology, perform analysis and therefore make decisions will be as common-place as advising on the best treatments for doing business within a group structure.
Get ahead of this curve but don’t be a programmer, be an accountant. What you can do, however, is hire a programmer!
Advise your clients on the best uses of technology: Steer them in the right direction with respect to Cybersucurity, going paperless and using data analytics tools. Any aspect of technology that can affect the financial health of the business should be your area of expertise in an advisory capacity.
So What Is The Future For Accounting?
Never underestimate the trust placed in someone who is a professionally-qualified advisor and this especially so for accountants.
Often the clients (whilst financial savvy in many cases) rely on the advice that you can offer to promote growth, sustainability and sound financial practice and decision making.
This will not change in the foreseeable future, your advice as a business mentor and sounding board will be as important as ever before. They will listen to you and you will be delivering a truly advisory based service. This is the crucial learn for me watching all of these developments.
In the future the reliance on the “doers” will lessen but the growth of “advisors” will increase. I can only imagine that this will lead to better results for all concerned.