Findings from a 2012 International Federation of Accountants Quick Poll of accountants at small and medium-sized practices reveal that the single biggest challenge facing practitioners is this mountain of regulation. The respondents see compliance as creating a huge workload while at the same time yielding little business value.
Conway expresses concerns about the capacity of smaller accounting firms, in particular, to handle this regulatory compliance issue and devote sufficient resources to it. “[This] is going to be an increasing area of focus, not just for accounting bodies but also for government,” he says.
He wants government to be conscious of the impost on smaller firms when considering regulatory reforms. “Our counsel to those making the changes is to think small first and consider how the regulatory change will affect a small entity before contemplating its rollout across an economy.”
There is also pressure in some quarters for the accounting profession to play a greater role in creating client awareness of environmental and social sustainability issues, such as carbon emissions and fair trading. Professor Roger Burritt, founding director of the Centre for Accounting, Governance and Sustainability based at the University of South Australia, says there is widespread industry awareness about sustainability accounting, although the global financial crisis has diverted attention.
“Everybody was worried about everything with the GFC, so perhaps it would have been a bit of a luxury to over-emphasise environmental and social issues at that point,” he says.
Professor Burritt encourages professional accounting bodies to roll out more career development courses, workshops and thought-leadership forums to promote sustainability awareness and skills among practitioners. He contends that integrated reporting on a company’s non-financial performance is in its “very early stages”.
Professor Burritt predicts a shift from a reporting emphasis to new accounting systems that better inform companies about their sustainability performance. “It’s the accounting systems themselves that have to deliver the information for the right decisions to be made socially and environmentally.”
Digital revolution
The digital revolution is arguably the biggest and most exciting change for the accounting sector.
Hill notes that Deloitte Private, with a significant client base on its books, can aggregate industry data and use that sector knowledge to deliver superior advice to family businesses and other wealthy clients. While privacy must be respected at all times, Hill says such digital analytics let Deloitte’s clients quickly benchmark themselves against other market players and potentially lift sales and profitability.
This gives their clients extraordinary insights into benchmarking their performance against that of peers who are private companies and whose financial statements are not in the public domain, he says.
While compliance work will still be an important component of accounting, Hill expects smart firms to keep embracing cost-effective ways of automating this work while pouring more resources into value-added services for clients.
Cloud computing, in particular, represents an opportunity for greater engagement with clients and can help expand the advisory role of accountants. It presents a number of advantages: enabling access to real-time financial information for clients and their accountants, allowing instant delivery of advice over web and mobile devices, and facilitating greater reporting accuracy (as just one set of accounts is required).
Growth strategies
In the latest BRW magazine list of the fastest growing accounting firms in Australia based on revenue, Grant Thornton ranks third, achieving revenue of $232.30 million for 2011/12, a rise of 52 per cent on the previous year.
As accounting firms seek to grow in the future, Tony Markwell, a senior partner in Grant Thornton Australia’s privately held business group, expects ambitious firms to pursue mergers such as his firm’s agreement this year with BDO to amalgamate its Melbourne and Sydney practices. At the same time, he says firms must also seek organic growth.
“Our future platform is for both,” says Markwell. “We think there is great organic growth to be had if you have the right services and you are getting into the right markets.”
Having the best people will be imperative, too. As economic markets rebound, firms that have paid attention to recruitment and retention issues will be best placed to succeed.
“The employment brand of any firm is a critical asset that needs to be nurtured and enhanced at every opportunity,” says Markwell. “Since the GFC hit, we really haven’t seen a war for talent like the one we are going to see in the next few years.”
While firms will inevitably pursue strategies based on the digital revolution and more sophisticated accounting software systems, Markwell says the truth is that good accounting firms will always require two principal elements: “Good clients and good people inside the firm. If you get those two things right, you can have a good practice.”
Collaboration crucial
Where does this focus on specialisation, technology and people power leave small to medium-sized accounting firms as they compete with the major players?
Markwell says clients will increasingly expect automation of basic accounting tasks, at little cost, while being prepared to pay for market-leading advice and service in value-added areas such as capital gains tax rules. In such an environment, he believes specialists will come to the fore and general practitioners will come under pressure.
This need for specialisation makes collaboration with other firms or experts inevitable, especially for smaller entities. “They’ll need the upstream speciality services,” he says.
Hill agrees that collaboration will be especially critical for smaller firms, along with a capacity to be agile while implementing new price and delivery models. “What they have – and it’s incredibly powerful – is the ability to move fast,” he says. “So they will absolutely thrive, I have no doubt.”
At the same time, Hill says all firms must be conscious of other factors at play. “We know that many of the international providers in a digital world and a global world are providing services from other countries with an even lower cost of labour direct to Australian clients. So, we are all being challenged from every angle.”
