Automation is changing how accountants do compliance work. And margin erosion is changing how they get paid for their services. Accountants are under increasing pressure to make their businesses more profitable while somehow managing a bigger workload.
The accountancy industry is facing three issues that affect profit:
- Increased Automation in compliance matters.
- Increases in the cost of production.
- Erosion of profit margins.
Increased Automation in compliance matters
Automation is taking on more and more of the traditional roles of an accountant. While a human is still needed to interpret data and help business owners apply it, there are now huge chunks of an accountant’s job description that are basically obsolete. We’ve been feeling the pressure of these changes since the introduction of cloud accounting services like Xero.
All of this sounds prudent, but it comes at a cost to our industry. As a result of greater automation there will be less compliance work for firms. If you’re relying on compliance work to make ends meet, you will really feel the squeeze.
Increases in the cost of production
Staff wages are the biggest expense of any accounting firm. And most of the firms I’ve spoken to lately say the cost of hiring, training, and retaining good staff is mounting.
Brian from Accounting plus is one boss who has been feeling the squeeze. “The pressure to keep increasing the local labour conditions meant my staff expected a certain level of salary,” he said. “So my mark-up and charge-out to clients for my fees has started to escalate, but my clients are resisting a fee increase.”
Shortage of good staff is especially a problem for firms outside of the main centres. To recruit someone new you face ever increasing wage costs to attract the senior talent you need.
Erosion of profit margins
Accountants are also under increasing pressure to reduce or maintain their prices for annual returns.
CA Paul Walker notes that his clients now expect to pay less for him to do more. “Clients see my compliance service in a cost-versus-benefit light,” he says. “Clients who use MYOB or Xero have been saying: ‘We’ve done all the hard work for you. Surely your fees should now be in the hundreds of pounds?’”
Firms need to move to a leaner production model for their business. Outsourcing your compliance tasks plays an essential part in reducing the cost of production. Reducing costs is especially important as the world navigates the economic havoc brought about by the COVID-19 pandemic. It also frees up time to start working on growing your business advisory services.
There is an urgent need for outsourcing all compliance matters which include:-
- Payroll
- Book-keeping
- Annual accounts and working paper files
- Management accounts
- Tax returns
The firms can use freed up resources to populate management information from the likes of Clarity, Fluidly (or Futurli) and any other forecasting software. Apart from this the practice management can be automated with the help of software which provides automated quoting, fee invoicing and Engagement letters.
The main focus areas for accounting firms going ahead should be face to face communication /Advisory/ Value added services delivered to clients.
The firms should aim for:
- To get more clients into software which will be essential for MTD filings.
- To carry out regular client reviews say monthly or quarterly enabling greater communication with / advisory to clients.
- To provide more advisory, forecasts and cashflows.
This strategy is a win win for all of for the accounting firms and brings them into the modern era, providing to clients the service they deserve and adding value. Ultimately these services shall bring about greater client retention, thereby freeing staff to tackle attracting and onboarding new clients. The firms need to look into social media Updation & need to create content, regularly update clients on topical issues and provide a library/better information – PR / CRM.
In an ever-changing business model, taking note of key accounting movements will help enhance business decisions, compliance and success. Making changes to your practice is not as simple as taking on an outsourcing company and beginning to offer advisory services. It’s a business transformation process that needs careful consideration and time to implement. It requires leadership skills to manage staff, make changes to your internal processes and realize the vision of where your firm will be in next coming years.
So, in sum accounting industry is facing a turning point for its business model- Is it time for you to look transforming your accounting practice? We believe that accounting professionals need to keep up with changes that are happening at a much faster pace than before. Speak to the team of Sapphire to see how we can help you to transform your business into a powerhouse of productivity. We carry your inputs and transformed to outputs and create value adding option. We consider it is possible to reduce cost and grow profitably with disciplined approach to business transformation.
