What sets leading firms apart
John Stokdyk presents the findings from a joint research project with Xero to uncover the key drivers that underpin successful practices.
George Osborne may have left behind an economic backdrop of confusion and uncertainty, but he also bequeathed an enduring legacy for fans of practice automation in the shape of Making Tax Digital (MTD), or “the death of the tax return” as he put it in his March 2015 Budget speech.
The trend charts from both the 2017 Practice Excellence Awards and Software Excellence Awards point to 50% growth in the adoption of cloud accounting systems among practitioners during the past year. With the use of expense capture tools trebling, cloud apps surged upwards too as accountants turned in large numbers to online tools that would help them streamline the record-gathering processes needed to meet MTD’s quarterly filing requirements.
Even online tax and practice programs, which have lagged behind the cloud bookkeeping boom, are showing up on the Practice Excellence trend radar:
Cloud adoption rates 2006-17
The MTD programme may be having a little breather ahead of the April 2019 VAT for MTD go-live date, but the second wave of cloud adoption it triggered dominated the practice landscape during the past year – to the detriment of practice developments and innovation in other areas.
Sustainable success in accountancy is not just about using cloud tools, it’s how you use them. As 2017 Practice Excellence Pioneer of the Year nominee Will Farnell explained in his entry: “Cloud-technology is no longer optional, it’s an essential tool for firms that want to offer their clients great service and great value. But effective use of technology is not enough on its own; it has to form part of a wider approach to client engagement and relationship building.”
With so much attention being devoted to getting on the cloud, many new converts to the movement may be overlooking more fundamental drivers of practice success. The 'What sets practices apart' project AccountingWEB undertook with Xero is designed to bring the focus back to the other fundamental drivers that underpin Practice Excellence.
Following the publication of Xero’s UK Partner Benchmarking Report in May, which showed that the more wholeheartedly practices committed to the cloud, the more successful they were likely to be, AccountingWEB put the findings to the test by comparing them with our historical Practice Excellence data. We followed that up with a survey asking practitioners what they saw as the key factors behind their growth.
We presented the findings at a Xero Uni event on Monday 2 October, and will repeat the exercise online as part of Practice Excellence Live’s Digital stream on 18 October. A follow-up report explaining what the top firms do to keep ahead of the pack will be available for all those who register for the online presentation.
Very simply, our latest study confirmed that the success formula pursued by Practice Excellence Award nominees like Farnell Clark boils down to the ideas that emerge from Xero’s research and many other practice development initiatives that we have heard about since David Maister coined the phrase “the trusted advisor” at the turn of the century:
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- Use technology to systemise your processes
- Build your firm around a clear vision and ideal client personas. This characteristic is particularly marked among start-up firms and established practices looking for new areas to fuel their growth.
- Manage client communications and referrals actively; firms that indicated they were tracking referrals with dedicated systems grew 1.5x faster than the PEA17 average, paralleling the differentiation seen between the best and average performers in Xero’s research
- Nurture your team
- Continuous improvement efforts.
These final two points go together: staff who buy into the firm’s vision and take an active part in shaping it are more effective than average performers. The PEA17 data confirms a notable advantage where firms made use of client feedback and involved staff in structured performance improvement initiatives (44% average fee growth).
Amid this wave of MTD-fuelled technology adoption, the people aspect of practice is coming to the fore and challenging the partner-based hierarchy that the profession has followed for more than 150 years.
One of the areas we investigated around the 'people' trend was new business development, where we used a measure suggested by Xero vice president Doug La Bahn of clients gained per employee per year.
When we looked at the data on “who owns the client” this is how the different approaches performed:
|Who owns client||New clients per staff average||Av fee growth|
This table was based on a sample of 40 firms, so it doesn’t offer definitive confirmation of the theory, but it certainly lends some credibility to the new clients per staff member measure. The formula has the advantage of being incredibly easy to work out, and to focus attention on one of the strongest indicators of continuing growth (alongside client satisfaction).
So far, the Xero Benchmarks and Practice Excellence trends highlight what firms are doing to stay ahead. The Digital track at Practice Excellence Live on 18 October will delve more deeply into how they actually do it, with contributions from Practice Excellence Award winners and nominees Paul Bulpitt, Sharon Pocock and Will Farnell.
Register now to indicate your interest – and ensure that you get a copy of the follow-up report.
AccountingWEB’s Head of Insight has been with the site since 1999 and likes to spend his time studying accountants’ technology habits. When not nerding out, you can find him exploring obscure indie music and searching for the perfect organic sourdough loaf from his base in Brighton, UK.