Don’t let FOMO delay you moving your practice into the cloud

Whenever I talk with accountants about cloud accounting I suspect that many suffer from FOMO. Sometimes their FOMO has worked in their favour and prompted them to take action. More often their FOMO is holding them back from making a decision. And the constant deferral of that decision is slowing down the development of their practice.

FOMO

FOMO is more commonly used to describe the anxiousness we feel that others might be having more rewarding experiences than us – often by attending an event to which we have not been invited. This causes a Fear Of Missing Out (FOMO).

Some of the sole practitioner accountants who want to work with me do so because their FOMO is related to the fact that other accountants appear to be more successful than them. Rather than simply continuing to work alone, a FOMO has prompted these accountants to seek my help and encouragement. That’s great, but it’s not the FOMO to which this blog post refers.

The concept of ‘cloud accounting’ software has been around for almost ten years. Throughout this time there have been commentators telling accountants that they must ’embrace the cloud’.

Some of the accountants who have done so will now only take on new clients who are either already using a specific cloud accounting solution, or who are prepared to move onto it. Others are happy to work with clients whichever cloud or manual accounting system they use.

Many other accountants have held back from exploring the options or from making a decision.  In part this is often due to FOMO. Or perhaps, more accurately a FOMAWC (Fear Of Making A Wrong Choice).

Is it worth it?

What seems to be happening is that many accountants are often NOT (yet) fully aware of how much potential cloud accounting has to revolutionise bookkeeping and accounting services. Nor are they aware of quite how much of an impact this will have on their practice in the next few years.

So there appears to be no urgency to move into the cloud. Any anyway before making any such commitment they feel they need to investigate at least 3 (or more) different solutions. This takes time and involves comparing features and benefits that don’t always turn out to be as relevant as you originally anticipated would be the case.
Is it necessary?
I do now think that the time has come.  For almost ten years I said there was no rush.  But MTD is now fast approaching.  Once it is upon us I believe that you will struggle to service your clients cost effectively if you are not using a cloud accounting system. I have heard stories of accountants who will take years to move all their clients into the cloud if they continue only doing so at the same rate as they have done in the last year or two. That will be too late for MTD.
As I have mentioned before, even I now accept that we are reaching a tipping point. This is indeed a direct consequence of my having attended the QuickBooks Connect conference in San Jose in November 2017 and other more recent exhibitions and conferences. There is so much more going on here than simply doing basic bookkeeping ‘in the cloud’.  Some people reference the eco system that ties into cloud accounting software. This generally refers to the wide range of related software applications that have direct links and which can populate and or draw information directly from the cloud bookkeeping system.

These apps provide many opportunities to enhance client service, to steal an edge on one’s competitors and to build a more successful and sustainable practice, faster than might otherwise be the case.  Accountants will start to lose out if they are unable to advise clients as to which apps work with their bookkeeping system and which are well suited to the client in question.

What is also clear to me is that accountants now need to adopt a cloud accounting solution for their own practice.  It is only after doing this that they really ‘get’ cloud accounting and can genuinely enthuse about the benefits to clients.

What’s the problem?

But here is the real issue. This is where the FOMO comes into play as there are so many options. There is a choice to be made. The decision will therefore take time.  Time we don’t have. We’re already busy and stretched. Yet we would want to make time to research the options, to compare them, to talk with other accountants and to decide whether to only work with one supplier or to work with more than one. And, which one to use for the accounting practice itself.

Perhaps we are also aware of the concept of conducing a ‘feasibility analysis’. Wow. That will be time consuming too. When your practice is running ok, it’s hard to even think about making time to conduct such an exercise in preparation for investing in some new technology.

Past experiences

Many older accountants remember getting their fingers burned when they first chose a desktop accounts preparation system, a tax return system or any of the other tech in which they have invested over the last 10-20 years.  Often the tech was oversold but many accountants didn’t feel it was so bad that they needed to look into switching to something new.

Accountants often feel trapped. They don’t like the system they have been using but they doubt that any of the alternatives would be sufficiently better. They also doubt whether the hassle of switching from one to another is really going to be worthwhile.

Plus, those past experiences also impact the decision making process. When choosing a new system or tech solution, we want to identify which features and benefits really matter to us and our clients. This isn’t always obvious until too late.

Necessary features and benefits

This reluctance to move forwards is understandable. But it can also cause stagnation. And anyway, you might not understand the real benefits to you and your practice of some of the features of the different options. This is a frequent issue in all works of life from choosing a new car, to a new kitchen and even a new laptop.

Some suppliers are wise to this and seek to get you on board with low cost initial offers – so you can effectively ‘try before you buy’.

What’s best?

Sorry, but I’m not in a position to recommend one supplier over another.

Online forums frequently reflect questions from sole practitioner accountants asking “Which is the best cloud bookkeeping system for a small practice like mine?” No doubt this is in the hope that a consensus has emerged as to the key options. However most respondents don’t have the experience to give a fully researched reply; they simply recommend the solution they have chosen – or the one they switched to after first trying something else.

This crowd sourcing of a short-list of options can be useful though, even if it rarely provides a definitive answer. What’s best for one accountant and their client base won’t always be best for others.

There is also the risk of making your choice only because it allows you to continue doing things the way you have always done them. This seems good initially as it minimises disruption. However it can also be very limiting and prevent you from taking advantage of new techniques that could help evolve your client service and to develop related advisory services.

Accountants I talk with who have yet to move their practice into the cloud feel that they can’t afford to pick one solution at random and then find later that it isn’t the BEST. So they put off exploring the options and making a decision. They have a FOMO and may end up with a less than optimal solution in due course when they rush to make a decision. And then they will be stuck with it – as they won’t want to spend time switching later.

I recommend that you book a series of one hour ‘Cloud bookkeeping research meetings’ (with yourself) in your diary over the next few weeks and set a deadline to move your practice into the cloud before the summer. I honestly don’t think you can afford to leave this any longer.

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What are you doing about your clients’ uncertainty about the future?

When I talk with accountants, which I do a lot, I often sense an unspoken concern about increased ‘uncertainty’ in their world.

It is clear to me that many business clients are uncertain, many private clients are uncertain and also many accountants themselves are uncertain.

Business clients

They are uncertain about future sales and expansion, funding options, the impact of Brexit and long term investment plans.

Private clients

They are uncertain about investment returns, future income sources, planning for retirement and funding long-term care costs.

Accountants

They are uncertain about all of the above! And the impact these uncertainties will have on their client base. Accountants are also uncertain about the impact of MTD, the continued increase in software solutions (not just cloud accounting options), the real value of their social media efforts, the ROI of marketing costs, the best processes to put in place to save time and the future of their practices.

What does this mean?

During periods of uncertainty most people seek greater stability and security. (NB: That’s not intended as a political observation!)

Typically their fear of failure increases and their appetite for risk reduces. This is human nature but you may be different. You may prefer to ‘zig’ when everyone else ‘zags’. Maybe this is your way (and your time) to STAND OUT from your competitors and peers. If that’s how you feel, well done. Just ensure that your chosen approach means you STAND OUT in a positive light among your target audience.

So what?

Regardless of your attitude to risk, the question I suggest you ask yourself is: What additional support and advice do my clients and prospects require during these uncertain times?

Can you tap into their current needs, struggles and challenges?

I have long encouraged the accountants with whom I work to find new ways they can offer to help their clients. Offering help (from a position of experience and expertise) is very different to trying to sell additional services. And yet, it still typically still leads to additional business.

The starting point here is to increase your visibility with those people (clients and prospects) who are most likely to want your help. To ensure that they know you are there and able to help them. Will they all respond positively? Some will; some won’t; so what? You will have reminded them that you are there and that they can approach you to help them with their current challenges.

It’s not hard. You could pick up the phone, as I often do; you could send an email or you could evidence your interest by asking relevant questions when you next meet clients.

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Categorising your accountancy firm’s clients for the future

Do you ever think about how your practice and your client base might be impacted in the next few years by changes in technology?

Historically most clients stay with their accountant for many years. They generally move only when they feel their accountant doesn’t care enough about them, puts their fees up significantly or messes up.

What we are likely to see more and more of over the next few years concerns what I might call ‘simpler’ clients, deciding that they don’t need an accountant any more. It won’t be long before they decide that it has become so easy to go the DIY route; and that their accountant doesn’t provide sufficient peace of mind or added value to justify continuing to pay them an annual fee.

In this context I would suggest that it makes sense to consider the impact of such changes on your client base by categorising your clients in terms of the level of service required, the amount of time they take and their future value to the practice.  I have summarised this approach as follows:

  1. Complex (or sophisticated) clients – those that require advice to resolve issues on a regular basis
  2. Ambitious clients – those that recognise they benefit from your business advice, but whose affairs are not very sophisticated or complex
  3. Typical OMBs – the majority of  ‘Owner Managed Business’ clients
  4. Sole traders, consultants, contractors – those swapping their time for money and whose growth is therefore limited by the hours available.

This is quite distinct from more traditional categorisation approaches, such as the ABCD client types I have referenced before:

  • A = Best clients (however you define them)
  • B = Those with the potential to become A clients
  • C = Those who are no trouble but are unlikely to become A clients
  • D = Those you’d rather not act for.

Most accountants know only too well who are their D-list clients 😉

Each accountant will set their own criteria for ‘best’ clients. Fee levels may have a bearing but so too may other factors such as the range of services required, each client’s attitude to you and to paying decent fees as well as their propensity for referring other good clients to you.  Clearly you want to nurture and keep in touch with your A-listers. Many, if not all of them, will be Complex or Ambitious (as defined above).

The distinction between clients on your B-list and C-list is less crucial. If you ever get this far, the value comes in identifying those B-listers who, with some encouragement could become A-listers. And those C-listers you want to retain even though they aren’t contributing very much. Crucially, they are good payers and nice to deal with so should not be confused with D-listers.

In contrast, the four new categories I have highlighted are intended to focus attention on those clients most at risk as compliance work becomes more commoditised, as clients become more familiar with cloud accounting systems and as AI further simplifies the role of the traditional accountant.

My conversations with sole practitioner accountants suggest that the vast majority of their clients are in categories 3 and 4 above.

Looking at them in turn:

Sole traders, consultants and contractors –  The liklihood is that these clients will have less need, than they do now, for accountancy support in a few years’ time. Much of the recurring compliance focused service they get from you will fall in value due to the increasing popularity and ease of use of bookkeeping apps and new simplified tax filing obligations. And so the fees that such clients will be prepared to pay you each year will also be lower (or maybe non-existent!). Chances are they won’t be paying more than now or requiring much in the way of ongoing advice.

Typical Owner Managed Businesses – Much the same will be true here as for the sole traders etc. I distinguish them though as they could grow, so they may have more potential for additional services and advice. They may also need help with more frequent enquiries from HMRC. The question will be whether you can ensure they appreciate the value of the advice you can provide to them and that they are willing to pay decent fees to you for such advice.

Those clients you want to encourage and retain are those in the first two categories (Ambitious and/or Complex). The sooner you start focusing your attention  on winning and retaining such clients the more confident you can be that your practice will survive and thrive in the future.

To what extent do you currently attract and advise Ambitious clients who recognise the value of your business advice (and are both willing and able to pay for this)? And also those ideal (for many) clients, whose affairs are Complex such that they regularly require your advice on a range of issues? These might include: property/business acquisitions, sales, HMRC challenges, specific tax incentives, anti-avoidance rules and so on. If you do not consider these to be areas of expertise at the moment I would encourage you to expand your skill set so that you are better placed to retain these clients in the future and to win new ones too.

Larger firms have long recognised the importance of focusing on clients who fall into the Complex and Ambitious categories. Historically though this has been because the smaller and less complex  clients are less economic for bigger firms to service. Imminent developments in technology mean this could well become the same for smaller firms too.

Does this analysis resonate with you? If not, how would you  categorise your clients for the future?

What’s next?

Once you have categorised your clients you can start to forecast the likely impact on your firm’s finances and resource requirements. Historically you may have assumed that little will change in the foreseeable future. I have echoed these views for a long time now. But we are now approaching a tipping point. You can probably continue with those assumptions for another couple of years but I’d strongly encourage you to forecast what might be happening thereafter. Then you can start planning now so that you don’t lose out or have to panic as you play ‘catch up’.

If you’d like to have a chat about how you can promote and build your practice so that it is sustainable into the future, feel free to book a call with me >>>

Why your current client base may not survive into the future. A new way of analysing an accountant's client base. Click To Tweet
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Has your practice plateaued?

My conversations with sole practitioner accountants over the years suggest that many are happy enough once their business has plateaued.

‘Happy enough’ is hardly an enthusiastic summation of how things are going. It suggests a degree of reluctant acceptance. The underlying message perhaps is that things could be better but the accountant is used to things as they are. It’s not so bad that it’s worth reviewing what could be different as there is a concern that this will highlight issues best left hidden. Or that any change will involve more hassle and fuss than seems worth the effort.

I have encountered this view many times over the years.  It becomes a particular challenge when retirement looms – and when the accountant realises that no one will pay a sufficient sum for the practice as things stand.  In recent times it is becoming the norm for higher prices to be paid only for those firms with well established systems and processes. IT takes more than few months to transition an old style practice into a new one pre-sale.

In 2006, when I first started this blog, I said it was for Ambitious Accountants as I thought it was a good title. I thought it would help to distinguish those who wanted to move their practices on from those who were happy with the status quo.  I dropped that title though when I learned that many, many smaller firms of accountants are not ambitious – nor do they need to be, if the owner is  generating a good enough living, without working crazy hours, and is only doing work they enjoy, for clients who appreciate it, and who pay decent fees without a fuss.

In practice many sole practitioners settle for much less than this. They work long hours, do too much work they don’t enjoy, hang onto legacy clients who won’t pay decent fees and feel under constant pressure to get everything done. There’s no time to review how they run the practice or to take steps to change things. “What will be, will be. I’ll cope, just as I have always done.”

I hear about these frustrations in running a small accountancy practice all the time and it’s not getting any easier. There are a number of new factors that will have an impact in the near future – even though none of them will have an overnight effect:

– new and more aggressive competition;

– recent and prospective changes in the tax regime that will impact the way that accountants work;

– the increasing interest in cloud accounting solutions and the extent to which these will change the accountants’ role;

– the introduction of MTD; and

– other developments and pressures that will change clients’ perceptions and needs.

Sole practitioners have long heard and ignored the predictions of change that will adversely affect their practices. I have long maintained that these predictions forecast a future that will  reveal itself over an extended period. There hasn’t and won’t be an overnight revolution. Many of the forthcoming changes will hit larger firms before the smaller firms are affected. Smaller firms can adapt faster as and will do so only when it becomes necessary to do so.

Having said that, many accountants in smaller firms do want to increase profits, reduce the time and hassle of running their practice and, the older ones, also want to ensure they are well set up for their retirement.

How about you? Has your practice plateaued? Do you want to take control, or just let events take their course? One starting point could be the Successful Practice Programme – a low cost series of weekly emails designed to help you move things along so that you are comfortable you are running a successful practice. Full details here >>>

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How prepared are you for what’s coming?

If there was ever an award for the most obvious predictions in finance, I might have won with those that I made in 2009.

At the end of my presentation at the Mercia Partners’ conference, I did, as I had been asked, and offered my predictions as to what would happen in the coming two years. I said;
• There will be numerous changes that will impact your practice.
• There will be new challenges to overcome.
• There will be new opportunities to exploit.

Looking back it’s hard to imagine why I bothered. In effect, all I was saying was that we don’t really know what’s coming next.

To be fair though, in my presentation I had also offered my traditional counter-balance to those commentators who constantly warned of gloom and doom. And of the need to change the way you do things “NOW” or allow your practice to fail. I asserted strongly (and accurately, as it turned out) that none of those changes would have an immediate impact on smaller firms of accountants.

Since then lots has changed. But equally little has changed in that we still have commentators telling accountants that you are about to lose huge swathes of clients, that you must invest in (their) new products and that you will have to make significant changes to your business models.

In reality the changes will not impact you overnight. They never do.

Looking back it’s clear there have been some major changes in the way the profession operates since 2009 and there are more to come. But it’s no wonder so many accountants are a little complacent.

None of the dire warnings I was (accurately) debunking in 2009 came to pass. There is still plenty of time now to adapt to take advantage of the changes afforded by cloud accounting packages (that were in their infancy back then). And the impact of AI is not (yet) right around the corner.

Nevertheless, if you want to grow your practice it is clear to me that you will find this easier if you develop your skills to provide more higher value advisory services. It will be become increasingly more difficult to build a sustainable and profitable practice if you continue to focus only on offering basic compliance services.

The accountants who choose to work with me, to secure their future success, know they can trust me to avoid the hype they hear elsewhere. They know I’ll help them on their journey and help them avoid needless and premature investments.   And they know I’ll also help them to be ready for the changes yet to come – including those yet to be identified.  How prepared are you for what’s coming?

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The end of accountants is nigh. Or is it?

Let me save you some time. Yes, the accounting profession is going through (another) period of unprecedented change. There will be fewer jobs for accountants in the future. There will be fewer large firms of accountants in the future. But there will continue to be plenty of work for savvy sole practitioner accountants for many years to come.

The remainder of this blog post explains my thinking. I’d love to know whether you agree.

Another period of ‘unprecedented’ change

Many commentators are (again) suggesting that the move to cloud accounting has reached a tipping point and is now creating a period of unprecedented change for accountants. I’ve tracked similar warnings about cloud accounting back to at least 2009 when I dismissed the warnings as being too loud and too soon.  There has been an increasing move into the cloud over the years and accountants have adapted – as they will continue to do.

Another big change ‘now’ is the rise of Artificial Intelligence (AI). Again, I suggest that the real impact of AI is somewhat down the line. And no, I do not see how it can replace the role of sole practitioner accountants – any more than the move to quarterly reporting to HMRC (part of the Making Tax Digital initiative) will decimate accountants’ client bases.

Fewer jobs for accountants in future

This prediction follows two key changes. The first is the (now) increasing move to cloud accounting, the influx of apps and automated facilities that reduce the need for so many accounting staff in finance departments and in firms of accountants.  The second change is the rise of AI which, over time, will only add to this trend. But neither of these changes will reduce the need for savvy sole practitioner accountants. Their activities may need to evolve but, as always, nothing will change their client base overnight.

Fewer large firms of accountants in the future

This seems obvious to me as the costs of running large firms continue to increase without any commensurate rise in productivity or quality of service to their smaller clients. Every decade sees more mid-sized firms merging and claiming this will help clients. Typically though the mergers are driven more by a desire to reduce overhead costs and thus maintain profits per partner.

Clients, on the other hand, are increasingly looking for lower fees and want evidence that they are better served by a larger firm with higher staffing costs than smaller firms. Over time this means that more and more smaller clients are moving to smaller firms of accountants. The exceptions are those who perceive that they are better served by a larger firm with higher fees and staffing costs than smaller firms.

It is no longer cost prohibitive for smaller firms to promote themselves aggressively in competition with larger firms, thanks to the internet and low-cost online marketing opportunities.  I have long seen a future where accounting firms are increasingly polarised – a few very large ones and thousands of very small ones. This will better match the demographics of the business world. Although many people glibly talk about SMEs, the official stats reveal that over 99% of  UK businesses are small (not medium-sized). And a very large proportion of them are, in fact, micro businesses. How many of these businesses or individual taxpayers need services that cannot be provided by smaller firms of accountants?

 Sole practitioners

A while ago, I decided to focus my advisory and support services on sole practitioner accountants. Yes, I also have plenty to say that is of value to those in larger firms and this is why I am engaged to speak at conferences for larger firms and for international associations. But I love working with savvy sole practitioner accountants who are keen to become more successful. And so yes, of course, I see there is a future for them. Their roles and activities will continue to evolve, as they always have done, and I will be there to help them.

I have worked with sole practitioners for many, many years. And I have constantly been debunking the ill-informed nonsense they are fed about the short-term impact of major changes.  When the first Accountex conference took place in November 2012 I was invited to write an editorial for the show guide. In it I set out dozens of ‘major’ changes to the accountancy profession that we had witnessed over the preceding twenty years. Most had been predicted (by others) as likely to have a major impact on accountants.  However, in every case accountants adapted. Some retired early but they were replaced by more accountants choosing to start their own practice. Many of these new entrants had been made redundant by the larger firms who were slimming their workforce as a result of mergers (see above). This trend is continuing.

The rise in home working and mobile working is also contributing to a rise in the number of sole practitioners and smaller local firms. For some years the professional training syllabus has been evolving to ensure that newly qualified accountants have better business skills than ever before. This, I suggest, is fuelling a desire to be one’s own boss, to run one’s own practice and to move away from the politics and cost pressures of working for mid-sized firms. An increasing facility to allow staff to work from home and whilst mobile can only increase the desire to cut loose from the mother-ship and go it alone or to create a new smaller and local practice.  As I noted earlier it is much easier and cheaper to market a smaller practice than ever before.

Those sole practitioners who are resistant to change will become increasingly frustrated. More will retire early (as did their predecessors) rather than adapt and develop their skills. Other commentators talk about the need for accountants to develop new skills. In many cases though, it’s simply a case of refining and repackaging services to highlight the benefits to clients and the value delivered.  Guess what?  These are topics I have long addressed through my own service offerings to sole practitioner accountants.

Conclusion

The future for accountants depends on whether you are employed in industry, employed in practice or engaged in practice. And on whether you will be in a large firm, running your own accounting firm or running a niche practice of some sort. I believe there is a strong future for savvy sole practitioners who are willing to adapt and move with the times.

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This is the problem for medium sized firms of accountants

This blog post was prompted by a tweet. It was posted by a top 30 firm of accountants:

“Are you aware of the range of services we provide? We do more than just a set of books at year end. Take a look”

There was then a link to a page on their website which described all the services the firm offers. It was pretty generic and almost identical to the list you’d find on almost all medium sized firms’ websites.

And that’s part of the problem for firms like this.

They have to allow for the variations in style, approach and service provided by so many people within the firm. As result the overall service promises are bland and interchangeable. Of course they are.

Each medium sized firm’s name and branding only takes them so far.

Their ideal clients will shortlist a number of firms as advisers. I’ve done it myself in recent years when seeking new accountants for a charity and for a members’ club. The first time I did this from the client side I realised how much it’s down to the individual partners to impress at pitch meetings. They need to evidence their teamwork – beyond bland assertions. And they need to distinguish their service offerings from their competitors. And yet – how different can they really be?

What makes the difference when it comes to choosing one firm over another? The people are often interchangeable. This is evident from the way so many people move between firms. There is even more movement and poaching of partners from firm to firm now than there was when I was in practice.

So is it the firms that are really different or just their branding and marketing? Most often it is only the latter. Is that enough? I think not.

What also struck me about the services on the web page referenced by the tweet was that the list started with a reference to ‘auditing’. Given that most companies with a turnover below £10million no longer need an audit it seemed an odd service to highlight to visitors from the firm’s twitter account. I doubt many CFOs or major shareholders of substantial corporates are following the account. So talking about auditing will have been irrelevant (and thus a turn off) for the majority of those who might see the webpage.

Ok. Maybe that simply highlights an overly ambitious social media manager. It’s all too common to see accountancy firms tweeting to a non-existent audience. I’ve addressed this topic before on my blog so won’t say more today.

My final observation by reference to the tweet concerns the language used on the webpage. It’s really jargon heavy. I don’t consider myself a marketing or copywriting guru. But I do recognise when language isn’t appropriate for the target audience. That page is written for accountants rather than in language that will resonate with clients. Again, this is a common mistake made by accountancy firms – of all sizes.

If I’m generous perhaps the tweet and the webpage are actually intended to support the firm’s recruitment effort. In which case well done to those involved. But this doesn’t change the main point I am making here.

The problem for medium sized firms is that they rarely offer a compelling reason for smaller growing businesses to engage them. Unless the individual partners have built solid reputations and followings. And cost conscious business clients are increasingly aware that larger firms charge higher fees than smaller firms. Yet the medium sized firm offer pretty much the same service as smaller firms. So why go to a larger (medium sized) firm and pay higher fees?

The standard reply to that question is that ‘our firm offers a wider range of services. All available under one roof.’ Ok. But how does that benefit me as the client? Especially if I have to pay higher fees for the basic services I need every year?

I first referenced this challenge in a blog post in July 2010: No long-term future for ‘halfway house firms of accountants’. This was a term I used to reference the same medium sized firms that I am referencing in this blog post. In 2010 I said:

“They are constantly fighting to become more efficient so as to reduce costs and maintain, let alone, improve profit per partner.”

“The only mid tier firms that will survive and thrive are those with clearly defined niches. By this I mean those that are known for having an area of expertise that makes them really stand out from the pack. They recruit staff and partners specifically to bolster this expertise and they don’t waste time and money trying to be all things to all people. And these firms will only survive as regards those specialist areas. The more generic areas of their practices will shrink as partners retire or leave to go to smaller firms with lower overheads and potentially higher profits per partner. The smaller firms will often be less pressurised environments too – especially if they stick to clearly defined, promoted and valued niche”.

“Those mid-tier firms that have no such recognised niche expertise will face increased pressure from the egg-timer squeeze of both the largest firms and of the smaller more focused and cost-effective firms. The larger ones are perceived as having more credibility for the provision of a wider range of services – when these are needed and valued. The smaller ones are able to provide compliance, advisory and special services more cost effectively.”

Since writing that blog post we have seen a further merging of medium sized firms. This will continue to happen, I suggest, at a faster pace over the next ten years.

There aren’t enough larger clients to go round. Medium sized firms of accountants have many smaller clients too. Clients who don’t need access to a wider range of services and who would typically be more profitable if their accountancy fees were lower each year.

The problem for medium sized firms is that they have to charge higher fees than smaller practices. And plenty of consultants are encouraging them to charge ever-higher fees too. I believe that a sizeable majority of clients of the medium sized firms do not secure enough additional benefits to justify paying higher fees than are charged by sole practitioners.

Over time the smaller clients drift away from the larger (medium sized) firms. This is evident from the number of established businesses that move to my clients – savvy sole practitioner accountants. They are able to provide more advice and to spend time with clients without being pressured to increase their billable time or to leave clients in the hands of managers.

The survival strategy for larger firms invariably involves merger and hope. And yet this only defers the inevitable.

A future in which there are fewer medium sized firms and more small firms and sole practitioners providing more cost effective and genuinely personal services to the majority of small businesses in the UK.

This all helps explain why I specialise in advising sole practitioner accountants.

I’ll happily speak at conferences and events run by larger firms. When I do that though my focus is generally on the individual partners and senior staff. I don’t advise firms on what they can or should be doing (other than re social media strategy where I do have a bit of a reputation in this regard). Many more medium sized firms will merge or break-up over the next ten years in my view.

So I address the individuals in the firms as ultimately it is them, their reputations and their expertise that clients need to buy. Backed up by the firms’ branding.

This is the real challenge for medium sized firms – they need to invest (even) more in making sure their people stand out from their peers and competitors. And yet, as partners build their reputation, credibility and following, so they become better placed to leave the firm and to take ‘their’ clients with them. And the more attractive becomes this prospect when coupled with the prospect of lower overheads, less firm politics and increased rewards. And fewer generic tweets about the generic services available from another medium sized firm.

 

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Where will accountants operate from in the future?

I was interviewed recently for a magazine piece about longer-term trends and changes in the accountancy profession. In this blog post I share my thoughts on one of the topics we discussed.

Where will accountants operate from in the future?

The options at the moment tend to be high street office, above a shop, off high street office, home or serviced office.

With increased rent and rates, reduced need to storage space, more cloud working and more remote working the options increase and could include:

1 – A hub of accountants or professionals (maybe a precursor to becoming a multi disciplinary practice) or maybe simply to share overheads – as in Barristers Chambers

2 – Increased use of facilities such as NearDesk – which is a variation on and less expensive than serviced office facilities. You will want access to 2 or 3 screens to be efficient so simply working from a laptop in a coffee shop is probably not a long term solution.

3 – Virtual offices – maybe where you work from home but have a back drop that hangs from the ceiling to shield your personal space from view when you use skype, Google hangout or other forms of video conferencing. Or maybe the technology will evolve so that it can create a virtual backdrop of a virtual office!

The more time we spend working, the more we want and deserve to have a pleasant working environment. Gone are the days when accountants have to operate from a pokey office that makes you miserable just thinking about it.

Where do you think you might operate your practice from in a few years time?

 

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Accountants will become more like lawyers in the future

Most lawyers only know a world in which they have to quote fees and charge for the provision of advice.

Few solicitors have the luxury of charging recurring fees to clients who come back year after year for the same recurring compliance service. Accountants, on the other hand, tend to earn much of their fees from work related to their clients’ annual accounts and tax returns (hence the term ‘recurring compliance services’).

Lawyers and accountants are also different in another way. Most solicitors typically specialise in specific areas of law and their clients know this. If you’ve been to see a divorce lawyer you wouldn’t be surprised if they recommend a colleague or third party to resolve a commercial dispute. No one would mind if a property lawyer suggested you see someone else to help you with your will. And so on. Indeed, most people seeking legal advice would prefer to see a specialist rather than the same lawyer who dealt with some completely different matter on a previous occasion.

Following on the thoughts in recent blog posts here I believe that accountants have a choice. The best ones will, in my view, specialise and niche their practices. They will focus on a specific type of clients, industry or area of work. They will not attempt to be all things to all people. They will be happy to admit when clients have issues that require expertise that is outside of their comfort zone. They will charge higher fees when they give advice on matters that do not recur each year. And they will seek out opportunities to provide this higher value advice in their specialist niche areas.

Instead of focusing on their recurring client work each year they will operate more like lawyers and they will be more profitable, more fulfilled and more in demand.  Do you agree? Let me know what you think.

The above comments follow on from recent blog posts and are taken from the final section of my contribution to a report, ‘GRF is killing the profession‘,  recently published by Bob Harper. He says it contains contributions from “leading thinkers, advisers and consultants to the accounting profession.”  (Ron Baker, Bob Harper, Dennis Howlett, Mark Lee, Mark Lloydbottom, Michael McKerlie, Finola McManus, Steve Pipe and Paul Shrimpling)

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No long term future for ‘Halfway house’ firms of accountants

I used the expression ‘Halfway house’ firms of accountants for the first time today when commenting on an internet forum. It seems sensible to explain my thinking in a short blog post.

I had in mind those mid tier firms that are largely all but indistinguishable – in the eyes of prospective clients. It’s a harsh truth that is perhaps best evidenced  by the promotional flyer about which I have written in recent blog posts. I also made a similar point when reviewing an innovative online video produced by another mid-tier firm.

It’s partly the difficulty in distinguishing themselves that will be the downfall of many mid-sized (half way house) firms. They struggle to win competitive pitches, to attract new clients, to secure new partners with a following and to retain qualified staff. They are constantly fighting to become more efficient so as to reduce costs and maintain, let alone, improve profit per partner.  The recession has reinforced all of these challenges.

The only mid tier firms that will survive and thrive are those with clearly defined niches. By this I mean those that are known for having an area of expertise that makes them really stand out from the pack. They recruit staff and partners specifically to bolster this expertise and they don’t waste time and money trying to be all things to all people. And these firms will only survive as regards those specialist areas. The more generic areas of their practices will shrink as partners retire or leave to go to smaller firms with lower overheads and potentially higher profits per partner. The smaller firms will often be less pressurised environments too – especially if they stick to clearly defined, promoted and valued niches.

Those mid-tier firms that have no such recognised niche expertise will face increased pressure from the egg-timer squeeze of both the largest firms and of the smaller more focused and cost-effective firms. The larger ones are perceived as having more credibility for the provision of a wider range of services – when these are needed and valued. The smaller ones are able to provide compliance, advisory and special services more cost effectively.

How many businesses really need to be served by halfway house firms of accountants?

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The future of compliance services for accountants

Many commentators seem almost contemptuous when talking about accountants who focus on the provision of compliance services.

We’re told that fees are being forced down and that firms that focus only on compliance services face an uncertain future. I’m not sure I agree. If you have an established practice and know your clients well, you are not suddenly going to lose a swathe of clients who all decide to rush off at once.

About the only thing that could cause a speedy dissipation of your client base would be widespread publicity of your incompetence or negligence. Any other changes to your client base will be sufficiently gradual for you to take steps to stem the flow as and when it becomes necessary to do so.

Of course the better prepared and ready you are for such changes, the faster you will be able to adapt and evolve. I do think it will be evolution rather than revolution in this regard.

What will change first and fastest in my view is your ability to win and retain new clients if you and they are focused on compliance services. That means tax returns, bookkeeping and accounts preparation.

The issue will be the alternative ways in which these needs can be satisfied and the time and cost considerations of each option. Are you even aware of the alternatives to a traditional accountant? Again, many accountancy strategists have been predicting this development for years.

I do understand those views and I respect most of the commentators who encourage accountants to plan for the future. Indeed, I agree that’s a wise move, especially for larger firms where there is an inbuilt resistance to dramatic change. However, for most firms of accountants there needs to be something equivalent to a burning platform before there will be a consensus for fundamental changes. At the moment, few partners accept and believe that forthcoming developments will have such a big impact.

What do you think? Please add your comments to this blog post.

Like this post? You can now obtain my ebook containing loads more insights, short-cuts, tips and advice aimed specifically at accountants who want to STANDOUT and become more successful. You can buy the book or download a summary for free here>>>

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The future of auditing and assurance services

At a recent ICAEW conference on the future of auditing I realised how what was once a traditional service provided by most accountants, is almost extinct. It won’t die out completely but it’s certainly becoming more specialised as the number of companies requiring audits has fallen dramatically in recent years. And that trend is set to continue.

Not only is the audit landscape shrinking but the principles are changing. I won’t pretend to fully understand the new “Clarity ISAs” (International Standards on Auditing) but I understand that the UK will be an early adopter within the next two years. Audit firms will need to invest in new training and systems to comply – but there won’t be any additional fees so this is simply an additional cost to be covered.

I’d also mention that earlier this year the Treasury Select committee asked the FRC to review the level of non-audit work that auditors should be permitted to undertake for audit clients.

And the outlook on the financial reporting side is also changing. A recent EU proposal would exempt micro-companies from the financial reporting obligations in the 4th and 7th directives. The current UK Government sees this as deregulatory; Just think about the implications for your practice if smaller companies were no longer required to produce formal annual accounts other than for the taxman.

How will these developments impact your firm? Have you yet undertaken any form of strategic review, perhaps comparing your current structure with that which you will need in 2 or 3 years time? And how will you evolve over that period? Will your firm be one of those that offers alternative assurance products – such as The Assurance Report? Will you be competing with other firms that do offer this service? Whilst you may think you know what your current clients want in this regard, what about prospective clients?

Please share your views and comments below.

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