Graduates are too expensive as accountancy trainees

Last week Personnel Today reported that PwC is launching a new graduate assessment route with less reliance on degrees. In effect this is PwC stating that they will cease to be seeking only those with top degrees. About time too in my view.

Some years back when I was a partner at BDO I offered a cost-cutting suggestion that was roundly dismissed by the then powers that be. I had noted how much time and money was devoted to graduate recruitment. The aim then was to persuade top graduates to choose a career with BDO rather than one with the Big 5 or 6 firms (as they then were). This exercise was costly and often disappointing as applicants frequently chose to accept offers from the bigger firms over the offers they received from BDO.

I was conscious that many of the partners in the firm had only ever worked for BDO (Stoy Hayward as it then was).  It seemed to me that the graduate recruitment process was predicated on the idea that the best recruits would continue to want or could be persuaded to stay at the firm post qualification. And that all future partners would thus be home grown.

I offered the view that, “these days” the best people often chose to switch firms after they qualified. Those in smaller firms often wanted the experience of working for larger firms. Those in the (now) Big 4 want the experience of working for smaller but still ‘large’ firms. I also noted that as the firm grew so would it’s need to recruit expert partners who had trained and worked in other firms.

I suggested that we should focus our time and money on seeking to attract the best qualified accountants rather than the ‘best’ trainees.  This would reduce graduate recruitment costs and would free up resources to recruit potential partners of the future only after they had qualified.

But for the recession and the consequent reduction in job opportunities for newly qualified accountants I am sure that the pressure to move post qualification would be just as strong now as it was 12 years ago.

I applaud PwC’s move to widen its net although I sense from their press comment that the change is not as big as it seems. But it is a sign of the times.

I predict that the profession will reduce its intake of graduates into trainee positions in the coming years. Increased automation means that many compliance related services will no longer appeal to graduates (if they ever did). And audit work is largely drying up at the smaller end of the market. Most importantly, firms looking to reduce their costs will not want to engage new graduates to perform ever more basic tasks. These will increasingly be performed by non-graduates. In effect graduates will become too expensive to be accountancy trainees in the conventional sense.

What do you think?

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How sure are you that you'd survive a negligence claim?

Most people prefer to avoid thinking about this. Everyone does their best of course – though a little thought often reveals that they are taking more risks than they would choose to do so. And the public are getting more litigious – especially if making a claim enables them to avoid paying for advice they didn’t like.

When I present my talks on ‘How to avoid negligence claims‘ I often start by asking the attendees if the thought of a PI claim ever keeps them up at night. Most say ‘no’, others reply ‘sometimes’ and a few answer ‘yes’ and add further comments:

  • Convinced my knowledge is not as uptodate as it should be but working on it
  • Anyone doing a proper job will be sued at some point in time;
  • Could lose everything;
  • Failure to recognise a claim or a potential claim;
  • Fear of getting it wrong;
  • I have discovered some ‘Donald Rumsfeld’ type “unknown unknowns”;
  • I know I don’t know everything!
  • Because even though conscious of PI issues I am always prone to human error;
  • Due to the ever-changing laws, regulations and the purposive construction of the law;
  • In case I do something wrong that I’m not aware of.
  • Lack of internal controls;
  • Professional image, loss of clients, disciplinary issues with the Institute;
  • Reputational impact and interpretation of advice;
  • Some clients may misinterpret the advice we gave them;
  • Sometimes – if I know I have made a mistake.
  • The law is changing very rapidly and it’s difficult to keep up to date;

I accept that there is little point worrying about something over which you have no control. Remember the old adage: Worry is like a rocking horse; it gives you something to do but doesn’t get you anywhere.

The key point I am driving at when I ask the question during my talk though is whether you are aware of the risks you run in your practice and are taking an appropriate amount of precautions to limit the downside. As some of the respondents implied above, you cannot be in practice, whatever your profession, and not run the risk of making a mistake that costs a client money or of a dissatisfied client alleging that you have been negligent. Equally you cannot operate effectively if you are constantly worried about these risks.

In my talk about How to avoid professional negligence claims I encourage attendees to recognise that the risk of problems arising can be distinguished between those likely to have a big impact and those that will have little impact. Equally some problems are more likely to occur than others. Your response to different risks should depend upon their potential likelihood and their potential impact.

I have also written a 10,000 word ebook drawn from my talk on How to avoid professional negligence claims, containing tips and risk management advice for accountants in practice. You can buy the book or download a summary for free here>>>

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How sure are you that you’d survive a negligence claim?

Most people prefer to avoid thinking about this. Everyone does their best of course – though a little thought often reveals that they are taking more risks than they would choose to do so. And the public are getting more litigious – especially if making a claim enables them to avoid paying for advice they didn’t like.

When I present my talks on ‘How to avoid negligence claims‘ I often start by asking the attendees if the thought of a PI claim ever keeps them up at night. Most say ‘no’, others reply ‘sometimes’ and a few answer ‘yes’ and add further comments:

  • Convinced my knowledge is not as uptodate as it should be but working on it
  • Anyone doing a proper job will be sued at some point in time;
  • Could lose everything;
  • Failure to recognise a claim or a potential claim;
  • Fear of getting it wrong;
  • I have discovered some ‘Donald Rumsfeld’ type “unknown unknowns”;
  • I know I don’t know everything!
  • Because even though conscious of PI issues I am always prone to human error;
  • Due to the ever-changing laws, regulations and the purposive construction of the law;
  • In case I do something wrong that I’m not aware of.
  • Lack of internal controls;
  • Professional image, loss of clients, disciplinary issues with the Institute;
  • Reputational impact and interpretation of advice;
  • Some clients may misinterpret the advice we gave them;
  • Sometimes – if I know I have made a mistake.
  • The law is changing very rapidly and it’s difficult to keep up to date;

I accept that there is little point worrying about something over which you have no control. Remember the old adage: Worry is like a rocking horse; it gives you something to do but doesn’t get you anywhere.

The key point I am driving at when I ask the question during my talk though is whether you are aware of the risks you run in your practice and are taking an appropriate amount of precautions to limit the downside. As some of the respondents implied above, you cannot be in practice, whatever your profession, and not run the risk of making a mistake that costs a client money or of a dissatisfied client alleging that you have been negligent. Equally you cannot operate effectively if you are constantly worried about these risks.

In my talk about How to avoid professional negligence claims I encourage attendees to recognise that the risk of problems arising can be distinguished between those likely to have a big impact and those that will have little impact. Equally some problems are more likely to occur than others. Your response to different risks should depend upon their potential likelihood and their potential impact.

I have also written a 10,000 word ebook drawn from my talk on How to avoid professional negligence claims, containing tips and risk management advice for accountants in practice. You can buy the book or download a summary for free here>>>

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10 key actions you need to take when starting an accountancy firm

These are not the only ten things you need to do, but they may be the most productive:

1 – Draft a business plan

What do you want to achieve in revenues within a year, 2 years, five years? What will you need to do to achieve those objectives and what will be the consequences and cost of doing so?  Drafting the plan and incorporating cashflow projections will force you to consider related issues and to plan what actions you will need to take to achieve your objectives. Identify and arrange all relevant business insurances as well. Will you work alone or need admin, secretarial or technical support staff? Will you do everything alone or use a Virtual assistant? Sub-contractors? How  will such decisions impact your cashflow projections?

2 – Clarify your service offerings

Will you be servicing private clients? Unincorporated businesses? Partnerships? Limited companies? Everyone/Anyone? (That’s always a mistake by the way). Will you be compliance led or also offering advice? On what subjects do you have the credibility and experience to provide valuable advice?

3 – Draft a marketing plan

How are you going to secure new clients? Where will you go? What will you do? What will you say? What will you spend?

4 – Distinguish yourself

Avoid being seen as just another accountant. Unless you do this you will probably struggle to pick up work from established businesses and from taxpayers who already have an accountant. Your distinction needs to be real and not a figment of your imagination. And it needs to benefit your target clients.

5 – Consider your pricing and billing strategy

Many new firms start by undercutting the competition. This means they build small practices full of cost conscious clients who will never move onto paying commercial fees. Decide whether to set fixed fees for compliance work, value based fees or the more traditional time based charges. Beyond fee levels determine your payment terms – up front, partial upfront, standing orders or only billing after the work is completed with payment due within 7 days? 14 days? 30 days? And what will you do if your payment terms aren’t met?  Factor such decisions into the cashflow projections in your business plan.

6 – Target a niche

You will secure more clients faster if you are perceived as having a special focus on a specific niche – be that clients in a specific business type (eg: shop owners, hospital consultants or dentists), or those with specific issues (eg: overseas property, divorce, large family, business start-up)

7 – Clarify the competition

Research online, in local newspapers, directories and in high street. Check out what others are doing, saying and claiming. You may find someone else has a similar focus to you. Their credentials and promises will be different to yours. You will need to understand those differences and whether this offers prospective clients a choice or means you should consider an alternative niche.

8 – Establish commercial processes

From client sign-up through to billing and cash collection. From the production of tax returns, accounts and reports and your IT infrastructure. Will you be happy to work in the ‘cloud’ or will you need hosted applications and backup facilities?

9 – Keep uptodate

Sign up for online and relevant technical updates across all the areas of work you will be doing. If you prefer hard copy updates subscribe to relevant magazines too. Consider your CPD obligations and how you will satisfy these. Many accountants (over 2,000) have registered to receive unique weekly practical tax updates written especially for accountants in general practice.

10 – Identify reliable technical support

Your professional body may provide a helpline facility. You may be able to call on ex-colleagues. And of course there’s the Tax Advice Network where you can source specialist tax advice as and when you or your clients have a tax problem, challenge or issue that goes beyond what you’re comfortable dealing with yourself.  Register to receive complimentary weekly practical tax updates written especially for accountants in general practice.

What else do you suggest needs to be done?

I have written a 10,000 word ebook containing insights, short-cuts, tips and advice for accountants who have already or are about to startup a new practice. You can buy the book or download a summary for free here>>>

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