Preparing For The Inevitable: Is My Accounting Firm Safe?
Anxiety is in the minds of accountants, accounting firm owners and partners. With the accounting industry in flux from widespread disruption of new-age technology and best practices, it is to be expected. Ed Chan of Chan & Naylor and WIZE Mentoring asks:
“Where is the Accounting industry heading and is your job safe, and is our accounting practice safe?”
He says that we are heading into headwinds and we need to be prepared which is an accurate assessment of the status quo. With this sentiment undeniably shared by the vast majority, there is no better time to prepare than now.
Why Accounting Firms Should Prepare
There are threats coming from two areas:
One: Technology (artificial intelligence and blockchain) will eliminate or reduce the demand for “grinding” and therefore the number of staff doing “grinding work.”
Ed Chan shares that way back in 1978, when he was at his first job, they needed 15 accountants to manage a $1M (equivalent) in fees and a typist per every two accountants (7 typists for every 15 accountants).
Then, when software like MYOB came along, it went to nine accountants per $1M in fees and around three typists/secretaries.
Fast forward to today, five accountants can manage $1 million in fees with no typist or secretary.
Accounting jobs are threatened by the advent of cloud accounting technology and the rise of artificial intelligence and blockchain.
Two: Competition (fees to clients are coming down due to competitors who are embracing technology and outsourcing).
Ed says that, in just the last 18 months, their clients have received offers from competitors to prepare their SMSF for $800!
Soon, fees for other services will see a marked drop because competitors who embrace technology and outsourcing can do quality jobs faster. Of course, it’s not the fees charged that’s important but maintaining margins.
Ed has often said,
“It’s better to charge clients $3,000 and make a margin of $1,000 and win market share than it is to charge them $5,000 with a margin of $1,000 and lose market share!
The fact of the matter is if your fee is low enough (with a good margin) then you will not only fence the client in but you also achieve revenue growth sustainability. The lower the price, the bigger the market share.
Accounting firms like yours should drive to be ahead of the curve to ensure that you not only survive but thrive for the sake of all concerned: Staff, clients, management, and shareholders.
How Accounting Firms Should Prepare
To achieve the above, Ed Chan says that everyone needs to manage practices more efficiently to stay ahead of the game and take opportunities as they come.
Two efficient management actions:
One: Run efficient teams with the right people doing the right work at the right cost.
The way the industry is going, no one can get away with using a high-cost staff member to prepare low-cost products like bookkeeping, BAS, individual tax return, or administrative work, and then pass poor, inefficient, and lazy management onto clients in the form of higher prices.
The commoditisation of compliance has made it so that outsourced teams are a more significant part of lowering your fees and building your ideal team structure.
“By outsourcing, you can compete by offering clients lower fees and providing wage increases to your local staff.”
But without the right technology like cloud accounting software, you can’t do outsourcing.
Two: Embrace Technology like Receipt Bank and Practice Ignition to gain the competitive edge.
If you don’t leverage technology, you won’t last the long run. Overheads such as wages will keep going up and your clients and competitors will keep putting pressure on your fees to come down.
“By failing to prepare, you are preparing to fail.” Nothing holds more truth for accounting firms in this day and age. Adaptability is the name of the game. So, start using the right technology the right way and build the right team doing the right jobs at the right cost. Do this and you will increase the odds of your firm not only surviving but thriving the upsurge of disruption facing the accounting industry at large.
Let’s discuss how we can help you do exactly this. Schedule a FREE online consultation with one of our global team specialists.