Accountancy becoming a trade, not a profession

Accountant David Logan spelled out a stark warning to fellow practitioners at the recent IRIS World event at Twickenham.

“Accountancy is now becoming a trade not a profession,” argued David Logan of Northern Ireland firm McIlveen Howard (MHL) during a panel session with three other accountants.

Continued...

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Comments

"We can get a set of accounts done in a morning."    3 thanks

Trevor Scott | | Permalink

Please define "done".

Also, please state the size of business and complexity of records.

 

I think in the free market    7 thanks

justsotax | | Permalink

they call it competition. No mention of the quality of work....just the moan that anybody can do a set of accounts. Time to man up and find a better way to sell your services.

Quality still matters    3 thanks

Mallock | | Permalink

A large number of my new clients over the past 6 months have come from businesses using accountants who just took the client's figures and prepared the accounts without applying any thought.

In some cases the clients realised that there were problems in the accounts and others came as a consequence of a visit from HMRC when problems were highlighted.

The common theme was that the accountants were just processing the figures in minimum time and with minimum care. When I have explained the problems of this approach to the prospective clients they have all embraced the idea of paying a bit more and getting a proper job done. The shocking thing for me was that some of the firms involved were large local/medium national practices who, in my opinion, should know better. The clients had gone to them in the first place because they thought they would get a better job.

I have had several referals from these new clients and look forward to making a decent living by offering quality at a reasonable price for many years to come. 

Nothing wrong with being a trade....    4 thanks

wilcoskip | | Permalink

...or with treating your business like a business, for that matter.

We have the advantage of recurring fees for compliance work, so let's get that done efficiently and then up-sell some tax planning or business coaching or whatever.  At the same time you get your marketing in place and get referrals from your completely-satisfied customers.  All sounds remarkably straightforward and sensible to me.  You rely on your excellent service, clear communication and building good relationships, and not on perceived barriers to entry such as letters after your name.

At the end of the day there's no great difference between me and a plumber/electrician/whatever: we get up, we help people sort out their problems or improve their lives, and we aim to make some money to provide for us and ours.  Perhaps it's no bad thing that we stop thinking of ourselves as being a cut above the rest.

WS.

In my view accountancy

taxguru | | Permalink

In my view accountancy practices have historically been about business + conduct. Conduct because a professional body regulated the practice - even with such restrictions as restrictions on advertising, soliciting business etc!!!. Moving the audit threshold up in recent times has effectively opened the floodgates for everyone to come in and trade. The franchisee model too has been quite successful. So we're here with everything now available for £xx.99 quids!!!!

.    6 thanks

ireallyshouldkn... | | Permalink

A good businessman accepts the market place and adapts their business to it, not the other way around.

 

accountancy the trade    1 thanks

chrisdxuk | | Permalink

As wilkoskip says...with treating your business like a business, for that matter....That is it. Take a leaf out of the traders handbook and bill 'em for everything!

mr. mischief's picture

Shape up or ship out!    1 thanks

mr. mischief | | Permalink

Compete or die!

If the kitchen is too hot, get the hell out of the kitchen!

etc, etc,etc.....

AnnaKournikovasKnickers's picture

Wish it were true.

AnnaKournikovas... | | Permalink

If you want to invest £10,000 now you have to go to an IFA. But if you want to put £10,000 into a business, you can go to anybody.”

 

If only that were true I'd put a deposit down on the Porsche now!. Punters can go direct, or to a bank, and after 1st January 2013 will increasingly do so I'm afraid. Accountants and IFA's like yours truly, are up against the second strongest union in the country, protecting vested interests. After the BMA, the Law Society and their accomplices at the Legal Services Commission, are busy making lucrative jobs like trust and estate administration 'reserved activities'.

elansea's picture

Evolution    1 thanks

elansea | | Permalink

Stop grizzling.

It's survival of the fittest

Offer a good value for money service and the lesser mortals will disappear!

a highly biased article    1 thanks

The Black Knight | | Permalink

as if IRIS solves the problem....in fact you don't need IRIS to churn out a load of rubbish and the cheaper (don't know what we are doing) providers are not using IRIS.

the silver lining is the pathetically useless will be easy to sue and should be an easy target for the tax man....if the tax man got his behind into gear and closed the budget deficit rather than whinging about it.

Paul Scholes's picture

Not the right room for an argument    1 thanks

Paul Scholes | | Permalink

The location/timing, of the panel was not a suitable forum to go off on one about ivory towers, and prejudice about those who are not "registered" or a debate over what "profession" means in 2012.

I accepted that David was telling it like he saw it in his business but it reminded me of the sort of heated debates we used to have on here 5 years ago about riff-raff upstarts (or words to that effect) taking our jobs.

The major part of work accountants do has always been form filling and number crunching, only in years gone by these activities were a mystery or too complex for others and so accountants were seen (and promoted themselves) as wizards.  With automation, deregulation and most importantly, clients and potential clients, being guided to DIY, there is no longer much of a mystery and it really is now "just" form filling & number crunching.

For those who saw this coming, they have done what so many other businesses have had to do; adapt.  I had never met David before Irisworls and didn't get a chance to speak to him, but the impression I got was that this message has only recently got through and that there was a degree of shock at what it all meant.

As a PS to this, there were also discussions about where this is going.  At the moment there is still sufficient compliance work about to keep accountants occupied however, will there be a tipping point, particularly with new young business startups, where businesses do not necessarily need an accountant. 

We may be sitting there with all our valuable new skills but, without the hook of compliance work, how are we going to convince clients they "need" us?  At that point we really do become like any other business and, with the new skills having taken years of experience and training to gather, will there be so many of us (whatever you call us) about?

 

johnjenkins's picture

I Have picked up many    2 thanks

johnjenkins | | Permalink

clients this year from people who did their own accounts and returns for the last 2 years. Suddenly the penny drops. Of course you will get people trying different things before they realise Accountants are there for a reason. Normally when the banks ask them for more information for their new mortgage.

Nigel Hughes's picture

Paul perceptive as ever

Nigel Hughes | | Permalink

Since I read the Steve Jobs biography and heard the "these guys are going to eat our lunch" story which led to the invention of the iPhone (clever man Steve Jobs) I've been struck with the parallel for accountants.

We used to be gatekeepers to the taxman and Companies House, because we could prepare accounts. Now it's up to whoever has the iXBRL software.

So, as has been said above, we have to adapt. Many have moved out of audit already, which is probably a smart move given what has happened to audit exemption, but there's an issue with where small charities etc will go for an audit.

Nevertheless, as the compliance work and especially the mechanical processing part of the work drops away, or certainly becomes even less valued than it is at the moment, the money will surely have to be made by giving advice which is valued by the client.

Someone once said, at an ICAEW Council conference I attended, you really have a problem when your core product becomes someone else's loss leader, or worse, their free giveaway. The firms giving the advice will, I expect, be doing the processing very cheaply indeed.

Paul Scholes's picture

I used to pick up many

Paul Scholes | | Permalink

John - yes we are still in transition here where a little info can be a dangerous thing and so lay people still have to do quite a bit of research and checking up if they are going to do a good job in doing a set of accounts. 

On the other side of the coin, most of my clients now do far more of their own stuff than they did 5 years ago, this is not only because it's easier (say with online accounting) but because I've got bored with bank recs, calculating depreciation and doing basic tax returns and so have educated them to make my life easier and enabling me to look at stuff more suited to XY years of experience.

A few years back I used to pick up clients who had been doing their own VAT returns and PAYE but had got into a muddle and came to me to undo all the past errors and put them right, but that doesn't seem to happen any more.

Bookkeeping systems have developed to take care of this and I now only cast an eye over one VAT return on a regular basis.

Rumour has it that bookeeping providers (especially online) are looking at taking things a stage further and building in additional functionality for year end accounts and tax returns, even iXBRL.  Why wouldn't they, VAT/PAYE today Accounts/Tax returns tomorrow, it's only numbers and basic compliance rules which would get a whole lot easier if the micro company proposals make it to legislation.

Even if clients still chose to pass them by us first before pushing the button, there goes a huge chunk of our current work.

 

johnjenkins's picture

I have always

johnjenkins | | Permalink

encouraged my clients to keep their own records including Accounting packages. I think the thing that is forgotton is that although there are many bookkeepers etc. out there, small business has grown and will continue to grow. Eventually we will see the demise of PAYE and most will be self-employed in one shape or another. Reason being large concerns will have no money to take on PAYE people (H & S, compliance, pensions etc.).

Large concerns

The Black Knight | | Permalink

johnjenkins wrote:

encouraged my clients to keep their own records including Accounting packages. I think the thing that is forgotton is that although there are many bookkeepers etc. out there, small business has grown and will continue to grow. Eventually we will see the demise of PAYE and most will be self-employed in one shape or another. Reason being large concerns will have no money to take on PAYE people (H & S, compliance, pensions etc.).

Everyone needs to follow the large concerns model......only employ single mums for 16 hours a week..hence no NIC costs to employer....state will make up their wages to £24K ish p.a.

discrimination? would think not the genuine reason is a cost and not being able to out bid the government.

Who needs a fancy avoidance scheme when there is a free government one available.

If you are a male you just need to charge for your sperm!

 

johnjenkins's picture

Don't forget the new generation    1 thanks

johnjenkins | | Permalink

of state pensioners, who with pension credits could fill the other 16 hours a week. How many years of Austerity???????

accelerated baby production

The Black Knight | | Permalink

And don't forget if you produce a surplus of babies by the age of 16 you can pass some of these up to be looked after the grandparents to secure their income.

Maintenance and sundry prostitution and drug dealing activities are not included in the calculation either....it's a win win.

Brings a whole new meaning to carrying on with a view to a profit.

johnjenkins's picture

carrying on with a view to a profit    1 thanks

johnjenkins | | Permalink

Sounds like a James Bond spoof movie.

Old Greying Accountant's picture

Yes accounts and tax compliance can be automated ...    1 thanks

Old Greying Acc... | | Permalink

... but the over-riding problem is GIGO!

"“What are you going to do? A £5m company can do its own bookkeeping and file the accounts themselves, with no accountant, and the government is happy.” 

Of course they are, they are rubbing their hands at the potential penalties!

johnjenkins's picture

@OGA

johnjenkins | | Permalink

I don't see that happening. Bookkeeping and accounting yes Accounts definately not. If the feedback I'm getting from new clients who tried to do it on their own is anything to go by then the reversal of the post is true. Let's not forget a successful business person will concentrate on what they know best and are willing to pay for the other stuff to be done. That, to me is common sense.

I think in times of severe austerity all costs will be looked at and it may well be that there will be a temporary blip in the profession.

I guess some    1 thanks

justsotax | | Permalink

(maybe myself...) would argue that in these times when clients are trying to reduce their liabilities accountants/tax advisers are potentially going to get more business (especially where a diy client finds he had a big profit and is worried about the tax.

 

And whilst i am looking to save money myself....even a simple service of my car is not something i particularly want to do...because inevitably what takes someone with the right tools to do in an hour....will take me a day (or weekend) - sames goes for accounts/tax...

The bad old days

secondhand_22 | | Permalink

I think a lot of firms still think they can just run the accounts and returns every year, raise a good fee and live in the big house at the top of the hill.  At least there are plenty round my way who act like that.

The firms what that attitude are dying - and quiet rightly.  I expect that's the same whether they are full on Chartered pros or QBE tradesmen.

 

Competition is a good thing - but

jamesc | | Permalink

there are many ways to skin the cat.  I work with clients to reduce their accounting overhead and produce meaningful regular KPIs that they don't have the in-house expertise to produce themselves.  I am then only too happy to turn over accurate annual numbers to an auditor if that is what the client wants but more particularly to a professional who can deal with HMRC.  My expertise is helping clients to run their business on a day to day basis without the need for a full-time financial controller, but still being close enough to understand the nitty-gritty issues.  What my clients really want is up-to-date accurate data on which to base their business decisions - compliance (particularly HMRC) is a separate issue that most business people realise must be done correctly.  If they don't beleive that at first, it only takes one challenge for them to see the light! 

Accounting issues are universal

Michelle Gargar | | Permalink

I know I'm an outsider on this debate, but interesting to see the same debate happening in another country to mine, and it's exactly the same!

We have the same competing issues occuring here in Australia but without all the regulation issues you speak of. We compete with others who simply take the work, rekey it and call it correct and ready to lodge. Every new prospect we come across though has a story to tell about an accountant who is not receptive,who has made mistakes, who tells them nothing etc etc. Interesting how they continue with these accountants though when they see they need to invest more to get more. Definition of insanity really! They continue with the same type of accountant expecting to get a different result, or to cost less.
Communication is the key and the most important part to communicate is the value proposition, but you must be delivering it for the message to be received. If we were getting it right however, where would forums like this be? Here's to getting it right as an industry across the world and raising the profile of our profession again!

johnjenkins's picture

@Michelle

johnjenkins | | Permalink

The one thing you and many others seem to forget is costs. Will clients pay for the time they feel should be spent on them. There are clients who just want a "rubber stamp" jobbie and there are others who want a lot more. There are many "number crunchers" out there that do a perfectly good job and get paid accordingly. This is the difference between a trade and a profession. So we are now in a two tier system. Those clients that want the professional touch and are willing to pay for it will go to an Accountant who will understand their needs and requirements.

Paul Scholes's picture

trade/profession...something in between?

Paul Scholes | | Permalink

Michelle calls for our "industry" to act, thus "raising the profile of our profession".

Some on this site have railed in the past with the use of "industry" to describe us, perhaps because it then puts us in the same bucket as those in the motor, textile, coal et al industries (work with hands and likely to be in a union).

The problem is that words like industry & profession mean different things to different people at different times.  Given the dictionary definition I think "industry" is probably the best way to describe what we are and even what we do,

With regard to "profession" if you go to Wikipedia it provides a good description, talks about the original vocations and how, during the 19th century, others began claiming the same description. It's noticeable however that accountancy does not appear amongst the examples.  We do however appear at the head of a list of professions linked from the same page, along with what is now a large number of other industries/disclipines, which will continue to grow.

As an aside, last week in a TV programme, someone was describing her great great grandmother, who came from an aristorcratic family, being castigated when she announced her engagement to a local GP, because he was "trade".

Sorry....to get to my point, "Accountancy" may be a regulated industry, even profession, for some, because they have been through the formal exams and are members of a body with letters after their name but that was their choice, they did not have to do it, unless I suppose they wanted to spend the rest of their lives auditing. 

There have been heated debates on this site with some calling for the law to protect the term "Accountant" but, as with "IT Professional" I don't see it happening. Consequently, we are now, rightly in my view, at the head of that long list of professions only because, by luck, we happen to start with an A.

From what I read above therefore the difference in one A from another A rests in how far each  wants to go in both the complexity of the work and the personal relationship with the customer and values like professionalism, ethics, integrity..remain purely as human attributes.

 

Service to the client    2 thanks

Mallock | | Permalink

The clients I come across who just want me to rubber stamp what they have done all believe that they have perfect books. I haven't found one yet who has done everything perfectly and many are seriously lacking.

I try to educate the clients that they need a bit more of my time to make sure that their accounts are accurate - some are very happy and are grateful for the advice on improving their books/procedures. Others just want the cheapest job and I tell them to go elsewhere because I will not just rubber stamp something I believe might be wrong.

Others don't take this approach but I have 44 new clients since this time last year and most have come from accountants of the rubber stamp kind.

As an example I took on one client from an 8 partner firm and had to tell the client that the £1000 fee they were paying was unreasonably low given the size and complexity of the business. I still got the job because the client felt that they were not valued and received no service. The client sells large pieces of machinery and takes the old ones back as a trade in. The old machines are then hired out. The client just showed sales net of the trade ins in their books and despite the fact that they had significant rental income, the rubber stamp accountants never engaged any professional thought in the 10 years they acted - the hire machinery was not shown on the Balance Sheet as an asset.

The client was shocked that they hadn't received the correct advice in the past. They thought that £1,000 was a reasonable fee for a limited company even though the client didn't even square the bank properly (there's another story there).

The rubber stampers devalue the profession, they give the clients unreasonable expectations of low fees and at the same time fail to apply the professional knowledge and judgement the client believes they are getting.

If we are talking about trades, I liken the rubber stampers to the painter who just slaps a new coat of paint on top of the old flaking paint and old wood. The professional rubs the paint down, removes any rot, primes the wood and then paints it with a couple of top coats. They both look fairly similar on the surface but if you go digging it doesn't take long to find the problems. Given that the diggers are likely to be HMRC and the financial consequences for the client could be dire, I believe we have a professional duty to protect them as far as possible by  carrying out a professional job.

I happen to believe that products like IRIS Open Books are very valuable tools which can reduce time and costs but not by as much as some would have you believe when you do the job professionally.

Old Greying Accountant's picture

@Mallock

Old Greying Acc... | | Permalink

What a good post, totally agree with everything - especially the analagy.