Prioritisation has become more complex thanks to increased digitisation, and regulated changes such as Making Tax Digital, on top of the demands of clients and staff. Add to this the challenges of an economic slowdown and significant inflation, and knowing which way to turn can feel overwhelming. John Edwards, chief executive officer at the Institute of Financial Accountants (IFA), assesses the possible responses
Early adoption and efficiency gains can support top-line improvement and create competitive advantage by enhancing the organisation as progressive and forward-thinking.
Fundamental changes in approach are typically driven by legislative or regulatory amendment, particularly in recent years. Covid-19 and the conflict in Ukraine have both prompted significant upheaval and emergency regulatory frameworks.
Planned improvements have also played their part, including Making Tax Digital for VAT and anti-money laundering updates. Legislative change is an inevitable part of practice but it is commonly perceived as an administrative burden requiring significant training and additional resource. What is more, it is arguably increasing, so it is essential that accountancy practices consider approaching change as an opportunity.
According to a study based on a survey of more than 650 accountants and business professionals that buy accountancy services, accounting firms prosper when they adapt their business models.
The 2020 research, led by the Hinge Research Institute, paid special attention to variation in value perceptions between accountants and their clients with a view to identifying opportunity. It found that there is a gulf between the services that the clients buy and the ones that they value the most providing accountancy firms with opportunity for diversification. The top-valued services include accounts payable (offered by roughly 33% of firms), data analytics and technology (offered by roughly 14% of firms) and forensic accounting (offered by roughly 8% of accountants).
The study also identified that accountants believe they communicate their services well, with 64% stating that they offer tailored recommendations to clients. However, clients do not agree, with fewer than 40% saying they receive this personalised approach.
Other key findings of the report reinforce missed opportunities including clients willing to pay more for services that address significant issues such as advice on cashflow and minimising overheads. The report identified a 43% uplift in revenue when firms offer advisory services with clients indicating they would expect to pay 50% more for an accounting package that includes both strategic advisory and consulting services.
According to a report by Flexi in 2021, businesses that switch to cloud accounting cite a 15% uplift in revenue garnered through better reporting, yet other studies suggest that the majority of SMEs do not use their accounting software to capacity, relying on the most basic functions only.
Accountancy firms have the opportunity to utilise software to drive automation of resource-heavy tasks allowing them to turn their attention instead to strategic or revenue enhancing expertise. For most firms embracing this change will be about building confidence in the technology being used and potentially taking a task-oriented approach to the division of labour as opposed to the more traditional assigned client model.
It is typical for an SME firm to focus on client relationship rather than internal efficiency and, while essential for building client rapport, this can lead to bottlenecks within your own resource. Leadership experts including Steve Kempster, advocate of systems thinking, and John Oliver OBE, proponent of TEAM enterprise, highlight that your culture is the key to winning hearts and minds by creating an inclusive approach that embraces change. Using people’s passions and strengths is key to succeeding.
Being a small firm enables more agility but it can stymie progress through inefficiency. Tackling priorities means looking to what is urgent versus what is important and carving out dedicated time for long-term goals. This approach can have the added advantage of supporting staff retention by demonstrating your investment in their personal development and progress and driving towards a shared goal.
While you cannot control the changes coming your way, you can control your response to the change. Frameworks including regular fee and service reviews can help manage client expectations while implementing change incrementally makes it less overwhelming.
Supporting this with continuing professional development is a must, as are shared visions and goals.