Future for Small Accounting firms

Future for Small Accounting firms

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Hello,

I am in my late 20s, I am AAT qualified and hope to be ATT qualified this year. The practice I work for (Turnover £150kish) have offered me partnership upon completion of the ATT.

We are very much general practitioners, typical portfolio of tradesmen and a few ltd companies.

I am obviously excited at the prospect of partnership as I've always wanted my own business but at the same time I wonder about the long term viability of this type of practice. Websites such as crunch.co.uk now offer insanely cheap compliance services with support from qualified accountants. Software is becoming easier and easier to use and more and more of the processes are being automated.

Even the legislation itself is being simplified! (allegedly)

I am seriously concerned these cheap online 'accounts factories' will do to firms like mine, what Tescos did to the high street butcher, baker and candle stick maker. By accepting partnership I am aquiring quite a debt and I need to consider the extra long term viability of the business. I'm also a bit of a worrier and over thinker by nature :)

I wonder if a better option would be to turn down the offer and seek employment with a big firm. Aim for the CTA qualification and become a specilaist maybe.

I'm at such a cross roads. I'm interested in hearing people's thoughts on the future of this segment of the Accounting profession.

Thanks in advance

Replies (12)

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By dbowleracca
01st Mar 2012 19:56

How many staff do you have?
I would assume that, if you only have turnover of £150k, you have say 1 administrator, you and the other owner/partner working there - possibly a junior?

There will always be a need, at least for the next 10 or 20 years, for small firms to deal with smaller traders. Many tradespeople I know don't use computers at all so they aren't going to get very far with crunch etc.

If you do decide to buy in, I would strongly recommend that you consider the range of services you provide. If all the practice does is compliance, then you will be under pressure from relaxation of regulations and cheaper online alternatives.

CTA is a good qualification, and would certainly enhance your earning potential - so if you want security this is a good route.

Whatever you decide, you must think of short term and long term prospects.

Good luck and please let us know how you get on.

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Teignmouth
By Paul Scholes
01st Mar 2012 22:44

"Traditional Accountants"

I've never bothered to look too deeply into Crunch but it has a great site and the marketing is brilliant.

if you look at their comparison table and see how they compare a Traditional accountant with their offering then who wouldn't go for them? If your firm fits the Traditional accountant model in their chart then I agree it is only a matter of time until Crunch, or a 21st century firm, starts taking business from you.

It happens in all industries that have become (or who are) stale, complacent or dare I say conservative, eventually something or someone new with modern and better methodology will step in and shake it all up.  Don't fall into the trap that their offering is cheap, it's a good price and I dare say it makes them a lot of profit, they are just more efficient and prepared to take a risk on winning & losing client by client.

So, if you enjoy the environment of GP, with the variety of work and clients that brings, then have a think about how you can make it work better, more efficiently, more like Crunch in approach to compliance, which frees you up to give the clients what they really need help with, running and planning their business into the future, not just recording what happened in the past.

With regard to the threat (as you see it) of easier software and simplification, this is nothing new.  A couple of years after I started training, the partners bought a pocket calculator which, in today's money, was probably over £2K, the partners had first shout when booking its use and the rest of us could pick a maximum of 2 hours a week.  No computers, printers, faxes etc (yawn) etc and I dare say the methods we used were rocket science compared to 40 years earlier (they would have killed for Biros & Tippex).  

If, as it seems, you can see change coming and can use it or even instigate it, then you will stay ahead of the game and might even enjoy it.

If all of the above is unlikely to be possible because your co-partner(s) are stuck in "tradition" so stifling any aspirations you may have for the firm, then don't lumber yourself, bide your time and start looking for an opening in another firm that will give you the autonomy.  Or if you really are excited by the prospect of a tax specialty (yuck - sorry) then follow that path.

I suppose the other key question is why are you being offered the partnership, what's in it for the existing partner(s), is it an exit route for them or is it someone to share the debt, or maybe just to tie you in to a successful & expanding practice because they think you're Brill?

Am happy to have a chat (e or otherwise) if it would help.

 

Thanks (2)
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By bernard michael
02nd Mar 2012 09:05

Don't forget the personal service that clients like. The ability for a client to ring up and pose a question or discuss a problem is important to them So long as the small firms are capable/have the experience of offering this add-on they will survive and dare I say prosper

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By exceljockey
02nd Mar 2012 09:36

add value

I think companies like Crunch will mean that small accountants need to add value to their clients. Crunch can produce numbers very efficiently but not everybody knows or understands the numbers. Thats where I see the future of small accounting firms and where I agree with bernard above. Using your Tescos example - yes i can buy a some-what decent steak at Tesco's - but if I want a 6 week dry aged T-bone from a specific breed of cattle then I need to go to my local butcher to get it. If the local butcher supplied the same meat as Tesco I would simply shop at tesco for my meat and he would be out of business.

I am also doing the CTA this year as I think it will add to the value I can add to my clients.

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By neileg
02nd Mar 2012 09:41

Surfing

You can be on your surfboard riding the wave, or under the water drowning. The only difference is courage and confidence.

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By Steve Holloway
02nd Mar 2012 09:50

Crunch and SJD work for some clients ....

but by no means do they offer something for the majority. I did a critical review of my client base this time last year looking hard at their needs / preferences / abilities etc. I identified 6 out of 150 who could easily make the transition to a bulk provider. Most simply want a person to talk to who knows them and their business ... the bulk providers could never beat that.

Example, on Tuesday a client phoned to say that he had left his partner (sad) and his partner is also his bookkeeper (disaster!). I spent yesterday providing some emergency training and handholding, sourcing a payroll provider, getting one of my bookkeeping contacts to provide on-going help and generally getting things back under control. I could do this as I know the client, the job and the right people to help.

This is the advantage we have and in most cases the client knows and values it.

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By Fred Smith
02nd Mar 2012 10:34

As a partner you will be able to influence the future direction of the business but it all depends on how much you are being asked to pay to buy in.  150k T/O is not much.  You could build your own business but of course not have much profit for a year.  Something to consider.  Accounting factories have a target client but have you ever bought a hair cut at Tesco? 

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By Archon
02nd Mar 2012 13:24

Thanks for your thoughts everyone. It has been interesting reading, especially Paul Scholes' post. I will likely take you up on your offer over the coming weeks as I think about these things.

Thanks again

 

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By Ken Howard
02nd Mar 2012 15:44

One size doesn't fit all.

I've no doubt that Crunch will do well, grow and prosper, just as will many other online accountants.  There's clearly a market for people who are capable of entering their own data and accepting responsibility for their own business, with minimal support from their accountant.  That's fine, we do it ourselves in our practice - we've never met over half of our clients who live all over the UK.

But there will always be a market for people who need a lot of hand holding, those that are incapable or unwilling to do their own book-keeping/data entry, those that need to have things explained to them in person rather than by email or on the phone, those who want someone else to do their payroll and VAT returns etc.  An online service like Crunch is useless to that kind of person.  And, no, we're not talking about relative intelligence here - I've plenty of degree level clients who havn't any intention of even trying to do their own "books" - they simply send an envelope of paperwork and we, in turn, send them their accounts/returns at the appropriate time.

There was a time in the dim and distant past when NatWest bank offered a book-keeping/accounting service.  At the firm I worked for at the time, we lost several clients due to their "efficienct" and "low cost" service.  Every single client came back to us within a couple of years due to pathetic service.

Practices evolve.  There was a time when all limited companies needed a statutory audit.  There were howls of outrage from the profession when the thresholds changed and now most small practices don't do audits at all, but there are still as many, if not more, practices out there.

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By dbowleracca
03rd Mar 2012 09:17

there is too much to know
I do think, when I see the small clients that we have (not subcontractors etc but proper small businesses) that there is just so much to consider that you can't avoid having an accountant to support you.

For example, a small business with turnover of say £150,000, needs to think about VAT, what the best scheme is, what can be claimed back, what rate to charge, how returns are submitted and by when, and how and when to pay. Also, what information needs to go on invoices.

If they have employees they need to know all about setting up and running a payroll, minimum wage, contracts of employment and benefits in kind.

This is just day to day, basic stuff for an accountant but to a business owner its a minefield - and this only scratches the surface!

Personally, I enjoy the more exciting consultancy stuff which gets a better reception from clients and commands a premium fee - but the above are all necessary for any practice to provide.

I can see crunch and others doing well - but there is always a need for smaller practices

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By Jon Norris
05th Mar 2012 11:51

Bit of confusion

Thanks for all the kind words about Crunch everyone - there seems to be a bit of confusion about how our service works though. We do offer a full service - it's not just software.

Every Crunch client has their own account manager and accountant who they can contact on the phone or via email whenever they need them - we offer the same level of support as a traditional firm. We're by no means a "factory" or anything like that.

Great to see interesting discussion, I'm more than happy to answer any questions anyone has about our service.

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By Archon
05th Mar 2012 12:31

I mention full support from Qualified Accountants in my OP.

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