Accountants providing unskilled labour

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Accountancy firms have traditionally performed the function of producing annual financial accounts for small businesses; to allow those businesses to fulfil their reporting obligations and assess their taxes.

When I learned my trade, in the Eighties, the steps required for this process were:

  • COLLECT the bookkeeping records
  • COMPILE the accounts
  • EXAMINE them for consistency, completeness and compliance
  • CORRECT the accounts where necessary
  • OPTMISE them to meet the owner’s tax / profit objectives
  • PUBLISH the accounts in a standard / required format

The collection issue was often a real hassle. Clients would have to drive into town, and find somewhere to park, in order to drop off “the books”. Alternatively a member of staff would have to go get them. Physical bookkeeping records were bulky (sometimes dirty and smelly) and took up a lot of (usually floor) space in the accountant’s office.

Physical records would typically consist of  Sales Daybook, Purchase Daybook, Sales Ledger, Purchase Ledger, Cash Book, Petty Cash Book, Wages Book, Sales Invoices, Purchase Invoices and Bank Statements.

Compiling a set of accounts from these records was a skilled job. Very skilled.  Knowing where to find all of the relevant information - which bits were important and how to piece them together to produce a set of accurate financial accounts that balanced - was something that took time to learn and intelligence to do. Years of training and experience were required.

Fast forward to 2011 and things have fundamentally changed. Affordable, easy to use bookkeeping software is now used by most small businesses.

This means that collecting records is no longer an issue; they can arrive electronically at the speed of light. More importantly, accountants are no longer required to compile accounts. The bookkeeping software produces balanced double-entry accounts;  which is another way of saying that the small business owner can compile accounts him or herself.

Compilation of accounts is no longer a skilled job. Knowing how to examine, correct and optimise them is. Clients need to buy these three services from their accountants, because they don’t have the training, experience and (sometimes) intelligence to do it themselves.

If you have lots of clients with physical records, or using spread sheets, you are still performing a lot of compilation work and you need to recognise that this is unskilled labour. Unskilled labour is not scarce, so don’t be surprised if clients don’t want to pay much for it.

The modern accountancy firm has to make sure clients understand the value of what they do with accounts – producing them is a given.

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