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Compliance is dead, long live compliance

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12th Nov 2018
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To paraphrase Mark Twain: reports of the death of compliance have been greatly exaggerated.

Compliance is routinely pronounced dead at conferences, in social media posts, or any gathering where an accountant is in earshot. Those reading aloud the obituary of compliance often do so in the same sentence as promoting the need for accountants to develop advisory services. Accountants who don't comply are told that they too will suffer a similar extinction. 

However, Cheap Accounting's Elaine Clark is one accountant who is fed up with this compliance bashing. She has (figuratively) tied herself to the pillar of compliance and has taken to social media to profess her love of the beleaguered accounting work.

The bread and butter of the profession

“Compliance is the backbone,” Clark told AccountingWEB. But banging the drum for compliance should not be seen as a snub against advisory. The two complement each other.

“It is the bread and butter of the profession upon which other services are built and sold because compliance provides you with the information, knowledge, understanding and touchpoints with the clients to make the selling of advisory easier,” said Clark.

More profitable advisory services are dangled in front of accountants as they’re told compliance is declining. But Clark said these compliance-ditchers would resemble a consultancy firm, not a firm of accountants.

“It’s like telling an undertaker to forget burying bodies and instead sell hymns,” she said.

 

Is MTD the death knell for compliance?

Feports of the decline in compliance is driven, in part, by the forecasted effect automation, AI and Making Tax Digital will have on the profession. With all the noise generated by the compliance naysayers, it is perhaps understandable why some accountants are concerned. The fear is that a lot of compliance work will be automated, so what will this mean for their fees? It’s no wonder the advisory voices are getting louder.

But as someone who recently joined the advisory board of banking and accounting app Coconut, Clark is not concerned by the effect technology will have on compliance.

“Computers should be used to automate processes that don't need intelligence, or where you can use AI do those things,” reasoned Clark. “What we as accountants need to do is keep looking at the tools, techniques, and technology out there to allow us to deliver a cost-effective service to compliance clients.”

If anything, the government’s digital dreams will breathe life into compliance work. Seeing the move to digital reporting in his home country Australia in 2000 with GST, From the Trenches podcast host Paul Meissner expects the UK to see the greatest period of compliance work in the last 10 years.

Responding to an AccountingWEB tweet that referenced the decline of compliance phrase, Meissner retorted: “Advisory will come to a standstill as MTD rolls out.”

An appearance on BBC Radio 4’s Moneybox Live with some puzzled business owners cemented in Clark’s mind the need for accountants embrace compliance work in a post-MTD world. “It's amazing how the business community hasn't been educated on what their compliance responsibilities are going to be from April next year," she commented.

Stand up for compliance

Clark’s ‘I love compliance’ campaign has received backing from other small practice supporters on social media. ICPA’s Tony Margaritelli said: “It’s what we do and we don’t make a song and dance about it like our adviser and futurist colleagues. We need to stand by what we do and not be talked down to.”

The ‘compliance disparagers’ are part of the negative noise that Clark believes is adding to the stress levels of sole practitioners and small firms. “If a sole practitioner or small firm wants to be 100% compliance they're not wrong. There is a valid place for them to exist in the accountancy profession and we have to stop kicking people.”

Software insider Phil Sayers also questioned on an AccountingWEB article the notion that advisory is the beacon all accountants should pursue. “Accountants need to decide whether or not this is an area they want to get into. After all, you wouldn't suggest that a client radically changes their business model if this flies in the face of the client's personal and business objectives.”

 

What side do you stand? Are you flying the flag of compliance? Or are the reports correct - is compliance in terminal decline?

Replies (15)

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Mark Telford Chartered Accountant
By Mark Telford
12th Nov 2018 19:11

Compliance isn't going anywhere.

Advisory and app advisory might be the buzzwords of the moment - but try getting one of the protagonists to explain what it is and how to do it.

Thanks (4)
blue sheep
By NH
13th Nov 2018 10:15

Why even make the distinction? As accountants, any advice we can give a business surely must start with numbers, to make those numbers have any meaning they have to be crunched in exactly the same way that they do for compliance purposes.
You advise on record keeping and software/apps that can help them, you help them produce the numbers or produce them in the most efficient way yourself, you make sure the numbers go to the right people at the right time so the tax gets paid, you report back to the business owner on those numbers and give advice on improvements that can be made. That is called being an accountant, both compliance and advice are given by 99.9% of us I would imagine

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By NDK
13th Nov 2018 10:29

Perhaps we should just ask our clients what they want to achieve, and identify how we can help them achieve it. Then do the work we want to do, and bring in other people to do the work they want to do.

It doesn't have to be any more complicated than that, does it?

Thanks (2)
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By Mrbailey
13th Nov 2018 10:33

Without compliance there is no progress where a client has been wild negligent and /or criminal.
A wise fiscal agent will comply swiftly with integrity and probity being mindful of the fiscal public responsibility. Post compliance the HMRC compliance officer will thank and salute the fiscal agent for his diligence and public service.
The fiscal agent has both a private loyalty and responsibility and a public obligation and loyalty.

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By johnjenkins
13th Nov 2018 10:44

Can't you lot at Aweb come up with anything better? I just read the drivel on Accountants owning their clients. Come on John et al can't you come up with something exciting? Come back Mr Lee all is forgiven.

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Replying to johnjenkins:
Mark Lee headshot 2023
By Mark Lee
20th Nov 2018 16:39

johnjenkins wrote:

Come back Mr Lee all is forgiven.

Well. In my latest talk I debunk the hype (and fake news) that suggests that compliance work is dying. It's NOT.

However I also believe that within ten years or so, most of the compliance focused work currently done by general practitioners will no longer be required. Your systems and processes and software will almost certainly reduce the need for your involvement (or that of your junior staff); and there will be more direct filing of data with HMRC.

Most of your current clients will not force you to reduce your fees but some will recognise that you're doing less work than before. You may take the opportunity to provide more advice, help and assistance than before. And they may value this sufficiently to allow you to keep charging the same fees.

The real issue will be that there will be fewer new clients around willing to pay the sort of fees you currently charge for recurring compliance work. They will be looking for a new accountant to help with the little bits they can't do themselves. And, new start-up businesses will be largely reliant on online bookkeeping systems that contain direct filing facilities. (Again, within ten years or so).

There won't be a BIG change in the next 12-18m. There will start to be a shift in the next 3 years though.

As compliance based work gets simpler and, almost certainly, cheaper, general practitioners will have a choice:

1 - Ensure they can compete for new clients who want (simpler) compliance focused services. And ensure their systems and processes will enable them to manage the larger number of clients/relationships than they do currently - in order to generate a similar profit to now; or

2 - Develop the skills and competencies necessary to provide valuable advice to clients on financial, tax and/or business related matters; and if your current clients won't want or pay for such advice, you'll also need to develop the skills to attract, win and service new clients who will do so.

In my talks and programmes I recommend starting to build those skills now so that you are well prepared by the time you need to rely on them. You won't just be competing with better prepared and trained accountants; you'll also be competing with business coaches and management consultants who already have the necessary skills.

I'm firmly of the view that you cannot force-fit the future to your current business model. The world is changing. And the pace of change has sped up. Weirdly, it will never be this SLOW again!

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Replying to bookmarklee:
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By johnjenkins
21st Nov 2018 08:56

At last a bit of sound talking. Although I have to disagree a bit with what you are saying. I understand that the pace is speedier but this brings me to my worry of "high techies" and "low techies". The other major factor, which HMRC et al have totally bypassed is that the small self-employed will nearly always come from a less technical background so that part of business will not change in 10 or 20 years time. You are right when you say you cannot force-fit the future to your business model cos this is exactly what MTD is all about. They and yourself don't realise that it is business and the way business works that mould the future not the pace by which technology is advancing. Don't get me wrong, the advancement of technology in the Accounting profession has made life a lot easier but only because it hasn't been mandated.

Thanks (2)
Replying to bookmarklee:
blue sheep
By NH
21st Nov 2018 09:12

I see you have been gazing into your crystal ball again Mr Lee, I wonder if your predictions 10 years ago for where we are now were correct (or even 3 years ago for that matter)?
10 years is a very very long time, and while the tax system remains so complex the average business person will not be able to properly comply with their tax obligations (just look at RTI, AE, MTD etc, without the accountant in the process these things would never have worked, none of my clients even knew about these things before I told them).
Yes I agree that in theory compliance should be getting quicker, easier and cheaper for the accountant but I do not see that the average business person will want to do this themselves, trust themselves to do it, or even have the ability anytime soon.

Thanks (1)
Replying to NH:
Mark Lee headshot 2023
By Mark Lee
22nd Nov 2018 13:28

Hi NH
Funnily enough I have looked back on my blog to see how accurate were my predictions ten years ago. What I found was that I wasn't making many predictions. And those I did make went against the prevailing view of the time.

For example, in 2009 I disagreed with those commentators and software suppliers who were telling accountants they must move into the cloud or they would lose their clients. I said that such views were, at best, premature. I was right ;-)

Ten years (almost) later and MTD is a great excuse/reason for accountants to ramp up the pace of change.

Your existing clients may be in no rush. An increasing proportion of new start ups will be asking about the cloud or will approach accountants AFTER having started to use a cloud bookkeeping package.

I don't think there will be much change over the next 12-18m. Equally I think things will be VERY different in 10-12 years time. When accountants will feel the winds of change will be somewhere between the two.

Thanks (1)
Replying to bookmarklee:
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By johnjenkins
22nd Nov 2018 14:35

I have found all new startups have never mentioned the cloud. What they do say is what do I recommend as a good system for keeping business records. Because of the way small business works I really can't see much of a change. I've been doing accounts for over 50 years and the format hasn't really changed. Ledgers have always been in an Accounting package even if manual. MTD will try and change the modus operandi but I doubt if that will ever be achieved. Keep your feet on the ground, Mark, and you won't go far wrong.

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By surreylass
13th Nov 2018 12:12

I don't understand why people think you have to be one or the other, they are complementary services and being asked to provide advice often comes off the back of trust based on solid compliance services in my experience. If you're not in regular contact providing compliance services, you don't get to know your clients in the same way. We've found a steady pattern of being referred by existing clients, providing compliance services for a couple of years and then as they get to know and trust us they ask for extra services and start to become referrers themselves. It's a virtuous circle. Doesn't mean we're behind the times, just not sheep and prepared to follow our own instinct.

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By Dandan
13th Nov 2018 12:49

Whilst being a very conservative and traditional kind of bloke, I have to admit that , to survive, the accountancy profession needs to ring changes.

It is clear to me that compliance work (for example, re personal tax) will decrease substantially. HMRC appears to be aiming at forging a relationship direct with the taxpayer. They want to act as adviser, teacher and customer service. Take income from Property as an example . Since I have been declaring income from a portfolio , I have been deluged with advice and offers from HMRC. They provide enough material and courses to become proficient in this area of tax.

We need to become broadminded. Many things are possible. It may not be common knowledge, but in Scotland , the majority of Solicitors are also Estate Agents. So it should not be inconceivable for Accountants to be also tech firms. That would resolve one problem : Cloud companies and Accountants bedding together in an unsolicited partnership.

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Replying to Dandan:
blue sheep
By NH
13th Nov 2018 12:54

Dandan wrote:
So it should not be inconceivable for Accountants to be also tech firms. That would resolve one problem : Cloud companies and Accountants bedding together in an unsolicited partnership.

Thats the point, the vast majority of us are already in "partnership" with various software companies, that is what we already do to accomplish both compliance and advice, in fact I would be very surprised if more than 5/10% of practice accountants do not already advise on software!

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By justsotax
13th Nov 2018 16:13

compliance is dead...20 years since I first heard this....it was due to be completely gone by 2012....

Lets put it another way, the planet is dying, CO2 emissions are changing our world yet we are still years away from reducing the emissions from one of the main contributors (cars) to anywhere close to nil (and that's only for 'new' cars).

It comes down to 'want' and 'cost'....they are generally in conflict....HMRC 'want' it....but are not willing to pay for it!

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By North East Accountant
14th Nov 2018 08:31

Compliance will never die whilst our lawmakers continue to complicate the tax system.

More software, more tech just means that those who don't know what they are doing can just make a mess of it quicker.

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