By Rob Nixon
The backbone of an Accountancy firm is compliance work and according to a recent survey of 103 UK firms 86% of their revenue was in traditional, historical compliance services. That means that 86% of the revenue was all centred on redundant data.
Where is the value to customer if you deliver a report (aka compliance) based on data that is 12-18 months old? As a business owner I don’t want a redundant data Accountant – I want a real time one!
The best way to become a real time Accountant is to embrace ‘cloud’ accounting and help your clients with advice based on real time information. If Accountants want to retain their ‘trusted adviser’ status then they need to be much more involved in their client affairs. They need to get closer to their clients and understand their clients’ financial affairs even more than before.
In the same survey we asked the 103 firms what percentage of their clients are currently on a cloud based accounting platform such as Quickbooks online, Xero and others. The average was 11% and what was super exciting was the focus for the next 12 months where the average goal was to move 35% of clients to cloud accounting.
Clearly this a strategy the UK profession is embracing. And so they should. Having your business clients on cloud accounting is proven to be a more efficient system for both client and Accountant alike. Having financial intimacy with a client includes which accounting software they use and clients are no longer going to a retail store to buy a boxed product for their accounting software. The vast majority are buying their software over the Internet – not in a box. Are your clients coming to you for advice which software application they should use or are they just using one recommended by their friends? Surely the Accountant who is ‘doing their books’ should be involved in that decision.
The movement to cloud based applications is one that no one can stop. Social change says that people want the information on their device 24/7 and technology companies are building applications to suit that appetite.
Globally, there is a massive push for the small business market to transition from their desktop accounting software to an alternative cloud based accounting application. Based on public information we believe that the following markets have already made this switch to a cloud based accounting applications:
- 35% of New Zealand small businesses
- 20% of Australian small businesses
- 10% of UK small businesses
- 5% of USA small businesses
- 2% of Canadian small businesses
Modern day business owners are demanding real time information not only to make critical strategic decisions, but also to stay competitive in their respective markets. Similarly this applies for Accountants who also need to adapt and evolve their service offerings, or else risk a significant decline in revenues and profit over the coming years. When a client is on a cloud system the ‘time taken’ at the Accountants end can be up to 60% less than through other desktop or hard drive systems. What are you going to do with all that capacity?
An example of such industry forces are evident in the trends of New Zealand based accounting firms which have recorded dramatic falls in profit compared to CPI. Profits have fallen below the 5% year on year growth projection as a result of efficiencies gained through cloud technologies and the lack of re-invention by the Accounting profession.
Practically, the profit decline is a result of Accountants failing to re-invent their service offerings and interactions with clients once they switch to the cloud.
The following are key trends impacting accounting firms globally:
- As accounting systems provide real time information, Accountants are not required to provide as much data integrity services.
- Accountants are no longer required to re-key financial information from one source to another and consequently spend up to 60% less time on preparing annual accounts.
- Clients are aware of such cost savings and their willingness to pay fees for less non-value added services is reducing at a rapid rate.
- This creates a market for the new savvy, nimble, marketing orientated Accountant who can promote and deliver value added advisory services to a marketplace that really does value the service.
- Regulators are improving the flow of financial information in terms of lodgement interfaces whereby cloud based accounting applications will be able to send financial data directly from the cloud, bypassing the traditional accountant
- This results in the annual compliance ‘bread and butter’ services becoming commoditised and Accountants facing severe fee pressures from clients and prospects.
Accountants who do not update their business models and who don’t offer new value added services face a diminishing client and fee base.
About the author:
Rob Nixon is the global leader in helping accounting firms grow revenue, profit and cashflow. He has been advising Accountants around the world since 1994. He is the author of ‘Accounting Practices Don’t Add Up’ and his most recent book ‘Remaining Relevant’. You can follow via his personal blog – www.robnixon.com. His innovation, PANALITIX, helps forward thinking accounting firms, shift from compliance to high value services by providing a combination of software, marketing and digital coaching (www.panalitix.com)
Over 750 firms use the software globally.