That puts accounting at the top of a list of professions likely to be impacted by technology, with 5.1 million jobs in Australia expected to fall victim to digital disruption over time.
Locally, the list of technologies replacing accounting work is growing, and the deadlines to comply with requirements grow closer.
The ATO’s MyTax – its new streamlined tax return portal – prefills a return from the previous year, as well as information provided by employers, banks, government agencies and so on. All taxpayers have to do is add in any missing details and select submit, notes the Tax Office.
Standard Business Reporting (SBR) will be replacing the electronic lodgement service (ELS) for 2016 tax submissions. Even small businesses must shortly ensure practice management software is SBR enabled. Plus, an estimated 30,000 accountants who currently deal with self-managed super funds may shrink to 10,000, after the removal of their Australian Financial Services Licence (AFSL) exemption on 30 June next year. For many, this is likely to force amalgamation, either with larger firms or with financial planners.
Ready to pounce
Acquirers see a chance to pick up quality clients and practices – going concerns – rather than trying to riskily win over business and market share in a competitive arena. So high-return, small accounting practices are under pressure from these circling buyers.
The burden to comply and the fact that many are nearing retirement age are encouraging exits, too. The Tax Practitioner Board estimates that 70 per cent of Australian accountants are over 55.
And baby boomer accountants are often simply not IT literate to the required level to keep up with the rate and types of change affecting the industry.
H&R Block, which pays from 50 cents in the revenue dollar up to 90 cents, depending on whether the owner wants to assist the transition, is vocal about its intentions on the acquisition warpath after over
a decade of organic growth.
It sees an opportunity to snatch market share, as small practices become overwhelmed with the regulatory impost and the diverse range of skills required, as well as the associated costs.
Regional director Frank Brass says the firm is in discussions across all states, and some “quite substantial” deals are progressing in Victoria and New South Wales. Deal activity has not met expectations
so far in 2015, though, and Brass admits he expected more “corner” accountants to approach H&R Block in search of a mutually satisfactory way out. “We’ve had a bit of activity, but we’ve not got the number of inquiries we thought we would,” he says. “The industry is changed out.”
This has surprised some industry members who were expecting takeover mania this year, especially in the single-principal arena. According to industry sources, this is just the calm before the storm, hough, and they expect a catch-up in acquisitions later this year, once the 2014/15 tax year has been completely put to bed.
Opportunity knocks
Australia has around 11,860 accountancy practices in operation, according to calculations based on figures from Business Review Weekly (BRW), the University of Melbourne and accounting directories. There are around 230,000 individual accountants, although not all are employed in a related role.
The figures suggest the largest chunk is made up of single-principal accountancy practices, which represent 5,680 firms or 48 per cent of the industry. A further 2,720 or 23 per cent have only two principals, while 2,075 practices or 18 per cent of the industry have three or four principals and just under 1,300 practices or 11 per cent of the industry have five or more principals.
A few years ago, consolidation was rife among the larger players – leaving PwC, Ernst & Young, Deloitte and KPMG in the top four slots, with well in excess of $1 billion a year in revenue each. Today, deals are more active in the mid and small sphere, driven by the technological, regulatory and demographic changes transforming the industry.
A case in point was the eyecatching merger of the Sydney firms of Pitcher Partners and Moore Stephens in May 2015.
This was preceded by the sale of Moore Stephens’ $42 million-a-year Melbourne office to China’s ShineWing and its $10 million revenue Parramatta firm going to Deloitte in February. KPMG bought single-principal accountancy Hayes Knight Western Australia at the end of April and says this is a sign of things to come, with KPMG looking at opportunities on the Gold Coast and in Wollongong and Perth.
Economies of scale
Many accountants outsource data collection and collation to data aggregators, saving hours of painstaking but lucrative sorting of paper records. Large players are able to negotiate better terms with providers, so it becomes inefficient to be small, as larger practices can become licensed and compliant for a fraction of revenue.
Client expectations are also changing. A new level of scrutiny and demand for a full suite of services will inevitably drive consolidation, as the pressure to advise beyond tax encourages top-tier firms to buy smaller players to boost their service offerings and drives lower-tier firms to merge and unify expertise.
“That’s the challenge,” says Mark Chapman, H&R Block’s director of tax communications. “Accountants will have to add value with skills in areas such as technology and marketing.”
No sure thing
For single-principal firms, compliance burdens and the pressure to diversify and innovate, coupled with an ageing demographic in the profession, will encourage more exits through mergers and acquisitions.
But for now, many accountants are still pondering what a practice in 2015 should look like.
What’s clear is that accounting as we know it is going the way of the dodo. And it’s not clear yet what being an accountant will mean in 10, 20 or 30 years’ time.
Right now, there are more people leaving the profession than coming in. “There are sexier professions and others that are not as demanding,” says Chapman. “It is constantly changing and you have to keep abreast of it all.
“You are not set for life.”
