Why firms should consider the composition of their practice

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Most people starting up in practice for the first time are grateful to get any profitable pieces of work and, in many cases, any work at all. Therefore, they do not even consider the composition of their practice beyond, one hopes, determining the kind of work that is beyond the pale.

While it is obvious that if you do not have an audit practising certificate then it would be unwise to practice as an auditor, in the early days and sometimes much later there is always a temptation to stretch the bounds of credibility and take on work for which you and your staff may not be fully qualified.

Frequently, this will do no great harm as it is easy enough to learn many skills on the job, as long as one takes great care and understands where problems can arise. Alternatively, you can employ the services of a consultant to provide support.

Make no mistake though, a great deal of what accountants do is highly technical and fraught with risk. Sending an employee on a half day course will not make someone an expert.

Overstepping the mark is frequently the first step on a rocky road leading to accountants receiving an expensive legal claim or getting struck off, after having received formal complaints from clients about their inability to deliver on tax projects that was a little bit tricky or being unable to spot large holes in one or more sets of accounts.

In an ideal world, before setting up a new firm of accountants, it would be sensible to determine exactly the kinds of work for which you are best qualified and set these out on a website or in publicity material so that any prospective clients or other work providers will recognise all of your specialisms and also your limitations.

As your firm develops and, one hopes grows exponentially, it will take on more staff and develop further skills as a result of the clients that it has serviced. For example, you might recruit an insolvency practitioner which will determine a particular area of expansion.

Alternatively, perhaps you have had great success attracting clients in the not-for-profit sector, in which case it makes perfect sense to capitalise on this expertise and create a big fuss about your skills in this niche area.

At the same time, there may be clients that worry you. As an example, I worked for a practice that audited a small number of banks. That number gradually dwindled down to a single bank. At which point the partner in charge of risk decided that it would make sense to move out of the area completely, rather than spending vast amounts of time and energy, not to mention cash, in training up a team of auditors in a very specialised area, merely to service a single client.

Similarly, giving complex tax advice in matters where you have no previous experience will make your firm a hostage to fortune.

The rule of thumb here has to be to avoid going beyond the practice’s skill set, while attempting to expand service offerings as much as possible. In that way, your practice can prosper but you also will be able to sleep at night.

About Philip Fisher

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