KPMG UK profits fall 13%

KPMG reported its UK profits fell by 13% to £349m last year, due to the current economic situation and Eurzone crisis.

The Big Four group, which saw profit fall by 5% in Europe to €861m overall in the year to 30 September, released their annual report this week. 

The firm's figures show profits fell across the UK and Europe, with European profit down €913m to €868m as increased costs hit areas such as audit and tax. 

Despite the falling UK profits however, revenues in the UK increased by 4% to £1.8bn, driven by risk management. 

As a result, KPMG's UK partners 602 partners saw their pay fall to £508,000, by almost a fifth. 

However, the firm's departing senior partner John Griffiths-Jones has seen in increase in salary from ... to over £3m in salary provisions 

Continued...

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Comments
Bob Harper's picture

Time to change the business model

Bob Harper | | Permalink

Its time to change the business model for big and small. 

Move away from time based billing thinking to Value Pricing and completely change the management mindset by getting rid of timesheets.

Bob Harper

John Stokdyk's picture

Bob - I don't think KPMG is listening...    7 thanks

John Stokdyk | | Permalink

Bob - are you sure your message is really a "one size fits all" prescription that would apply to a pan-European entity such as KPMG or any other of the Big Four?

These are huge organisations that have invested heavily in their business models during the past century. Even if they wanted to reshape themselves, I really don't think they're capable of implementing your suggestion. Part of the reason for their reduced profitability this year is due to restructuring.

How much is it going to cost them to reshape their businesses and retrain all their staff?

I also think you haven't acknowledged the extent to which KPMG and the other Big Four have moved into business consultancy, risk assessment, and all manner of added value services away from the compliance arena (which is the loss leader that pulls in business for them).

And finally, while I don't profess to be intimate with KPMG's internal work management processes, do you really know that they haven't dispensed with time sheets and applied value pricing in some areas?

In common with many other accountants, they probably also keep timesheets so that they can plan and manage resourcing and profitability - if you're working on fixed fee engagements, it would be important to be able to assess the costs going in to ensure that you extract a reasonable margin.

We've pursued your line of reasoning so many times before that I'm a little reluctant to stir up the arguments again. But I also think parroting the same message over and over again no matter what the circumstances diminishes your credibility and that of value pricing among many accountants.

Bob Harper's picture

Yes

Bob Harper | | Permalink

@John - Yes, I am sure Value Pricing is the right business model. Not interested how big they are because market share doesn't = profit share.

No, I don't expect KPMG to listen to me...a bit like most accountants but I do believe they can change. Even if this means getting rid of clients/staff. 

Timesheets are not needed for planning, managing and/or measuring profitability. There are more effective ways to do these things.

You think what you want about my comments. I think your comments reveal you are also stuck in "time is money" paradigm and don't really understand Value Pricing. If you did you'd support my call for the profession to change it's business model.

Cheers

Bob

 

 

Nicely put John    1 thanks

Jeeves | | Permalink

Bob it's good you've no expectation of a global practice to change based on your comments. But are you really suggesting that the top 4 accountancy firms haven't mastered the art of extracting money from clients?

I appreciate that, as you put it, market share doesn't equal profit share, but even after a 20% fall the partners profit share was £508,000.  Can you point to a practice using the Value Pricing model who have improved on that?

Bob Harper's picture

Nice

Bob Harper | | Permalink

@Jeeves - when I was at PW the billing was time based and I guess is that they all keep timesheets so I believe they are not optimising their pricing.

What's £508,000 as a percentage of sales? We could then compare that against accounting firms that use Value Pricing.

My point is that they are doing what the majority of the profession is doing; leveraging resources (people's time) and the sheer amount of resource is what delivers £508,000.

Sales increasing, profits falling and less people needed in the future...this is what has been predicted for the profession for years and it now seems to be starting at all levels.

Over the next 10 plus years most firms will notice average fees falling and more competition for clients. Without a change in the business model the end game is fewer firms and accountants.

Bob 

BigBadWolf's picture

@ BOB    1 thanks

BigBadWolf | | Permalink

Change the record!

If your ideas/ theories were so good and practical - you would be running a successful Accountancy Practice - not have a long trail of failed businesses behind you!

Bob Harper's picture

BBB

Bob Harper | | Permalink

@NotSoBigOrBad - for the record, Value pricing is not my idea/theory and one liquidated software company in the only "failure".

I don't call it a failure because the underlying business is sound - the liquidation was forced due to accountancy firms not be able to get finance agreements because of the Credit Crunch. The software and the firms that use it are doing well thanks.

I stopped being involved in an accountancy practice to do the software. But, getting back involved is an option with the re-launch of Crunchers franchise in April this year. But, do franchisees want me building my practice or helping them build their?

Would me running a successful practice mean I'm right? 

Bob