How can SMPs best overcome economic uncertainty?
While SMPs are facing significant challenges, the poll showed that respondents were generally more positive about 2012 compared with 2011, though Europeans were noticeably less optimistic about the future than those from other regions. As the global economy starts to pick up, there will be emerging opportunities and SMPs should adapt to capitalise on the emerging opportunities. There are two key strategies which should be considered.
First, boost marketing and promotion efforts. According to the poll, growth in practice fees will be driven primarily by winning business from new clients. This will demand more and smarter promotion and marketing efforts that should focus on what distinguishes SMPs – as mentioned before, most notably their reputation for competency and trust, responsiveness, and geographical proximity. Accounting and compilation services are perhaps worth special focus as poll respondents saw this as the fastest growing source of revenue, and the marketability of compilations should increase with the release of the International Auditing and Assurance Standards Board’s new standard on compilation engagements.
Second, focus on advisory/consulting services. These services, ranging from tax consulting and financial management to newly emerging services like wealth management and advice on sustainable business practices, are a crucial growth area for SMPs. The poll found it was the second fastest growing source of revenue after accounting and compilation. But perhaps most telling was the finding that insufficient partner time and marketing services to clients jockeyed for the position as the top challenge in building advisory/consulting services work.
This suggests SMPs need to free up partner time to make it work, perhaps use value-based pricing to ensure a good return, and, as mentioned previously, increase their marketing and promotion. The poll also revealed that an existing client relationship is the main reason that SMEs seek advisory/consulting services, suggesting practices should, where ethical rules allow, promote them to existing clients.
A changing landscape
In what ways has the world changed and how can SMPs change with it? First, internationalise. Cross-border trade in goods and services and investment is growing exponentially and great advances in transportation, IT and communications infrastructure are making the world a smaller place. As a result, SMEs are increasingly doing business internationally. SMPs will, therefore, need to internationalise themselves if they are to effectively support these SMEs.
A good place to start is to have a strategy, which might include joining an international network or association of practices, possibly to affiliate with a national firm with international connections. The value of an international network or association comes from the local knowledge that member firms can offer to clients. This means even a small practice can help a client go global and may help the practice retain clients that might otherwise choose a larger firm.
Second, exploit emerging technologies. Emerging technologies such as cloud computing offer the opportunity to increase your practice’s service offerings and, generally, do more with less. From a remote location, SMPs can now provide SMEs with a full range of services – from basic bookkeeping and payroll to virtual CFO – in a way that is safe, secure and more cost-effective than traditional face-to-face delivery. SMEs can thus enjoy many of the same benefits of having an in-house professional accountant that larger entities enjoy.
The implications
There are a number of potential implications for policy makers, regulators, and standard-setters. Even at a time of global economic uncertainty, concerns around regulation and standards are still uppermost in the minds of SMPs and SMEs for whom compliance may be disproportionately burdensome. And according to an earlier poll, the nub of this concern seems to be the pace or speed with which regulation and standards are changing, more than complexity and volume.
Regulation is intended to bring benefits, for example by helping markets operate fairly and efficiently. We somehow need to ensure that these benefits outweigh the burden and are widely recognised.
IFAC has spoken out on these issues. IFAC believes that regulatory reform should not create unreasonable obstacles for the progress of SMEs: costs and complexities that will impose burdens on, and threaten the sustainability of, the small business sector must be carefully examined. In addition, international standards should be applicable, accessible and cost-effective for SMPs and SMEs. The committee plays a pivotal role here by stressing the need for a stable platform of regulation and standards that are relevant to SMEs and SMPs and capable of being applied in a manner proportionate to size of practice or entity.
Strength in numbers
While an individual SMP may feel that it is too small to make a difference or that it lacks the capacity to contribute in a significant way, the strength of the SMP voice comes from their sheer numbers. Therefore, it is important that we all play our part, no matter how small, and get involved in some way, be that by writing a comment letter on an exposure draft, responding to a survey or poll or participating in the initiatives of the SMP Committee. The challenge, however, is to ensure one cohesive, clear, and collective message. The SMP Committee aims to act as a mouthpiece for the voice of SMPs. The committee has an online discussion board and conducts regular polls, which we encourage our member bodies to promote to their SMPs so that we can channel the voices from a global representation of this sector.
Copyright © March 2012 by the International Federation of Accountants (IFAC). All rights reserved. Used with permission of IFAC. Contact permissions@ifac.org for permission to reproduce, store or transmit this document.
