Shifting sands ahead for the accounting profession

Robin Nicholson
Director: Corporate-911

The disruption that we are currently experiencing has forced many companies to take a long, hard look at their products and services and make an honest assessment about their future sustainability.

The accounting industry has arguably been one of the industries that has felt the biggest impact of this disruptive change. What does the future hold for the profession? As a business rescue practitioner with a background in accounting, I feel that our services will be in significant demand, just not in the way we expect it to be. This was evident in some of the reading I did over the past week.

Changing attitudes
The Global Advisory Trends Report points out that attitudes towards advisory are changing, but accounting firms are struggling to deploy at pace.

Economic uncertainty created by the pandemic has accelerated the need for advisory services worldwide. The role of a trusted advisor has never been so vital in helping clients make prudent financial decisions in difficult and unpredictable times. A year and a half since the pandemic changed the global landscape irrevocably, the data shows that many firms think they could be providing more value-add services and want to – they understand how critical their services are for their clients and they are generating revenue streams from it.

The report adds that, equally, a large majority of firms aren’t where they want to be and are struggling to have the business model in place that they most desire.

Forced diversification
The report points out that diversification is happening and new services are offering choice.

There is an acceleration of global accounting firms who are diversifying service offerings beyond tax and compliance services. Revenue is being generated throughout all seasons, without reliance on just the tax season and annual compliance flow.

The report adds that the industry is seeing a broader range of value being provided through services like management reports, budgeting and forecasting, and strategy and mentoring, which will help with client retention and satisfaction, while having a positive impact on overall revenue.

There will be a major war for talent in the future
Photo By: Firmbee via Pixabay

The war for talent
The report points out that the war for talent continues – and some practices may be better placed to win.

Firms continue to be challenged by the availability of good talent and attracting them in the hiring process. Firms with a strong brand, and those who have embraced technology, provide additional services to clients, and have worklife balance, will benefit from stronger retention of staff, and attract higher calibre candidates.

What is the outlook across accounting firms and what services are being offered?
The report points out that more firms are providing advisory than ever before. The current advisory boom shows an increasing number of firms taking advantage of new opportunities to add more value for their clients. Seventy-two and a half percent of respondents have identified themselves as being part of hybrid or progressive advisory firms.

Businesses will always need help with compliance work, but in our survey, only 25.3% of firms say they are traditional in the sense that they mainly offer tax and compliance services. Only 1.4% state that they aren’t interested in advisory work at all.

Value-add services. The report adds that firms acknowledge they could do much more. At this point, the question is no longer if firms are providing value-add services like management reporting, mentoring, forecasting or similar work, but rather what services deliver the best ROI: a whopping 91.7% of respondents said they already offer advisory services in their firms!

Specifically, 20.8% derive a significant portion of their revenue from these value-added services, while the remaining 70.9% of respondents said they were providing advisory, but wanted to do much more. We expect more accounting firms to develop expansion strategies for their service offerings and make this a priority for their clients in years to come. In addition, client-led pressure to offer more and be more is likely to accelerate.

How many firms are offering advisory services, and do they want to offer more?
The report points out that the industry is witnessing a new era of advisory services. Over the past few years, advisory services as a serious component of an accounting practice offering has become much more widespread. Close to 80% of our respondents say that they are already working on advisory services right now and 8.2% plan to offer advisory services in the future.

This is compelling news if you consider how many firms were proactively offering and marketing advisory 10 years ago.

The report adds that it is an uphill battle for some (but not as many as you may think!). While 79.8% of respondents are currently working on offering advisory, 9.6% say they face significant roadblocks. Anecdotally, the Spotlight team feels that the push-back against advisory services by some is much less than it once was – as the numbers indicate. Just as some industry voices and old guard practitioners railed against cloud software back in the day, so too do the advisory laggards today look like an increasingly out-of-step cohort. Thankfully they are much less of a roadblock to change than was once the case, with environmental and resourcing challenges much more likely to slow the pace of change down.

Adhering to strict standards will become more important in the future
Photo By:Isabela Bela via Pixabay

Common roadblocks include:

  • Lack of time/headspace
  • Not knowing where to begin/which clients to begin with
  • Not understanding current service trends/what to offer
  • Lack of confidence around pricing/monetisation.

we have seen firms who have been able to successfully overcome these obstacles – key to their success is moving quickly and not waiting for perfection to land.

The most successful accounting firms are the ones who:

  • Invest in the right resources and training;
  • Have close and ongoing customer conversations, not just at year end;
  • Empower their teams with the time and bandwidth they need to make the switch;
  • Build change management into their core KPIs;
  • Put systems in place to hold themselves accountable and build momentum.

The biggest challenges for accounting firms in the next 12 months.
This is the part of the report I found interesting. By nature, accountants are risk averse and want to plan for every eventuality. This is impossible in the current paradigm. So what does the future hold for the profession from a challenges point of view?

The report points out that hiring staff remains a top concern for accounting firms. Hiring staff is the main challenge for accounting firms across the world, with 50.1% of respondents identifying it as a key issue in the next 12 months. The war for talent is set to continue in the accounting industry in 2022 along with poaching. With a talent shortage, many firms are vulnerable to losing their best so will need to be thinking about not only attracting, but protecting top talent. We expect more focus to be on offering interesting work (Spotlight Reports and mentoring, anyone?), competitive salaries, financial incentives, clear career progression, and increasing emphasis on intangible aspects like firm culture, being able to have a life outside of work, and brand resonance to keep the best employees.

Work-life balance. Is it getting better or is it getting worse? The report adds that just over 45% of our respondents have also indicated that work-life balance will be a challenge for them in the next 12 months. For some firms, busy periods will see some staff working 50 – 60 hours a week and of course Directors and Partners are often the last to go home or turn off the laptop. This fast becomes a wellbeing issue when it is repeated and becomes the “new normal”; something for us all to be aware of. While there is a war for talent, we anticipate the firms that focus on developing a culture of wellbeing and prioritising work-life balance to be the ones that have less exits. Directors will need to lead by example.

Concerns about what we cannot control. In the midst of the sweeping disruptions caused by Covid-19, 35.9% of respondents stated economic impacts as a challenge. Similarly, 24.1% identified government regulations as an obstacle for their firm. While we can’t necessarily control these challenges, we can prepare. To confront these challenges, accounting firms need clear processes to plan and forecast for the what ifs. Technology will help accountants interpret risks and opportunities and advise clients proactively.

Robin Nicholson is a Director at Corporate-911 and is a Senior Business Rescue Practitioner.