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Beyond audit: Making up for lost income

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25th Nov 2005
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Regulatory changes mean accounting firms serving the SME market can no longer rely on a steady flow of annual audit income. So what can firms do to make up for lost revenue. According to SAP, forward looking firms are investing in their knowledge of business processes to advise on IT investment.

Regulatory changes such as IFRS and Sarbanes-Oxley have led to a fundamental shift in the market for audit work. While the big four have gained from the changes, small to mid size firms have seen a substantial drop in their audit work.

However, the 'big four' accounting firms rarely have the time or the experience to meet all the business needs of an SME. Typically an SME will need reliable advise from a trusted advisor on a wide range of business issues - in particular on their choice of IT software.

A survey by SAP reveals that SMEs are generally dissatisfied with their past investment in financial and accounting software. Poor implementation and lack of training means critical information is fragmented around the business, and buried in a mixed bag of accounting software

According to Mark Weir of SAP, SMEs do not understand the benefit of their software. Forward thinking accountant have a unique opportunity to use their knowledge of business processes to help SME cross the 'digital divide' that will increase their ability grow and unlock the value of their IT investment.

SMEs are not getting the consultancy services they need, says David Reynolds of the Independent Association of Accountants Information Technology Consultants (IAAITC). "Firms need business consultancy around business processes and IT underpins every business process today," he says. "SME have a problem in that they all grew from small beginnings, and for that reason investment in IT infrastructure has been very fragmented."

Accountant can help because they understand the business processes he says. "They understand the business processes needed to move forward and then look at the IT necessary to underpin those processes."

At the same time accountants need to understand the importance of business management software to their business. "That is where they will get their USP," says Reynolds.

One example of a firm that has moved into advising on business intelligence software is Baker Tilly. Partner Mark Holland says revenue has been affected by regulatory changes and change to the audit threshold. "Although regulatory changes have increased fees, it has not increased fees in relation to the workload, so margins have been squuezed and the risks increased," he says. "For a long time firms had it easy. Now, instead of steady audit income, firms have to get used to a afar greater degree of one-off jobs. "That is a massive change in the way the profession works," says Holland. Accountancy firms that are able to advise SMEs on the full scope of business software are using their traditional skill and values to create new revenue streams and enhance client relationships.

It is a huge opportunity for the profession, says Holland. But becoming a trusted advisor takes time and investment. Not all firms will make the change, he says.But for those that can, there is a unique opportunity.

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Dennis Howlett
By dahowlett
25th Nov 2005 16:03

Can't agree with this
This is all over the place.

SAP is being a tad partonising if it believes accountants are best placed to understand process. That may be true for financial processes but little else. They can act as the conduit for getting the processes users need. A differernt thing.

But I find it particularly worrying that SAP should be punting a 15 year old message that didn't work in the 1990s and is unlikely to work today. More snake oil? You bet!

Also to say revenues have fallen through a reduction in audit work goes against the reported improvements of many top 50 practices who have found the regulatory morass a fertile hunting ground for new fee sources tht links back to audit and compliance in general.

Lesson? Don't believe all the BS put out by software vendors.

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