The Accounting Industry is Evolving (And Three Reasons Why That’s Good News for Clients)
As the owner of an accounting firm for the last 20 years, I usually check out the Commonwealth Bank’s Accounting Market Pulse report, a regular survey of the Australian accounting industry.
This survey, compiled in conjunction with Beaton Research + Consulting, is completed every 6 months, and provides insights and information on the latest trends and developments affecting the accounting industry (my competitors!).
The latest survey shows a more optimistic view of current business conditions, when compared to the last 6 months, with confidence remaining over the long term. Larger firms in particular, have the most positive perception about their business and broader economic conditions.
Most accounting firms have seen an increase in revenue from non-accounting services, but have felt the pressure to hold costs on traditional accounting services and increased competition. Although I think most industries in the last year or so have felt some pressure on prices and competition.
The key point to be taken, is that the clients of accounting firms will be the winners. And many accounting firms within the next 12 months will be concentrating their key activities on the following:
Increasing the role of business advisory and management consulting services
With the commoditisation of the accounting and compliance services, accounting firms will engage or increase their offering of business advisory services and management consulting services.
How this should benefit the client — With access already to your accounting data and history, these services will help your business maximise profit, undertake new efficiencies, identify growth paths, utilise your resources and strategic objectives. This will be achieved by business bench marking, structural advice, financial analysis and operational productivity.
Traditionally, these services would have been contracted from another organisation, or you would employ someone with these skills. These added services are designed to complement the skills of the clients’ management group and in particular, support businesses who are under cost pressures and time poor, helping them to remain focused on critical activities.
Increasing their investment on staff training and information technology
To support the strategy for the accounting firm to become more efficient from the pressure on revenue, they will increase their investment in these two key areas.
How this should benefit the client — Increases in staff training will see an improvement in customer service, best practice procedures and productivity gains.
The training can target the skills to meet the needs of the accounting company’s operation now and in the future. The client will also likely to benefit from the accounting companies improved business performance, profit and staff morale.
The increase in IT investment will likely to include cloud based accounting software, which delivers real time benefits and timely compliance. It also enhances access to business data and intelligence, across all business functions and locations for more accurate decision making.
Increase the volume of outsourcing work
This is in line with the commoditisation of accounting and compliance services, and by outsourcing these tasks within Australia or overseas, efficient and cost effective preparation of meaningful financial and non-financial information can be produced on a timely basis.
How this should benefit the client — Outsourcing of certain services to new avenues will counteract this pressure on prices, as has been seen in the banking, IT and telecommunications industries. It can be seen as a cost reduction strategy to protect margins for the accounting firm, and maintain accounting services costs for the client.
From my perspective
There has definitely been some disruption in the accounting industry in general, as highlighted in this survey, with pressure to maintain accounting services revenue, as those traditional services become commoditised. Accounting firms will struggle in the next few years, if they do not diversify.
With experience in the accounting industry for over 20 years, and as a business owner and company director, I can say there have been some different influences and pressures on our business.
As a specialist firm, our compliance work is not our main focus, as it may be with the other firms. Therefore, we do not outsource or offshore our accounting services and have been offering management consulting services such as virtual CFO, company secretary and business advisory services for some time now. We have been finding that these services are gaining in popularity and reputation.
Our other focus is on assisting overseas organisations establish and manage an Australian subsidiary. This area has seen a slight increase in interest in entering the Australian economy. There has been greater growth in Asia, which has the roll-on effect into Australia.
The rest of 2016 will see revenue remain steady, however, the Budget 2016 will have a positive effect on small business in relation to the company tax reduction.
In the IT and communications space, our focus has been on cloud computing for some time now, as I see this as the technology that will really benefit my clients, and the service my firm can provide for them. The traditional accounting firms have been slower in their uptake of this software but they are now catching up.
Like most industries, the accounting industry is not sheltered from disruption. For accounting firms, my advice is to make sure you are moving forward and looking at different areas for innovation, and take this opportunity to strengthen your business.
For the clients of these companies, is your accounting service the best it can be? Are they providing the kind of service and advice that your business needs to profit and grow in these changing times?
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