Advisory v compliance: Picking your course

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“Oh man, I’m public enemy number one,” said Chris Hooper with unexpected relish when he spoke to AccountingWEB recently. A self-styled accounting futurist, Hooper has a passion for technology. He has spent the past few years preparing his business for what he terms “the Accountapocalypse”, an epochal shift in the profession where most of the value chain is automated.

“Everything that can be quantified, will be quantified,” says Hooper. “And I fully expect the laggards – people who have waited too long to adopt technology – to go out of business.” The looming spectre of automation has given Hooper’s view more urgency.

While not as apocalyptic as Hooper’s rhetoric, the big talk at this year’s Practice Excellence Conference was on advisory services vs. compliance. It was repeatedly emphasised that accountants would have to pick a course and stick to it.

A term that cropped up repeatedly when discussing the dichotomy, often with a hint of derision, was ‘compliance factory’. One practice that could be considered a compliance factory is Maslins Chartered Accountants in Kent. “We don’t do a formal, chargeable, advisory work,” says Chris Maslin. “My personal view is that, at least at the micro end of the business world, people value advice but are only prepared to pay for the compliance.”

Maslin doesn’t veer one way or the other. He intends to work as an accountant for as long as the market allows. “Don’t know,” he says when asked about Maslins’ future. “I suppose I consider all modern businesses as fairly temporary. Make hay whilst the sun shines, be aware things won't always be the same, and be ready to change when things outside your control change.”

It’s a refreshing outlook in what has often been a contentious discussion. Maslins uses cloud technology, working only with FreeAgent. He doesn’t regret it despite the technology’s potential to make his services irrelevant. “I’m aware it’s just around the corner that the likes of FreeAgent will be able to submit statutory accounts/CT returns at the click of a couple of buttons. Whether at that stage we get a mass exodus of clients or not (why pay us £99 a month when they can do it all for £25?), I don’t know.”

Maslin compensates for being undercut by aiming for “slightly higher-earning contractors or freelancers”. “We should be fairly safe. Reason being, £99 a month often isn’t too much to them, and whilst they could DIY, they appreciate the fact of having us there, almost like an insurance policy.”

Maslin’s philosophy may be a breath of fresh air, but it won’t work for everyone. Not all, indeed most, practices are like Maslins. Stephen Paul at Valued Accountancy in Durham is intent on giving his firm more staying power. He’s not as c’est la vie as Maslin. His firm was named Xero practice of the year, and Paul says he has been shifting his offering toward advisory. “I’d say the ratio at the moment is a 45/55 split in favour of compliance – but I fully expect that to change.”

Valued Accountancy also recruits young, with a robust apprenticeship scheme right across the business. Paul has been very happy with the results, noting that these employees don’t come to the company with preconceived ideas and are much more receptive to change.

What are your plans for the future of your practice? Is it as black and white as it’s made out?

About Francois Badenhorst

Francois

I'm AccountingWEB's business editor. Feel free to get in touch with comments, tips, scoops or irreverent banter. 

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02nd Oct 2015 08:41

To Misquote mark Twain .......

The reports of the death of traditional accountancy have been greatly exaggerated. 

The profession is extremely diverse, from multinational multi-discipline firms down to the sole practitioner. And long may that continue.  

Within that diversity there is room for all shades of opinion when it comes to embracing (or not) the technology available. I see no reason why that should not continue, more or less indefinitely. Sure, there will always be technology creep - how many of us continue to practice without the use of a computer? But despite the edicts of those with a vested interest, most practices have a sufficiently diverse client base to allow them to adopt the technology at their own pace, as the clients demand it.

So while practices have this choice of how they work they also retain the choice of the type of work they do - a big chunk of compliance here, a little advisory there - and so the idea that there is pressure on firms to make a 'choice' between different types of work seems to be a moot point.

And thank goodness for that. Leaving aside the problem of putting all your eggs in one basket I for one don't have the time or the inclination to re-engineer my business from the bottom up and I think that probably applies to most small practitioners.

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02nd Oct 2015 09:59

I tend to agree with you

I've written on this very topic already. I feel as if the debate is tainted by exaggeration. Everything is going to be fine, things will equilibrate. 

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02nd Oct 2015 09:52

Public enemy number one?!

I don't think so.

I(we) have no idea who he is...

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02nd Oct 2015 09:57

I get you

Kent accountant wrote:

I don't think so.

I(we) have no idea who he is...

Apologies, I should've mentioned he's based in Australia. He's pretty divisive. He's also very intelligent and charming and I don't think it'll be very long until you do know who he is.

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02nd Oct 2015 10:06

The problem is..

In my experience that people with 'a passion for technology' tend to focus on the use of technology rather than on the bigger picture. This leads to the use of technology for its own sake rather that for the sake of improving profitability.

If my car is broken, and I take it to the garage, I don't car if they fix it using high tech equipment run by people in spacesuits or an old bloke in a cardigan with a hammer and chisel, so long as it's fixed properly in a reasonable time frame, and the price is sensible.

As for the techno 'laggards' going out of business, no they won't.  Those that go out of business are the ones that don't give clients what they want! Twas always thus.

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02nd Oct 2015 10:57

Nothing new. The ability to file one's own returns has always existed. Even 30 years ago when my father had shops there were a few of our fellow shopkeepers who filed their own VAT returns because they wanted to save a few £100. The majority of businesses who actually make money will always have a place for accountants. We have plenty of clients who use cloud software to do their own bookkeeping - all of these softwares can file payroll, VAT, etc. Do any of our clients use it to file their own returns? Not one out of 100s. So what if it can do year-end accounts and corporation tax. Most businesses would rather pay a fee and let somebody else handle it. There will always be the very small side-businesses who make a small amount of profit - in my experience they are the ones who prefer to do it all themselves. A profitable business is usually profitable as experience has taught them to stick to what they know best and delegate the rest.

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02nd Oct 2015 11:09

.

Claiming tech can replace what accountants do is always a misnomer.

Tech is great, I love tech, but tech doesn't think. 

Good accountants think.

There is always a niche for a thinking person in a technological and complex world. 

how big or small it might be is open for debate, and is a function of many things, not least regulation, but I think it is crap to suggest there will be two streams "advisory" and "churn".

There will always be "bespoke" who process AND advise, and if anything being a sole prac has never been easier.  Its certainly easier now then when I started up.

Gone is the needs for meeting rooms, receptionists and hordes of staff doing bookkeeping. Accountants and clients can communicate directly with no barriers.  Tech is cheap, and open to even to the smallest practice. No longer to large companies have the advantage of being able to afford to develop their own in-house software, you can buy it off the shelf. 

 

 

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02nd Oct 2015 12:02

Nothing is certain....

Except death and taxes.

 

I am thinking of acquiring an undertakers business so I have both ends of the market covered.

 

Wonder if theres a car benefit in kind on a hearse?

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02nd Oct 2015 12:07

Some of these services are miss sold.

I recently took on a client who was paying quite a high fee for an all inclusive service to include bookkeeping, virtual FD and growth advice.

I have been through what he had been given and IMO it was little more than a virtual bookkeeping service and most of the advice was around when tax payments were due and filing deadlines, basically what you would expect anyway from a basic compliance service.

they produced a quarterly set of figures and tagged a few KPI's on the front of the report and emailed it over to the client, with a few very basic comments, no in depth advice.

Many accountants also advertise themselves as "Business Advisors" but only give accounting or simple financial advice, surely business advice covers the areas of non finance such as operational, marketing, HR, legal etc and ultimately what do you do when the sh*t its the fan. I find accountants who have only worked in practice will struggle to advise on this aspect of the work in any depth.

The hardest thing I have found in the advisory side is that when you first start there are usually a few quick wins or low hanging fruit you can nail early and present real value going forward. The problem I see is maintaining that into years 2 and 3 when it becomes harder to keep pulling rabbits from the hat, I therefore find maintaining fee levels becomes an issue.  Also as the business grows beyond a certain size they would look to recruit internally.

So for me the advisory stuff is good but it comes on the back of the compliance work not instead of.

Seeing a business grow and create jobs is a fantastic reward though, much better than saying I have filed all my tax return with a week to spare in January.

 

 

 

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02nd Oct 2015 12:13

.

@Tom, a hearse might qualify as van, being primarily designed for the conveyance of a coffin? I probably ought to know given I used to audit a funeral parlor back when you could play "draw the dots" with the spots on my face as an audit junior. 

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02nd Oct 2015 12:29

There will always be compliance
Surely all this automation requires clients to get on board too? When I think about the kinds of clients the firm I work for represent, I can't see this changing. They want to be running their businesses like they always have and employ us to handle this stuff for them. We've got the odd client keeping their books on old versions of tasbooks. If we said to them "we want you to use this now" they just wouldn't. Compliance work will be our bread and butter for some time to come I'm sure.

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By abaco
02nd Oct 2015 13:17

What...

...is this jargon-fest supposed to mean?

“the Accountapocalypse”, an epochal shift in the profession where most of the value chain is automated.

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02nd Oct 2015 14:18

Jargon-fest

Or perhaps, Jargon-palooza. Or to make it more British orientated Jargon-bury.

Jokes aside (it's Friday, grant me that), your criticism is warranted. It was a sentence I struggled with. If anything, it's indicative of the jargon that dominates the debate. I'll try harder in the future to cut through the noise.

I hope you enjoyed the rest, at least.

Best,

François

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02nd Oct 2015 15:13

.

Lets face it Francois, whatever you write for us bunch of miserable old so and so's you wont win. Anything less than the online equivalent of a very hard 3 man rugby tackle down and a few 'accidental' knees in the groin on the way up and you have to consider its a decent article. 

back in the old days journalists used to write stuff that got published in magazines in a thing call "print" and from where you sat you couldn't hear people tutting and moaning about the articles as they sat miles away. These "comments" on articles are quite frankly making a rod for your own back. I smirked somewhat at the thread on the review website and folks moaning about having to deal with feedback from clients. O the irony!

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03rd Oct 2015 13:34

Cheers

ireallyshouldknowthisbut wrote:

Lets face it Francois, whatever you write for us bunch of miserable old so and so's you wont win. Anything less than the online equivalent of a very hard 3 man rugby tackle down and a few 'accidental' knees in the groin on the way up and you have to consider its a decent article. 

back in the old days journalists used to write stuff that got published in magazines in a thing call "print" and from where you sat you couldn't hear people tutting and moaning about the articles as they sat miles away. These "comments" on articles are quite frankly making a rod for your own back. I smirked somewhat at the thread on the review website and folks moaning about having to deal with feedback from clients. O the irony!

Haha thanks. Nah, but honestly, one of the reasons I enjoy writing for the site is the very forthright comments and community. Writers don't like to exist in a vacuum. It's nice to have my writing be relevant, criticised and read. It makes me better, and it'll mean better content in the future. But your support is very gratefully accepted! 

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05th Oct 2015 08:50

Not sure home many people will do it themselves

A few of my clients are accounting contractors. Some of them I trained with whilst doing articles. They are more than capable of doing their own returns, I have even offered to give them access to my software so that they could cost effectively do it themselves (they are friends and I would rather they did their own accounts) and they are just not interested.

So whilst the advent of technology may cause many to do it themselves, many will not.

I could easily wash my own car but I still pay someone to do it and I think the principle is the same. It would be far quicker for me to do it if I took the time it takes to drive to the carwash into account but I still don't / won't.

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05th Oct 2015 10:13

Joined-up reporting

Hi Francois

It's a shame that you didn't reference Accounting Web's other recent article on this subject, and the comment thread that followed:

https://www.accountingweb.co.uk/article/management-reporting-future-acco...

What I would love to know is how many firms would be able to generate sufficient advisory income if they abandoned the associated compliance work altogether?

As I said in the other thread I reference - I do not believe this is a binary outcome, despite your use of a fork in the road image. Are accountants really "Moving away from" compliance work or, in reality, looking to "Add advisory services on top of" compliance work.

Anyone at your end fancy addressing that issue for us?

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06th Oct 2015 12:34

In my experience

Most UK based accountants are bored of constantly being warned about upcoming changes that are going to kill off their longstanding business models.

Those commentators from overseas assume things are the same here as in their countries. They aren't.

Few informed and genuinely experienced UK based commentators issue such warnings these days. Those who do are simply restating what they've been saying for years and they are still ignored. One day their prophecies may be right. But in real life few accountants will lose all of their clients in one go.  They will start to take action only as and when they see sufficient numbers of clients starting to move away from traditional (compliance focused) accountants.

When that happens the forecasters of doom will claim they were correct. Maybe. But they've been warning of these changes for ten plus years.

Better, in my view, is to reference the impact of changes and how some forward thinking accountants are adapting their approach. New start ups are best placed to build practices that take account of new developments. Let everyone else decide for themselves whether and when to adapt.  That's why I never argue that 'all accountants' need to do anything to stay in business or to win new clients.

Mark

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06th Oct 2015 13:13

Mad Max

Was also an Australian view of the future.

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06th Oct 2015 15:08

Stanley Unwin

I think Stanley Unwin wrote the above article.

Who is Stanley Unwin, chick on for his interpretation of the budget

https://www.youtube.com/watch?v=yFB_FS9rV0c

 

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