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Practice changes happening faster than expected

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19th May 2015
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The inevitability of change within the accountancy profession has become common currency, but several observers at the Accountex event in London last week voiced surprise at just how quickly practitioners are adjusting. But another school emerged to warn accountants that they weren't adapting quick enough.

Accountancy is caught in a vortex of change and this article sets out to establish how typical UK firms are reacting. 

Cloud and mobile technologies that were not available five years ago are having the most visible impact, but they are accompanied by demographic shifts as the “Baby Boomer” generation is being challenged by more ambitious, adaptable younger generations. At the same time the newly elected Conservative government is likely to continue its drive to reduce administrative burdens and red tape - which ultimately means less compliance work for accountants.

Most of the software companies showing cloud-based systems at Accountex drew the connection between cloud and the shift from compliance to advisory work. There is a marketing motive for this link, but AccountingWEB’s Practice Excellence Programme confirms that firms that have embraced cloud technology most enthusiastically are also the ones who have pushed the furthest into advisory territory.

The key ingredient to this process are “virtual FD” services, where firms support their clients with online bookkeeping systems, and use the data to compile monthly management reports, or meet their clients for quarterly strategy reviews using live figures.

During a presentation on Practice Excellence at Accountex, Robert Lovell and I asked the audience how many of them had adopted this approach. While a majority of the delegates were now using cloud accounting systems (reflecting our estimate that more than half of AccountingWEB members are doing so), only half of those cloud users had made the next step to using the system as a platform for management reporting and advisory services.

Based on a sample of just 30-40 accountants, we still felt that the audience confirmed some of the underlying characteristics of our practice community. Surveys of our members done in tandem with BankstreamXero and Thomson Reuters over the past year or so have helped us to compile a profile of member attitudes towards cloud accounting, practice effiency, and the profession’s appetite for change.

While still a very rough estimate, we think our members fall into one of the following groups:

  • Cloud pathfinders (10%)
  • Profitability pioneers (10%)
  • Thinking about change (30%)
  • Status quo firms (40%)
  • Lifestyle and “mates & friends” firms (10%)

Of those groups, only those actively implementing change or thinking about doing so were likely to make the trek to East London for Accountex - unless they were more complacent firms looking for a bit of free CPD.

That’s the AccountingWEB view, which was endorsed by several people who visited our stand. But several other observers had sterner words for firms clinging to the status quo.

In a stimulating video interview at Accountex (full version below), AccountingWEB blogger Norman Younger told us: “What I have noticed is there’s not enough older accountants here, which is ringing some alarm bells.

“It seems to me a lot of accountants are interested in technology - it’s all about cloud, online accounting and interacting with clients. It’s all changing. I suspect a lot of visitors are looking to change their practice profile or are looking to go into practice and they want to start with the best avant garde technology,” he said.

“But I think there’s a lot of people out there looking at changes and thinking, ‘This isn’t for me. We’re just going to trundle along for a few years.’ But that’s a big mistake, because the longer they wait, the lower the value of their practice,” said Younger, who now specialises in brokering accountancy firm sales.

He signed off with a warning for firms who are hiding their heads in the sand: “A third to a half of these guys are not going to be here in 10 years, because they’re just not up for it.”

Xero’s UK managing director Gary Turner was just as trenchant in another video interview with AccountingWEB: “I think there is a community of accountants who won’t make the transition because they choose not to or misjudge the impact of it,” he said.

“Our guidance now is that it’s not optional. You have to do it. Your clients want you to do it and the profession is going that way anyway. If you choose to sit it out for another 2-3 years you’ll be at a profound disadvantage. Will there be 20,000 accountancy firms using Xero and cloud products in 10 years? I don’t think so.

“I think there will be an oversupply of accountants and those that adopt more efficient ways of working will be the ones who prevail and those that don’t will fall by the wayside.”

Where does your firm fit within the ready-for-change spectrum? Have you noticed similar changes taking place around you, and if so - how are you responding?

Replies (12)

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By Tim Vane
20th May 2015 10:38

Fuzzy thinking

So, "only those actively implementing change or thinking about doing so were likely to make the trek to East London for Accountex".

How does that make any sense? The practitioners who are embracing the cloud and its new ways of working are the very same ones who are unlikely to perceive any value in trekking across the country to visit the same old suppliers hacking out the same old tat.

If I want to catch up with the latest innovations in cloud technology, I can do that most easily and quickly from my desk. That's kind of the point.

If it's "all about cloud, online accounting and interacting with clients", why the big emphasis on slogging across the real world to attend an event with less relevance every year, and at which some of the more innovative cloud software vendors were not even represented?

The practitioners who don't attend next year won't be those on the verge of dying out, it'll be the ones who keep coming that are living in the past.

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John Stokdyk, AccountingWEB head of insight
By John Stokdyk
20th May 2015 11:59

Interesting observation

If you are right, and Norman Younger's comment about the dearth of older accountants at Accountex is correct, should we assume that the profession's most senior representatives are the ones surfing the cloud wave?

Joking aside, I think you can pick up a huge amount of information by coming to an event like this where so many people are gathered in the same place at once. You can download and play with apps - but that takes a lot of time and effort (eg an afternoon per app). If you've got some specific requirements, you can go talk to the developers, get a sense of where they're coming from and how responsive they are to your needs - and then go back home and test drive their tools.

One of the most interesting things I saw at Accountex were the prototypes for Sage Impact and its online corporation tax companion. Some might dismiss sage as a desktop dinosaur, but I wasn't the only one at Accountex who was pleasantly surprised by the way its cloud tax/practice tools are taking shape.

The lesson I would take away is that there is no single route to enlightenment - you can pick up useful information from a variety of sources and in a variety of ways. And if anything, the more digital our working environment gets, the more I see people flocking to live events where they can gather and talk face to face.

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Teignmouth
By Paul Scholes
20th May 2015 21:59

Accountex and Cloud stuff

I go along with what Tim says above with regard to Accountex and Cloud Accounting.

Most firms who are looking to make changes to their methodology will look to do their major research in Feb-March (I always have) and, having attended Accountex once as a punter & once as an exhibitor, let's not con ourselves, the prime motive of exhibitors is to sell, and a punter is never going to get a balanced view of what the software can and can't do on a busy stand, with hundreds of punters in a 10 minute slot.

As Tim indicates, it is just silly to do your research and comparisons of cloud software based on a physical exhibition that only happens 1/2 days a year (and, was it not for the fact they make so much money, the people who run the exhibitions would agree with me), it defeats the whole benefit of the cloud approach in which you can view tours, participate in detailed webinars online and visit Accountingweb for unbiased opinions.  

@John, I didn't download or play with any cloud apps until I'd researched the available systems and, picking up on Tim's comment on providers not being represented, I did a quick tally of the exhibitors a week ago and could only see about 50% of the cloud accounting providers.  Clear Books ,who I work with, saw it as a complete farce last year and this year got far more enjoyment and customer appreciation by spending the time & money on their own "Accountex" for users.  There is also a major supplier who exhibits only because it is expected of them, and I'm certain they are not alone, it's self fulfilling hype.

With regard to oldies not attending, I'm 60+ so may reflect a population your surveys didn't pick up and for the hard-core stay at home oldies, no matter how much hype there is about the speed of change to the cloud and other new technologies, there's still enough inertia in the accounting industry to give them years of status quo till retirement, plus what everyone seems to ignore is that their clients will look to them for advice on accounting, and will have no reason to doubt the accountant warning them off the cloud.

Norman Younger said that such an approach might seriously down-value the accountant's practice whereas, in reality, if I was looking to buy fees and was offered a practice of Xero, QBO, Kashflow, Wave, Gbooks, (or 15 others) users, I'd walk away.  It's always been the case that you are far better buying a well run practice where you can make a positive difference to the clients and I'd jump at a practice with no cloud users.

@John, you mention how interesting you found yet another innovation from Sage, but don't balance it with the responses to your "Sage roll out" article a week ago.  Despite the marketing budget it is finally dawning on people that the masters of hype's days are numbered, they should have been the first into the cloud, they weren't, and do not deserve the coverage they still get, when there are probably 20+ providers out there offering as many if not more, features and functions.

As far as the other non-cloud stuff at Accountex is concerned (including any of the unbiased talks) there is a benefit to attending, I'm sure, and I spent hours in the excellent small business ex that was taking place next door, far more enlightening.

PS: Here's another Q&A on Accountex this year

 

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By JCresswellTax
21st May 2015 08:59

IR25

I say no more...

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By PK Group
21st May 2015 11:58

The Benefits Of Cloud Software For Accounting Firms

There are clear benefits to be had by adopting cloud accounting software. We have had great experiences with Xero & Kashflow software and are always on the lookout for new technologies to increase the efficiency of our practise.

We pass on these efficiencies to our clients, resulting in a better all-around service.

 

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Adrian Pearson
By Adrian Pearson
22nd May 2015 10:24

It's more about the people

I attended Accountex for the first time this year. For me, the real benefit was chatting to the people there (the visitors not exhibitors).

There are better ways to learn about and research new products. There are better ways to stay informed on the changing world of accountancy and likely future developments. But events like this are probably the best way to expose yourself to a "melting-pot" of people who just might have different ideas and different perspectives to you: ones that you can benefit from, or that will at least stimulate your own thinking.

As with most things these days, it's all about identifying the signal in the noise.

Adrian
www.checkmybooks.co.uk

Thanks (2)
Teignmouth
By Paul Scholes
23rd May 2015 14:19

Good point Adrian

This is the case for many events, Iris World is a good example and even some CPD courses I've been on.  So how about Accountex where the exhibitors are behind closed doors?

 

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By raybackler
26th May 2015 12:11

What about client inertia?

There is a huge move towards cloud accounting with indisputable benefits.  However, those accountants who resist this change will only lose business slowly.  Accountants may be slow to change, but the biggest obstacle is clients, who are also slow to change.  I am 60+ and like Paul Scholes, an avid advocate of cloud accounting (committed to Liberty Accounts).  I am now a committed Taxfiler user too.

I don't need Accountex as I can check out products online at my leisure.  Accounting Web is an excellent forum for exploring new ideas and that was where I found advice on Taxfiler.  I also found Receipt Bank through Accounting Web.  I have no objection to exhibitions in general, but my practice needs are very specific and I only introduce new offerings to my clients after a careful assessment against what I am offering now.

Many clients do not take full advantage of what we have available for them and they could just as easily not use cloud software.  Client inertia is the biggest drag on getting the full access to the benefits of cloud accounting.  Change is gradual and for the better, but there is no revolution going on.

 

 

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By 68fw
26th May 2015 13:03

not for me...

Once again I chose not to attend Accountex in no small part due to the 'corporate style' marketing, abundance of here today gone tomorrow redundant, worthless security risk software -

Really don't need another early adapter/adopter T-shirt...

In my mid fifties (have worked in public practice for thirty five years) and assure you, my small and thriving two partner firm will be here in twenty years time, providing traditional accountancy services

Incidentally, I don't use e-mail and own and use accounts prep software (for my c300 sole/par/ltd clients) which I bought in 1987... for those of you renting the latest version of iris, sage etc, well done, no doubt you got what you deserved. 

Always find it more rewarding to create real jobs.

 

 

 

 

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Replying to puzzel:
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By JL
26th May 2015 13:39

I couldn't have said it better myself - thank you 68fw, you tell 'em!

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By DMcIver
26th May 2015 15:54

Is the hype a distraction?

I've got to say, whilst the cloud is of course a very useful tool. How long before the software companies make it super easy for clients to prepare a set of ixbrl year end accs and CT return at the click of a button with no real knowledge of whether they show exactly what they should?

You absolutely cannot substitute an accountant's knowledge - all very well having bank feed and automatic posting but how about knowing where things should go? The difference between accounting treatment and tax treatment? The list will go on.

Don't go thinking the cloud is the most important thing, it's not. It is a tool to help us. Knowledge is where we add value and justify our fees. Our personal service is the absolute key to the core business of accountants. I just think endless talk about the cloud distracts us a little bit from this.

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By qhas
26th May 2015 18:23

Thanks D McIver
I couldn't put it more eloquently. I'm with you all the way. These wonderful software applications are no substitute for knowledge but they are marketed like they are. By all means use them where you find it useful, like I do, but don't fall for the hype,

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