As accountants, I believe we hold the cards, the knowledge and the ability to make an enormous difference in the lives of our clients. And this difference is only going to become greater in the future.
Because the less time we have to spend in data-entry and collation of information, the more time we get to really make an impact—helping business owners realize more profit, grow further, employ more people, create the lifestyle they want, buy more assets, and achieve their goals.
Our industry has changed a lot in the last 10 years in terms of information. Conversely, many other parts remain the same: we still deliver compliance services, we still work with our clients on cash flow projections, and we still offer advisory services. It's the way that we prepare and deliver these that has changed dramatically over the last 10 years. So what will evolve in the next 10? And how will this change your practice management?
I started my journey in accounting 17 years ago. My job was to open the huge green ledger books and summarize all the data. I used an adding machine. All the working papers were, well, on paper. We had one computer in the office connected to the Internet with an email address! And we gave clients information on how they were going once a year.
Fast forward to today, and the 19-year old we have in our office would die if I asked him to add up hand-written accounting records! Now, all information is automatically sent to Xero via a bank feed, Squirrel St, Receipt Bank, HubDoc or Expensify. For the most part, all we need to do is click the OK button or tick a box to create an ABA File. The data-entry time is reduced, we have the information constantly instead of waiting until the end of the year, and we can easily analyze the underlying data to see where improvements can be made.
The 19-year old who was once a glorified human calculator is now providing value to the client. They are analyzing numbers, coming up with ideas on how a business can improve and learning things accountants didn’t learn until they were 10 years into their career. These 19-year-old’s are eager to learn and think differently about solving problems. This is amazing for accounting firms as the value add starts from the 19-year old.
The traditional model of an accounting firm has already changed. Accountants are moving up the value chain into more advisory-based services, taking on other divisions such as technology and marketing. Some firms are amalgamating, while others are ‘breaking up’ and going back to being smaller sized firms. More firms are removing their focus on billable hours and one-off fees and moving to value-based and fixed fee monthly billing.
Because of the move towards more specialized services, I believe we will see a lot more collaboration between smaller firms—whether it’s firms in different countries working together, or those with specialists in different areas helping each other out (for example, tax dedicated firms bridging gaps for business advisory firms, and vice versa.)
This collaboration will see the smaller firms easily competing with the big guys. Likewise, bigger players will start to target the SME market. It will be interesting to see this plays out, as smaller businesses often prefer smaller firms for their dedication and specialization.
The future of accounting practice management will see a lot more firms being run like true businesses. And they'll focus their attention and expertise on certain types of clients, types of work, building culture, learning platforms and actual marketing plans.
This is something I’m quite passionate about. As much as I love technology and what it can do for a business, I also understand the psychological impact. With more and more distributed teams working alone, it’s important we have a focus on building an inclusive culture. Accountants are predominantly introverts. If your practice doesn't focus on social skills and inclusion, you run the risk of creating serious isolation problems for your staff.
Sure, it’s true that technology from a social standpoint connects us. However, we need to ensure it’s connecting everyone in the team, not just the louder players. As technology develops further and teams become more distributed, culture will become even more pivotal for the accounting firm of the future. Competition for the best team members will be fierce, with geographical location not being an issue. Training, collaboration and systems that deal with this new workforce will need to change. They will need to be highly focused and treated as a crucial part of your practice management strategy.
No longer will accounting firms measure performance on hours billed, write-ups and write-offs, or revenue per partner. As the majority of firms move to value-based and fixed fee arrangements, these metrics will no longer make sense and will become a thing of the past.
We will define success by looking at new AaaS (Accountants as a Service) metrics. MRR, CAC, LTV, NPS and other new KPIs will become the standard measurements of performance. These metrics will define how fast you grow, where to invest, and/or the multiple you sell for.
With less and less effort going into producing compliance work, we will also look at the results we are achieving for clients.
Accounting at its core hasn’t changed and isn’t likely to change anytime soon. We still need to help our clients meet compliance requirements, ensure they pay as little tax as possible and give them advice on cashflow, growth, strategy and employees.
But the way we deliver and process these services has changed, and will continue to over the next 10 or more years. If there is one thing I'm certain of, it's that we must pay attention to this what these changes will bring and get on the front foot to ensure our practices adapt. This means rethinking your practice management—exploring modern ways to establish and maintain your firm’s culture, using innovative techniques to find the top talent, putting a greater focus on motivating your team, and overcoming the challenges of a remote workforce.
And if we can manage this, I can’t wait to see the impact our profession can have with smarter, more efficient, more timely data.