Is compliance the golden egg for accountants?
Many of us have read the headline “compliance is dead” but in reality, this is far from the truth. Many accountancy practices are finding the total opposite with compliance fees on the increase and are proving highly profitable.
One thing is for certain: the world of compliance is changing and, as a result of these changes, so are the fees accountants can charge for it. What is important is to do compliance and to do it well. So where do we start?
What is compliance?
First of all, it is important to define what exactly we mean as compliance. In this article, compliance means something we report to a regulatory body such as HMRC or Companies House, including the processes that get you to the end result. Therefore, compliance includes bookkeeping tasks as well as year-end accounts production and filing the annual confirmation statement.
In recent years there have been massive advances in technology. Many more accountants are using new tools, with the introduction of Making Tax Digital (MTD) for VAT the catalyst for much of this change.
As well as advances in the cloud-based accounting software such as Xero and Quickbooks, we have also seen an increase in the number of apps which can work alongside accounting software to streamline processes. These apps, when implemented correctly, can automate many of the manual bookkeeping processes.
Technology has had a significant impact on supplier invoices and receipt processing. Once a very manual task, we can now use apps such as Receipt Bank and AutoEntry to automate this process. Receipts can be submitted via a photo on a mobile phone, invoices emailed or uploaded and the apps can even fetch invoices regularly from suppliers directly. These are then posted into the accounting software, along with an image of the invoice or receipt – no need to keep paper copies now.
Many of these apps now also use artificial intelligence (AI) to remember commonly used supplier nominal codes and VAT rates to automatically populate these fields and can even post these into the accounting software with no human intervention!
The accounting software also has many time-saving features such as bank feeds, bank rules, and recurring invoices all of which result in further time saved.
The reduction in time has led to significant cost savings which, in turn, has resulted in a fall in compliance fees charged. Significantly, although fees have fallen, profitability has increased in the firms who are using this technology well. Many of these firms also are winning larger bookkeeping clients because it is cheaper and more efficient to pass this work to them rather than have their own staff do it in-house.
OK, so technology is not for everyone and some firms do not utilise it – often due, ironically, to a lack of time and lack of resources to implement it in the first place. This approach will, however, put these firms at risk. Not only will there be increased competition, but there will also be consolidation in the market and the number of practices will be reduced. Therefore, the route of no change is a very risky path to follow.
Use the technology – but use it well
It is key to use the technology and to use it well to see the benefits. How you implement the technology is therefore critical.
Select your apps of choice and then stick with them. The app ecosystem is constantly evolving, with new features emerging all the time. While it may be tempting to move around, the chances are that the apps you use will soon have these features too.
Define your processes, train your team and keep up to date. Do not skip any of these steps as they all are critical to a successful service line. Also, ensure you review your fees and your profitability regularly. If a client’s business is growing, usually there is an increase in transactions processed. Even using technology, this results in more time being spent. Therefore, set time in the diary at least every six months to review transaction levels and increase your fees where appropriate.
Compliance is here to stay and, through technology, this can be a growing and profitable area. Many firms are already experiencing this growth and, through well-defined processes and training, other firms can also achieve similar results.
Those resisting change, risk compliance fees being squeezed and subsequent reductions in profitability. This raises the question of how long the “no change” approach will continue and if it is a viable route for much longer.
You might also be interested in
Caroline Harridence is the founder of Counting Clouds Cambridgeshire – a digital and technology focussed firm specialising in cloud strategy and app advisory for both businesses and accountancy practices.
Caroline is highly experienced in assisting accountancy firms to migrate clients onto cloud software and implement new technology and...