Two industry researchers give their take on the future.
Daniel Wyner, general manager emerging business opportunities, Wolters Kluwer CCH, says:
The future of pure transactional compliance revenues is changing. Common sense and operational success mean professional accounting practices must consider a move to offering advisory services. They should become compliance/advisory practices.
It’s what we were trained to do, what most of us enjoy doing and where many of our clients see the value in putting trust in our skills. The accounting profession is the most trusted adviser for Australian organisations of all sizes, in particular the broader SME (small to medium enterprise) band.
How to build that advisory and find a competitive advantage
Big data and predictive analytics have been with us for years, but the game-changer is tool sets specifically designed for accounting practices and corporate reporting and compliance teams.
For CPAs, a big part of accreditation lies in their knowledge of tax and compliance. Now is the time to leverage that expertise.
Accountants spend most of their time looking in the rear-vision mirror, keeping up with past regulatory changes. However, predictive intelligence – once the realm of data trawlers within the largest firms – is now automated, the results produced in real time and cost pressures reduced with cloud-based subscriber access.
Qualifying intelligence from every source
Predictive intelligence has a powerful benefit for clients: it can unlock the library of client data amassed over the years, transforming it into a powerful “profile tool”. Imagine being able to offer a “need-to-know” compliance service based on otherwise redundant data.
Predictive analytics can match files containing a history of investment habits and goals, lifestyle choices and background data – such as time to retirement and risk profile – with current and future events. Compliance and advisory capabilities can be switched on immediately courtesy of hard-working algorithms and data analysis, searching through tax and accounting resources, tagging and matching those clients most impacted by change.
The profession can be proud of its embrace of cloud computing, but accountants now need the tools to deliver on clients’ trust.
In 2015 alone, there were more than 300 tax and macro-economic events that had a material impact on Australians from a compliance and taxation perspective.
Predictive analysis tools can greatly assist in determining the amount of tax that clients pay. What are the government’s plans for negative gearing? What changes are mooted to innovation investments and ownership structures? What will tighter superannuation thresholds do to retirement planning? How will details within the federal budget impact clients? Predictive intelligence assesses data and flags clients who may be affected, helping businesses understand more readily what impacts them.
“A mix of compliance/advisory services can transform the business structure of a practice.”
New forms of compliance/advisory services are available to all, instead of the big corporate few. Compliance and advisory capabilities allow the prediction of a range of potential outcomes based on probable decisions.
With deeper industry expertise guiding them through compliance, advisory, taxation and financial planning, a rise in client confidence and positive outcomes for business are more likely.
A mix of compliance/advisory services can transform the business structure of a practice, taking it from providing traditional accounting services to being a value-adding business adviser.
It’s not about just updating clients with marketing spin and newsletters, but empowering them with compliance/advisory insights, and having the ability to drill into what delivers a successful outcome for both parties. New and highly agile business development capabilities and supercharged CRM (customer relationship management) tools can create a new frontier for service delivery.
Use data power to predict customer needs
Accountants have embraced the cloud for practice management, client servicing, and processing and administration services with the Australian Taxation Office. Accountants lead the way for the wide variety of cloud-based bookkeeping tools now being used within client sites.
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However, to ensure both accountants and clients are winning, the profession needs to craft an environment that fosters client loyalty. Accountants must move out of the comfort zone and, as the late Steve Jobs said, “Get closer than ever to your customers. Tell them what they need before they even realise it.”
Telling clients what they need will deliver a sustainable growth path for individual firms and the industry.
If a roadmap for operating in a digital world can be built, it is entirely plausible that predictive intelligence will help deliver a highly regarded compliance/advisory business. Practitioners can then be the trusted advisers in a digital world that their client wants them to be.
Grant Bloxham, chief executive officer, Bstar, says:
There has been a major shift in accountants’ top business concerns. In Bstar’s 2014 and 2015 Accountants Research Reports, the highest concern among accountants was declining compliance fee growth rates and profit margins. In the 2016 report, however, things have changed.
Ongoing Bstar research shows accountants are now hungry for growth, and that attracting new high-value business clients tops the list as their number-one business concern.
Indeed, the need for growth was the key factor linking the three top business concerns, which were:
- Attracting new high-value business clients
- Service fee mix – compliance/advisory
- Fee growth rates and profit margins.
It looks like the switch has been flicked from the previous 12 months, which saw accountants in public practice concentrate on reducing costs and restructuring their practices in response to tightening cash flows. Now it seems it’s all about growth. As Bstar’s 2016 research detailed:
- All of the accountants surveyed indicated that growth planning is important to their practice
- Eighty-six per cent of accountants surveyed said they are in the “growing” phase of their practice’s life cycle
- Seventy-one per cent of accountants believed all their practice principals are motivated and focused on growth.
How are accountants growing their practices?
The majority of accountants agree that transitioning to an advice practice is the key solution for growth. However, 81 per cent of accountants say they lack confidence in their own abilities to deliver advice services. While this number is a little startling, this is still an improvement on the 2015 results, when 91 per cent said they lacked confidence. This advance is mainly due to accountants realising that to grow their practices they need to invest in developing their advice services skill sets.
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While accountants are hungry for growth, they need more planning and support to adapt and change. The most striking new trend identified is “high awareness but low action”.
Accountants are well aware of the external factors altering their industry and are worried about the future – 50 per cent believe they need to make major changes to grow their practice, but only 41 per cent of accountants have a detailed growth plan.
The good news is that, after cutting costs, accountants are now prepared to concentrate on growth – 62 per cent of those surveyed are allocating part of their working week to planning (compared to 42 per cent in 2015) and 57 per cent of accountants do it with a trusted practice adviser (39 per cent in 2015).
“Before accountants are ready to provide advice services, they need to do their homework.”
However, there are still obstacles to overcome, including:
Many practitioners don’t have a clear understanding of how they can shift to an advice model of business.
Only 32 per cent of accountants have segmented their client base to identify future growth opportunities; and only 5 per cent regularly survey their clients.
Before accountants are ready to provide advice services, they need to do their homework and planning. This means understanding their client base and having a clearly defined service package for each client segment. Segmentation can be as simple as dividing clients into small, medium and large – as defined by variables such as revenue, profit or the fees generated.
Advice practices lead the way
Bstar defines an advice practice as one that makes a minimum of 40 per cent of its fee revenue from advice services, with a goal of 60-80 per cent of advice services delivered by professional staff/future leaders, rather than practice principals.
Accountants that make the transition to an advice practice benefit financially as they are more profitable and valuable than compliance-based ones.
Note: Extract from Bstar’s accounting industry Knowledge Bank valuation benchmarks for practices with fees ranging from A$2m-A$6m, allowing for A$150k per annum in partners’ salaries and a completed accounting industry risk and value driver assessment.
There are clear opportunities for accounting practices to transition to an advice practice, with 90 per cent of accountants believing they are their clients’ most trusted adviser, but many are not leveraging this relationship. Importantly, only 64 per cent of accountants believe they have enough relationship and product trust with their business clients to grow advice services.
Bstar believes accountants have two key growth opportunities within their existing client base:
- Converting an existing client to an advisory client.
- Generating new client referrals from an existing client base.
There are two common client questions: “What do you do?” and “How much is it going to cost?” Being able to articulate your service and value proposition to clients and explaining or demonstrating how you create and add value is a key indication a practice is ready to provide advice services. Bstar encourages accountants to obtain a copy of its 2016 Accountants Research Report to help focus their efforts for 2016.
About Bstar and research methodology
Bstar supports accountants to grow advice services through research, education and solutions. Bstar has a relationship with more than 200 accounting and financial planning practices. The content in Bstar’s research information is taken from Bstar’s ongoing face-to-face strategic discussions conducted with accounting and financial planning practices.
Bstar continues to collect real-time live data year-round. Bstar research includes material from reinterviewing previous Alliance Partner (Bstar clients) participants and conducting new interviews in 2015-16. The primary tool utilised to collect this research information is the Bstar Needs Assessment process.
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