Tuesday 01 April 2014
How technology can change the way accountants work
Tuesday 01 April 2014
With the accounting industry experiencing a shift in traditional revenue lines, changing client expectations and growing cost pressures, technology is becoming increasingly relevant as a way to drive efficiencies in practices.
Over the past five years, the efficiency of business processes has emerged as the second biggest challenge for accounting firms in Australia, according to 2013's The Good, the Bad and the Ugly of the Australian Accounting Profession benchmarking survey (GBU), while growth remains the number one challenge.
At the same time, sources of revenue are shifting, with the report revealing that tax and compliance revenue has fallen nine per cent in the past four years, but still accounts for 61 per cent of total revenue.
Shaun Kamler, Division Director at Macquarie, expects that this decline in traditional revenue streams will continue, with firms needing to think about new ways to keep costs down. He explains that technology can change the way practices work and, in some cases, redefine the value accountants provide clients.
"The tax system is becoming more automated and, as a result, there is a higher expectation from clients in terms of the level of automation and the speed of turnaround times. This means accountants also have to consider the value they can provide above a basic tax return to clients," says Kamler.
"Both of these factors are forcing margin compression across the industry and, as a result, accountants are looking for new ways to drive profitability."
Kamler says that for accountants looking to deliver more value to clients more efficiently, it's necessary to spend more time understanding client needs and subsequently improving internal processes and systems to reflect these. This is where technology can have a big impact.
"Proactive accountants are looking to position their firms for future requirements by focusing on the bottom line, not just increasing revenue," he says.
"We're seeing firms that are trying to consolidate back-office operations using accounting software, and in doing so, they are transferring a lot of the administrative and traditional bookkeeping activity back to clients through technology," says Kamler.
Examples include online submissions of forms and data feeds from bank accounts into the tax systems, both of which have the potential to drive efficiency and keep costs down.
Another emerging trend is for firms to use outsourcing options for basic compliance, according to GBU. The survey found that 27 per cent of firms are now outsourcing work, predominantly for self managed super fund (SMSF) audits and compliance.
"We're seeing a lot of back-office compliance activity starting to be moved offshore," says Kamler.
"For firms considering outsourcing, it's important to have robust plans, including good contingency plans as well, and also having your current processes documented adequately so they can be replicated offshore, which takes time and resource allocation." Kamler adds that it's likely there will be a transition period that runs for six to 12 months before the process is operating smoothly.
"But once you do one process, it gets easier. Pick one process that will have a positive impact on costs, and one that you can also afford to make some errors with before clients are impacted. Make that work really well, learn from it, and continue to roll it out."
A lot of it is trying to automate the basic accounting activity, forcing accountants to reevaluate how they provide value to clients - Shaun Kamler.
The survey revealed that firms are also looking to improve efficiencies by speeding up job turnaround times. Having the right software can be an enabler to help staff complete jobs more efficiently, for example through establishing data feeds from client accounts directly to the software. The faster staff can complete a job, the more jobs they can take on and therefore charge for. Jobs that are completed quickly will also likely have a positive impact on client satisfaction. However, 47 per cent of firms do not have measures in place to track job turnaround times, making it difficult to find ways to improve. For those who did track turnaround times, partners achieved an additional 10 per cent of revenue per partner, on average.
Cloud technology was also in focus, with 52 per cent of firms indicating that they used some form of cloud software for their accounting firm. Of those firms, 30 per cent used cloud technology for their own internal accounts, according to GBU.
Cloud-based accounting applications have the potential to 'commoditise' traditional accounting work, says Kamler.
"A lot of it is trying to automate the basic, traditional accounting activity, which is then forcing accountants to re-evaluate how they provide value to clients. It means either trying to better use the systems they've got or, for some accountants, it means moving out of the traditional tax return space into multi-advice."
Kamler says the firms at the forefront of multi-advice are ones trying to combine all aspects of a client's financial needs into one consolidated advice model.
"This is driving profitability and a different type of service model than has traditionally been done."
"In our network, we're seeing accountants going into financial planning and SMSF advice. They are trying to expand the way in which they generate profit and also create value in their practice," says Kamler.
"If you look at the multiples in the market, it's clear that the multiples for accounting practices are lower than those for financial planning or insurance firms."
"With the removal of the accountants' exemption coming up in 2016, we're seeing a merging of advice. It's not accounting advice and it's not financial planning advice – its multi-disciplined advice to a client."
"The next decade will be really interesting for accountants in terms of how clients value their role, how accountants continue to reinvent themselves and the value they provide to clients in a cost-effective way. Technology is going to be a key driver," Kamler says.
- 47% of firms do not have measures in place to track job turnaround times
- 61% of total revenue is accounted for by tax and compliance revenue
- 52% indicated they used some form of cloud software for their accounting firm
- 30% of the firms who used cloud technology, used it for their own internal accounts.