Practice of the Future Part 1: Key Accountancy trends professionals can’t ignore

By Jake Martin

6 min read

The Intuit ProCloud Partner Programme offers a package of benefits and support to help accounting professionals looking to work with their clients online. The ProCloud Partner Programme benefits are free to accountants and bookkeepers with at least one QuickBooks Online active client*. Join now.

This blog post is adapted from a ‘Practice of the Future’ whitepaper, part of a series written by John Stokdyk, editor of AccountingWEB.co.uk, and sponsored by Intuit.

Prefer to print out and read the article? Download the full whitepaper now

The accountancy profession has been in a constant state of flux during the 21st century, reflecting the profound economic, social and technological shifts taking place around it.

Change is a constant within accountancy and its pace is accelerating; you can either accept it and adapt, or you can continue to do what you have always done. Those who choose the latter option run the risk of earning the same old fees from an ever-dwindling base of clients.

This blog post, the first in a three-part series, starts by analysing which market drivers are having the most impact on your profession. Later we’ll look at the challenges facing practice owners and managers, and suggested tools and techniques to help you steer your firm through the years to come.

As well as sketching out the trends that will shape the future of your practice, we hope these blog posts will stimulate new ideas on how you are going to get there. Let’s look at some of the key trends:

Accountancy Trends 1:  Less accounting and audit work

Several recent regulatory changes are likely to have a significant effect on practitioners. Consider the following:

• In October 2012 the Government relaxed the audit threshold criteria, and permitted exemptions to dormant companies and subsidiaries. Around 120,000 entities may no longer require a statutory audit, with a potential loss of nearly £400m in accountancy fees.

• Proposals are currently circulating on EU plans to relax statutory reporting requirements for micro-entities (below £578,830 turnover/10 employees/£289,415 total balance sheet assets).

• FRS 102 ‘The Financial Reporting Standard applicable in the United Kingdom and Republic of Ireland’ is set to come into force from January 2015, with early adoption permitted. The new standard is part of a package that effectively splices international financial reporting standards (IFRS) on to UK GAAP. Smaller companies will be allowed to continue using a new version of FRSSE that includes a few elements of FRS 102, but there won’t be much time to relax as FRSSE is likely to be further aligned to the new UK GAAP in the future.

The need for technical accounting expertise is unlikely to go away. But the people and businesses who seek professional help and the nature of the services they want will continue to change. If compliance work is becoming less important, are you ready to emphasise more value-added and consultative services in your practice?

Accountancy Trends 2: Commodification of personal tax

With the drive towards universal e-filing HMRC has emerged as the main point of contact for many taxpayers. Accountants may feel uncomfortable about this situation, but the complexities and frustrations of dealing with ever-changing rules and online systems are driving more taxpayers and businesses to seek professional advice directly from the source.

A look across the Atlantic can also show how the UK profession is likely to develop. Thanks to a longer US history of self assessment we can see how the market for personal tax work is dominated by large specialist combines such as HR Block. It’s a perfectly viable business model, but one that tends towards economies of scale and consolidation. As competition increases and margins fall on personal tax work, UK practitioners will need to explore new options to grow their businesses.

Accountancy Trends 3: The  market bulges towards the middle

As the global economic crisis set in, Office for National Statistics figures show that small accountancy firms, in particular, suffered a drop in numbers during 2008-9. But the supply of sole practitioners seems to be self-replenishing – particularly when small businesses and accountancy firms are cutting back – and their numbers have rallied since.

The biggest firms, meanwhile, appear reasonably stable and secure – until the next wave of acquisitions takes hold. The number of firms turning over £50,000-£250,000 has grown by roughly 10% during this period. Inflation may have pushed some firms up a notch on the turnover bracket, and fees at some larger firms may have fallen back. But firms with 3-7 partners taking part in AccountingWEB’s Practice Excellence Programme during the past two years have shown a visible improvement in their client satisfaction ratings.

While economic hardship has affected accountant-client relationships in most sectors, the mid-market surge supports the assumption behind the Practice Excellence Programme that firms will prosper on the back of good client service. Small firms are typically characterised by very personal service, with sole practitioners maintaining strong, one-to-one relationships with their clients. Medium-sized firms have prospered during difficult times by being able to replicate that intimacy on a larger scale.

According to comments from firms shortlisted for Practice Excellence Awards, they did this by putting systems and procedures in place to ensure consistency of service, seamless handovers between departments and fast responses to client queries.

Accountancy Trends 4: Demographic shifts

Accountancy is wrestling with a serious generational divide between the 50+ baby boomers (born 1946-1964) who control many established firms and the succeeding generations who have found their career paths blocked by older incumbents, or seen their prospects blighted by economic stagnation or a burden of debt.

Several different generational groupings have been identified, from Generation X and Y to younger “Millennials”. All of these groups have grown up with technology and are likely to be more willing to pick up new tools than older, more senior staff. If the firm drags its feet, these digital natives will merely bring their own smartphones and tablets to work. They also have less rigid attitudes to organisational hierarchies and more flexible work habits. To recruit, retain and manage them effectively will require systems suited to their capabilities and preferences, and a more collaborative mindset.

Accountancy Trends 5: Technological transformation

In case you haven’t noticed, a technology revolution has been underway during the past five years, driven by third (and fourth) generation smartphones and cloud computing. By 2014 more users will access the internet via a mobile device than a traditional desktop PC, according to Morgan Stanley Research.

These mobile users are also pushing the mainstream adoption of the cloud, where it doesn’t matter what device connects you to the web. Mobile and cloud applications challenge companies like Microsoft and Sage that rose to prominence during the PC revolution, but they also create opportunities for new business processes and ways of interacting with staff and clients.

The numbers can be quite surprising: Intuit has 60 million customers and 45 million of them are being served by connected services. Social media is a case in point. Networking platforms such as Twitter, Facebook and LinkedIn show how consumer-focused cloud services have infiltrated the business computing landscape. The web offers limitless possibilities to develop one-to-one relationships with clients and prospects. Rather than trying to hold back the tide, smart accountants are exploring how they can adapt these facilities to their changing practices.

Now what?

The combined effect of all these accountancy trends will create a less structured accountancy profession. In place of bread-and-butter small business clients, firms will need to seek out new niches to differentiate themselves and develop specialised service lines to cater for their clients. Work will be modular and based more around project teams who come together for specific assignments.

Many of these initiatives will involve subcontractors, external partnerships and temporary engagements, so workplaces and management techniques will have to adapt to this new flexibility.

We’ll look at these accountancy trends and explore the challenges you face in more detail in the next blog post in our three-part series.

Download the full whitepaper now

 

The Intuit ProCloud Partner Programme offers a package of benefits and support to help accounting professionals looking to work with their clients online. The ProCloud Partner Programme benefits are free to accountants and bookkeepers with at least one QuickBooks Online active client*. Join now.

Terms and conditions apply. Subject to ProCloud partner agreement.
 
[Image courtesy of artur84/ FreeDigitalPhotos.net]
Information may be abridged and therefore incomplete. This document/information does not constitute, and should not be considered a substitute for, legal or financial advice. Each financial situation is different, the advice provided is intended to be general. Please contact your financial or legal advisors for information specific to your situation.

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