2015 in review, and what’s on the horizon
In mid-December Wayne Schmidt hosted three industry professionals for an insightful webinar that looked at the past year in accounting and what is on the horizon for 2016.
The panel discussed what they learnt in 2015, and determined what actions we should be taking (or not taking) to move accounting businesses forward in 2016.
The panelists
Joining from Singapore, Paul Dunn is the founder of B1G1, a social enterprise and non-profit organisation. He is a 4-times TEDx speaker and was recently honoured with a Lifetime Service Award to the Accounting Profession in the UK.
Joining from Australia, Rob Nixon is CEO & Founder at PANALITIX, a business advisory software for accountants. Rob has authored two best-selling books and has been speaking, coaching and consulting for many years.
Joining from the USA, Jason Blumer is a practitioner running a virtual firm, and promotes accountants as creative entrepreneurs. He is a speaker and coach to firms and founder and CEO of Thriveal CPA Network.
Before we start
When we asked about the big trend of 2015, first and foremost the panel felt it important to clear the air, so to speak.
“The cloud happened. It’s over. The question is whether you are adopting it and whether you are innovating.” — Paul Dunn.
Phew! Now we can move on.
What major trend did you see surface in 2015?
It seems that 2015 was full of promise for growth of accounting businesses, but many have not adapted to the big changes in the industry.
A major worry is the decreasing profitability across firms. Rob Nixon explains that while technology brings opportunity it is also responsible for the decrease in partner profits that we are seeing.
The proliferation of cloud accounting in the small business community is very high in New Zealand and Australia. As these businesses get more efficient with bookkeeping and accounts, there is less time needed at the accounting firm’s side to do the client’s books. Rob says this is fantastic because it creates all this capacity to do other work, but sadly, the accounting profession has not yet filled this capacity gap.
“We lead the world in the trend of cloud accounting… but what’s interesting is how the cloud accounting firms have not adapted to it with their business models.”
“We’re seeing a decline in profit because at the root of it you’ve got technology driving efficiencies and the accounting firm hasn’t reinvented itself and its strategy to combat and capitalize on it.”
In the US, where cloud accounting has not been as widely implemented, Jason Blumer has noticed a fear of the cloud and of millennial employees, and subsequently a focus on succession planning. In his coaching he comes across many older firms that have a number of partners but no real leaders, and are “busy trying to do transactional work, and noticing that’s wrong”. This type of firm needs help to change their business.
“I’m seeing a lot of fear. They know the cloud has happened. They haven’t done it.”
Our panel sees this fear as a good thing. “An impetus to force the change that’s needed, that lots of us have been talking about for a long, long time.”
Jason notes the effect this is having on younger staff. He sees partners abdicating leadership, scared to push or provoke millennial staff, and scared they will leave if they don’t want to put up with it or take on more clients.
“They don’t see anyone who can fill the shoes of what they have been doing for the last 30 years. People aren’t afraid to work hard but they aren’t going to buy in to the antiquated model.”
What is the main issue facing accounting practices in 2016?
Our panel agrees that in 2016 accounting practices will be hindered if they continue to treat their practices as stale accounting firms, and not as entrepreneurial businesses. Issues that stem from or generate this inflexibility include being afraid of change; sticking with your old pricing structure; and not expanding your services.
Jason says that his coaching is trying to create education that helps accountants become entrepreneurs and leverages the creativity of people.
“The main issue facing firms is that they have to become businesses. Not everyone has that bent toward risk.”
Having had experience taking a firm virtual, Jason found that taking away offices, dress-codes, even eye-contact, is not a hindrance.
“There is not a lot that you really need to run a business, but the thing you do need is a strong sense of culture and solid people that want to transform their clients.”
Another major issue is that accountants are too busy to “be proactive” — and that’s what they are being told — that they have to become a “firm of the future”. Our panel agrees that it’s not about the firm of the future any longer, but about the firm of now.
“In 2003, people could look forward and say the future was a bit removed from where they were. We can’t do that anymore. We have to look at it now,” Paul says.
Rob says it’s the now that strikes a chord with accountants. “Accountants are here and now people. They have an ingrained process of being reactive.”
To become a firm of now, manage declining profits, price pressure and leverage capacity, firms should look to do one or more of the following:
1. Reduce headcount and or overheads, even outsourcing certain tasks.
2. Sell more services to existing clients.
3. Turn on the marketing tap to get more clients.
Many accountants are seen as a cost to their clients, but they need to be seen as an asset. Paul says the question accountants should be asking themselves is, “how can I move from dispensable to indispensable?” Only then can they start building new models that work now.
What one activity should practices start doing in 2016?
We asked our experts what they deemed should be the priority activity for accounting businesses in 2016. Their answers all hinge upon the notion of authenticity. Accounting firms all look the same to many business owners. Understanding your “why” is so important, so you can optimize your processes, services and team, and get the word out to increase business revenue.
Paul Dunn explains why accountants may need to do a bit of a self-audit to reconnect with who they are, with their team members, and with the right clients.
“Differentiation comes from clarity of why not from excess of what. The moment you get that everything changes.”
Jason believes that in business, we are often more defined by who we don’t allow to work with us rather than who we do. He says firms shouldn’t be keeping hold of clients out of need if they are holding progress back. Sure it’s dangerous to fire clients and it will have some cash flow effect, but bad clients will drive out new clients. “Pruning is a big part of growth.” Jason says. “A breakthrough often happens after a break-with.”
With a strong sense of what you can do for your clients, it’s important to articulate it in a way that is compelling.
The activity that Rob Nixon believes the industry should make number one priority in 2016 is content marketing. “Clients don’t leave accounting firms because of financial intimacy.” To release the stranglehold that another firm has on a client or to get existing clients to upgrade to an extra service level, they “need to see the smarts of the firm before they buy,” he says.
Rob explains you can provide free content about what clients can do in regards to eight key areas:
Growth of revenue of wealth
Profit improvement
Cash flow understanding and improvement
Asset protection
Tax realization
Financial retirement
Succession planning or sell
Estate planning
Use case studies to tell stories about helping your clients, or tell them about a tool that might work to improve their business. Then they can come to you when they need to know how — and your firm can implement the solution.
What should practices STOP doing in 2016?
In order to keep the to-do list in check, we suggest that you can’t add something to your activity list until you take something off. So, Wayne’s final question for the panel was what accountants should stop doing. Our panelists keep it short and sweet, but not necessarily straightforward.
Paul revisits an issue that’s come up a few times over the hour-long webinar: measuring time. He says accountants need to stop doing this, as it is a bad model that’s doing no good at all to the people who have to account for those 6 minute units.
Jason’s suggestion is attractive to say the least: stop working. Jason speaks of personal capacity issues around the business consulting work that he does. As the main content producer, he needs time to think, read and write. He needs to free up time “so that I can have my million ideas a day and sort through them.”
For Rob, the number one thing for accountants to do in 2016 is: do something. Do anything, he says, just stop procrastinating! For over twenty years the message in the industry has been to be proactive and add value to your clients. But goal-setting doesn’t always work. Rob says the key could be to get yourself an accountability buddy. This could be a firm-to-firm deal — throw a little collaboration into the mix!
In summary
With cloud accounting firmly in place for many firms, the capacity to acquire more clients and offer them more valuable services has increased. But many firms have not yet taken advantage of this and changed their business models so that they can leverage their new situation. Practices need to treat their firms as entrepreneurial businesses, hiring staff that fit the accounting firm of now (and stop talking about the future, as it makes change seem like something that isn’t immediately necessary).
Accountants have to make themselves be seen as an asset and not just a cost to their clients. This can be helped by offering valuable insights through content marketing and expanding services, as well as changing pricing structures. To achieve these things, it’s important to understand the why of what you do, and be able to articulate your point of difference successfully to existing and prospective clients.
One change you can make straight away is to stop billing time. This may be especially necessary if your role requires you to do less traditional accounting work, and more value-adding work like content creation, consulting, coaching and business advisory services.
Whatever you plan for 2016 — make sure it is more than a plan. Do something! Get someone on board to keep you accountable for goals you set, and if you’ve been thinking about changing something to fit the future, know that that future is now.
A big thanks to our great panelists for their intriguing insights, and Happy New Year from Karbon!