As traditional accounting compliance services go the way of the film camera, many accountants are finding ways to disrupt their businesses without disrupting themselves.
The accounting industry has felt the increasing tremors of disruption since the arrival of cloud-based accounting a decade ago. As routine compliance work becomes more of a commodity – a product that clients can access through automated services rather than a trip to their friendly accountant – many practitioners are considering ways to provide greater value to their clients. For many, this means shifting the focus on their offering. It’s a case of disrupt or be disrupted.
In the disruption economy, the most successful companies are those that view business through the lens of the customer. Innovative companies are exploiting this shift, challenging the status quo and restructuring traditional industries through the use of technology.
It’s called digital disruption, although technology itself is the enabler rather than the driver. Disruptive companies zero in on a customer need and use technology to remove superfluous steps, costs and time.
Uber, the app-based hire-car sharing service, is an example. It received US$258 million from Google Ventures in 2013 and is disrupting the taxi industry through means of collaborative consumption.
Digital technology has changed established ways of interacting and doing business. It has replicated some of the functions of accountants, offering speedier and cheaper solutions. Research by accounting software provider CCH shows that two-thirds of the small to medium enterprises (SMEs) it surveyed would consider replacing some of the services their accountant performs with cloud-based software. Half said they would consider looking for a new accountant if their existing one did not embrace a cloud solution.
Almost one in four accountants currently use a cloud platform, according to the CCH research, and 60 per cent of accountants who are not currently using a cloud-based system say they are likely to adopt one in the next two to three years.
Mark Holton, director of Smithink2020, an accounting consultancy and business coaching firm, says that while cloud technology creates greater efficiency, the key to remaining relevant for clients is to shake up your service offering.
“I’ve been saying for the best part of 10 years that we need to change the way we do business and we need to offer services to clients that they truly value. One of the challenges when it comes to compliance is that we’re offering services that clients don’t have to have. When it comes to advisory work, we’re offering services that they don’t necessarily need to have, but they should have. For some firms, it’s pretty hard to sell that want-based decision. But I don’t think the majority of good firms have a choice and I think they’re starting to put infrastructure and support staff in place to make it work.”
"A five-minute phone call a few times a quarter is not a big deal and the client really appreciates it.” Mark Holton
Disruption can blindside entire industries – when was the last time you shared a Kodak moment with a film camera? (Kodak is the classic example of a “disrupted” major business which lost market leadership when digital cameras totally disrupted film camera sales). Understanding the drivers of disruption and the technology that enables them can help businesses future-proof their offering.
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Futurist Rachel Botsman has developed a framework to identify where disruption is likely to occur and identifies five key drivers.
The first is “waste”, where there is unlocked value in an underused asset. Airbnb successfully exploited this by creating an online marketplace for wasted capacity in spaces, such as holiday homes and shared rooms.
The second driver is “redundancy” – layers of superfluous roles and processes. Botsman cites Netherlands-based Vandebron, a company that identified an opportunity, bypassing utilities firms by connecting small-scale energy producers with customers who want renewable energy.
“The third driver is “complexity”, when there are ways to simplify complex and frustrating customer experiences,” says Botsman. Disruptive companies in this space include peer-to-peer platforms such as TransferWise and CurrencyFair, which have stepped in to simplify customer experiences by removing the complexity of currency exchanges.
“Limited access” is the fourth driver of disruption, according to Botsman, when products and services are out of reach for many or don’t require full ownership. The BMW Drive program is an example, enabling shared access to luxury goods.
The fifth and final driver of disruption is “broken trust”. When trust in large institutions, such as banks, has faltered, companies like peer-to-peer Lending Club and Zopa have stepped in to challenge the traditional personal loan.
“You can see how the drivers apply to the accounting industry and make it prone to disruption,” says Botsman. “On the one end of the accounting spectrum we will have commoditisation of services that can be offered through tools and platforms such as Xero, and on the other end we will see hyper-specialisation. It’s the middle market that is most vulnerable.”
Peter Knight FCPA, principal with Knight Partners, agrees that specialisation in areas such as self-managed super funds or technology can help accountants remain relevant to customers in the future.
“If you’re going to go digital, don’t muck around,” he says. “Make it a specialisation and then stand on the roof and shout that you’re an expert in it.”
Knight has found a niche in helping clients disrupt themselves. His practice now favours consulting over compliance and his services include monthly or quarterly business meetings with clients, where he grills them about every aspect of their business.
“Talk about disrupting! An accountant asking questions about sales and marketing! But you can really cut through all the palaver,” Knight explains.
“The role of the accountant in this is not to have all the answers but to ask all the questions.”
Knight has extended this formula, holding regular performance group meetings for a range of clients who commit to attend for 12 months and to complete a business plan.
“Sometimes the members are all from the same industry, but there’s an amazing dynamic when you’ve got people who are from different industries. There’s an opportunity for accountants to facilitate performance groups for their clients,” says Knight.
“You become more relevant to them. Yes, you’re helping them with their tax but you’re also helping them with their business, and that’s the shift.”
If compliance work will be lost to technology in the future, should all practitioners consider strengthening their advisory services? Greg Hayes, director of Hayes Knight, is not so sure.
“I hear from time to time that the accountant of the future needs to be a business adviser, and that if you’re a compliance accountant you’re dead in the water. But that’s the greatest load of nonsense that’s been trotted out about the profession,” he says.
“Compliance represents a significant part of what the profession is and always will be. When I started out in practice, it was all about producing a set of numbers. Now it’s more about making sure that when you look at those sets of numbers, you’re looking more from a risk management point of view. This is not about advising people how to run a better business, this is risk management on their compliance obligations.”
In order to remain relevant, Hayes adds that accountants must understand their client base.
“If you look at the market of micro businesses, someone is going to say there’s an opportunity if we get it right.” He says this requires a cost-effective solution for these businesses – rather than an advisory service.
“This means fast, efficient processes and that means maximising the advantage of technology in your processing or you might be using outsourcing as a way of addressing the cost issue.”
Botsman says the current model of outsourcing will change from something that is sent overseas or interstate to sourcing the talent we need on demand.
“It can enable organisations to scale up or scale down labour in highly flexible ways. Most SMEs do not need a full-time accountant. They can outsource the work they need done, such as bookkeeping or financial forecasting, to a vetted individual versus a firm, at a fraction of the price.”
For Tyler Wise CPA, principal of Western Australia-based practice Wise Accounting, the future of accounting rests with technology, and he uses it to put his clients in the driver’s seat. Wise’s website includes a membership section with benefits including free calculators that Wise has developed to help clients understand different tax outcomes and assist them with business forecasting.
“The ultimate benefit for the members is that users can get information whenever they want,” says Wise, who believes compliance work for accountants will decrease, and so positions his practice as an advisory firm.
“Compliance is retrospective and not really worth as much as something that’s predicting the future,” he says. “Clients will place a higher value on you having a crack at what you think will happen.”
Technology is central to the operation of Wise Accounting. All data is stored in the cloud and the office is paperless.
“I’m always employing new software and I get to beta test a lot of it, which means that when something is launched we’re ready to go with it and have evaluated whether or not it’s any good. What is the best today will not necessarily be the best tomorrow.”
Maintaining healthy customer relationships
With customers demanding more choice and control than ever before, maintaining healthy customer relationships is essential to business success. Business consultant Peter Knight FCPA does this by positioning his Knight Partners practice as a hub for businesses.
“Picture a wagon wheel and the accountant and their clients are in the centre and the spokes are the other services you can provide or the other service providers you can refer clients to – a lawyer, a mortgage broker and financial planner,” he says.
“The client knows then that you are the go-to person.”
Client relationships are at the very heart of industries such as advertising and public relations. Just like accounting, their role is to help clients achieve their business goals.
Bronte Tarn-Weir, an account director with Ogilvy Public Relations in Melbourne, says the key to healthy client relationships is understanding your clients’ needs.
“A good consultant will know what their client wants probably before they ask for it,” she says.
Tarn-Weir adds that emotional intelligence is essential. “You need to understand what keeps the client up at night and what success looks like to them and to their business. I like to think of myself and my team as an extension of our clients’ team.”
Tarn-Weir says you can never be in contact too often with your clients but that the level of contact depends on the nature of the client and the project. “A client should never have to check in with you for an update.”
Knight agrees: “I meet with all of my clients either monthly or quarterly. I think quarterly is the minimum because you’ve got a Business Activity Statement to review and you can check on their financial progress as well.”
Tarn-Weir says that effective client management should include identifying new opportunities for clients. “Business objectives of clients evolve. Ultimately we want to meet their business objectives, and if that means entirely changing the strategy, I think it’s worth having the conversation with them. Clients are open to new ideas so long as you’re not being pushy and what you’re offering aims to meet their objectives.”
The method of communication and service delivery used depends on what your client needs. “Some prefer a quick email and some respond much better to having a chat about their personal life as well as the work situation,” says Tarn-Weir.
Mark Holton recommends monthly phone calls with clients. “These little touch points are critical and they show that we care. If there are any issues they’ve got an opportunity to tell us at the end of the month rather than at the end of the quarter. A five-minute phone call a few times a quarter is not a big deal and the client really appreciates it.”