By Stuart Spalding, Business Fitness
We’re all aware of how the industry has changed, and we all have an idea of where it’s headed. In discussing the consequences of these changes, it is interesting to analyse the key observations from my own 30-year journey in professional services, starting as a trainee accountant in 1984.
Let’s consider the following key areas of professional practice life and how they have progressed since 1984, which I will refer to as the 7 C’s of technological disruption.
The traditional methods of accounting were paper-intensive and lacked automation; manual preparation of compliance work consumed much of an accountant’s time with the majority of a client’s work being done only once or twice (for those with “interim” tax planning services) each financial year.
The initial introduction of basic computing hardware and software in the 1980’s has been followed by a steady stream of upgrades that have delivered a wide range of efficiency benefits and productivity gains, but often at considerable pain and cost to accounting firms. Today, with rapidly advancing technology to automate data processing, accounts production and almost unlimited options to deploy, access and share through web-based and cloud related services, the traditional manual techniques will be lost forever as we go more and more mobile in the search for instant responses and reporting.
The more that work can be computerised, the more that you (as a firm and an individual) will need to focus on meaningfully different deliverables. The ATO are predicting major changes in the role of accountants regarding traditional compliance processing and reporting from as early as 2016. Some commentators are suggesting the “automated SMSF audit” in the future also.
The geographical freedom offered by the cloud and mobile technologies is perhaps most noticeable in the placement and future movement of your team. When I started out in the industry, all of the work done in a firm was completed in the same physical office, the team’s home from 9-5, Monday to Friday. All the workforce were locally based and paid a “geography” premium due to the scarcity of suitably trained alternatives. Each team member had a defined career path within the firm, and received mostly on-hand, generalised training.
Digital freedom is not merely an opportunity for a dispersed client base – it enables your team to better serve these distant clients through their portability: their ability to work from anywhere and at any time. Or maybe you focus less on allowing your local team to travel further, and more on employing staff from all over the world. This global staffing opportunity opens up the best talent the world has to offer (or the cheapest, if that’s what you prefer). Even if interstate or internationally based employees is not your preference, technology essentially eliminates the need for employees to work from a central office (or any office), giving you the freedom to employ stay-at-home mums, and all other kinds of employees who are no longer office-bound.
As geographically random as your employees can now be, so too will be their career paths. No longer will staff work up the ladder of an accounting firm their entire lives. These days, the new generation are switching degrees, companies and even entire career paths as they please. The future of the individual and the company is flexibility. What does this mean for the modern accounting firm? It means you’ll need a much more employee-focused business model if you’re to attract and retain these powerful employees. They’re also a lot more aware of the possibility of working for themselves.
Communications – in every aspect of life – have too been revolutionised since my beginnings in the industry. This has in no way been a rapid and unexpected revolution. Rather, it has been an evolution: a continual process of improvement in technology, in turn making communication quicker and more economical. Now we send 5-word text messages as opposed to handwritten letters. Thirty years ago, accountants interacted with clients by letter, over the phone or face to face, and partners were careful to take control of any communications with clients. Communication between team members was very localised – working under the same roof all week was all that was known.
Technology has completely changed the definition, scope and rates of communication. It makes regular contact with your clients fast, simple and impossible to procrastinate. However – and this is where many firms may be a little blinded by the shiny toy that is technology – technology cannot replace genuine, face to face communication. The more digitised the world becomes, the more you stand out as a professional service firm with a focus on physical interaction with your clients. The best way to use technology is to automate and make more efficient your internal processes – leaving you more time for the real, human work.
The same goes for your internal team communications. While technology is a game-changer for the way your team works together, true face-to-face teamwork creates another element of team spirit altogether.
C4: Client Base
The clients these firms secured were almost always from their local geographical area – any further afield was often too impractical. Clients had a limited access to information, and so came to their accountant less educated – the accountant held the power. Many clients also had a history of loyalty with a particular firm, and would be unlikely to look elsewhere if ever a problem or slight dissatisfaction arose.
These days, although technology makes communicating with distant clients a breeze, your team’s portability means face to face interaction with these clients is no less feasible than those around the corner.
Just like we’re experiencing a new breed of graduates and potential employees, so too are we seeing a new generation of clients. These clients are technology savvy, they do their research, and they’re no strangers to bargain hunting. They’ll come to their accountants already armed with knowledge they’ve found online or through the people they’ve connected with – the question is whether you use this more balanced relationship to add more value to the exchange, or let it undermine you and lose you the client.
Unlike yesteryear’s code of loyalty, your new clients are much more likely to shop around to find what best suits their needs – hence the importance of offering specialised services and attracting a specific group of clients, as well as building a strong relationship with the client to increase your chances of retaining them in an industry overflowing with choice.
Compliance work was a defining feature of an accountant’s offering, with a high focus placed on completing this and “saving tax”. The accounting regime was much less complex than today’s, and as such, the accountant was expected to know the answer in most instances – he was a generalist, not a specialist.
Though it may not disappear entirely and parts of it will remain unnecessarily complex, it’s undeniable that the future of compliance work (or more specifically, compliance work completed in Australia by highly paid senior accountants) is looking dim. The need for accountants to offer additional, value-added services applicable to each of their key clients’ does not need further elaboration at this point, it has been an ongoing theme for many years. Even the ATO are suggesting Accountants are going to have change what they do from as early 2016 due to technology initiatives that they will be implementing.
It’s being forecasted that the key to standing out from the crowd in this era of global competition is a firm’s ability to provide niche services to a very specific client base. Your clients can research all they want on the Internet, but the guidance and advice of a trusted expert remains highly valued.
Accounting firms were secure in the knowledge that only the firms moving in down the street posed a direct threat to their livelihood – the localisation of the industry prevented competition from any further away. Fellow accountants were the only kind of competition they encountered – planners, coaches, consultants, bookkeepers, banks and solicitors weren’t even in the picture.
Today, though the sheer breadth and depth of your competition can be a frightening reality, it can just as easily be motivation for your firm to be the best it can be. This threat of competition can spark new business models that can open up even more opportunities for your firm. One accounting practice profiled in this year’s report achieved so much success with their outsourcing ventures that they have commenced a business to help other accounting firms to outsource their operations.
Your competition is your invitation to become more dynamic and offer interesting value to your clients.
With a traditional approach to billing clients (based on hourly rates) and fees based on the previous year’s fee with an added percentage, clients were expected to pay whatever fee the accountant charged at the completion of a job. Cash flow was frequently an issue, especially if the client was resistant or simply wasn’t able to pay immediately. Only being paid when a job was completed made for a particularly irregular cash flow. Entry and exit of partners was based on typical goodwill calculation parameters and there were generally enough younger accountants looking for buy-in opportunities.
The need for marketing was relatively limited, accountants rarely lost more clients than they gained and most clients were loyal even if not entirely satisfied.
Accountants are having to adapt to the new expectations of their clients. With fixed fees and monthly subscriptions becoming the service industry norm, accounting services are no exception. Clients don’t want to be surprised by inflated post-job accounting fees – it’s old school. However, fixed fee and monthly subscription business models can be beneficial to both your firm and your clients; they ensure a regular cash flow and motivate your firm to improve your internal efficiencies and allow an easier payment cycle for clients.
With social media on the rise and new channels of advertising (many of which fall into a kind of guerrilla marketing category) opening up every day, accounting firms are now needing to place a lot of focus on their marketing tactics, like any business. Though certainly not every accounting firm around today is fearlessly embracing new methods of marketing and novel business models, this kind of innovative experimentation is undoubtedly the way of the future.
Accounting is becoming almost another industry completely; it is a wonder whether those in the profession fifty or sixty years ago would even recognise it today. But there’s only so much we can talk about the changes, the status quo is no longer a safe option for your business model.
We all know it’s happening. Now it’s just time to act. Don’t settle for good. Turn the good into the great. Now.