On the regulatory front, everyone has sat at their desks, popcorn bowls at hand, watching a royal commission tear strips off Big 4 bank CEOs for woeful oversight of financial planning. The Hayes report (5th February 2019) will radically change the banking sector.
A likely consequence is that citizens will turn their back on the amoral behaviour of the banks and head for someone they trust to discuss personal finances. And as countless surveys show, the accountant holds more trust than any other advisor. How many firms will expand services into financial planning and wealth management as a result?
For another regulatory mandate with profound consequences, look no further than Single Touch Payroll. The Australian Taxation Office is heavily focused on ensuring that business owners understand the implications for cashflow, now that PAYE tax must be lodged simultaneously with pay.
A greater implication for accountants and bookkeepers is that STP forces every business with an employee to use cloud accounting software. Cue a mass migration of several hundred thousand MYOB desktop software users plus every small business that uses Excel to run their accounting.
It is not just a long line of SMEs wanting to convert files from one accounting program to another. Certain features such as payroll and inventory are better served in the cloud by ecosystem apps; and all of a sudden accountants and bookkeepers need to know which apps to recommend. And so, by default, they end up moving into broader software advice.
Then there is the growing trend for business advisory. Building over 20 years, more firms are dipping their toes into the shallow end of business advice known as management accounting. Cash flow forecasting, KPIs and budgeting are critical services that SMEs desperately need (and are gradually learning to pay for). Despite the name, bookkeepers are moving into this area because they have a more regular connection with business owners and a more intimate understanding of their business.
The most entrepreneurial firms are taking SME business advisory to a new level with business intelligence and Big Data software usually reserved for mid-size companies. Mixing an ongoing stream of operational data with financial data demands a shift from spreadsheets to databases, plus algorithms to clean the data systematically. Yes, firms are already selling these services up and down the east coast of Australia.
This is where the biggest opportunity is for CFOs, controllers and other accountants in commercial enterprises. Operational data holds all the leading indicators that reveal the most effective levers for increasing profitability. Or conversely, it exposes the parts of the business ripe for systemisation. As one Accounting Business Expo speaker told me, just adding one new ordering feature can double a company’s turnover.
For all those compliance-focused firms that are not interested in new opportunities, they still cannot escape the tide of technology. This year we are likely to see a jump in the level of automation in compliance workflows thanks to the next iteration of MYOB’s connected practice and the launch of the Xero-backed FYI Docs, a process automation platform for compliance workflows.
The impending arrival of GreatSoft, a cloud-based practice suite for very large firms, will provide new ideas to the slower-paced end of the market.
Every year, compliance takes another step towards fuller automation. It may never be completely automated, but that may not matter. Automation improves margin – and price competition quickly follows.
The overall sense is that we are gradually entering the age of multidisciplinary firms. It will become easier and more tempting to add a new service line and harder to make the same profit on compliance alone.
As this trend takes hold, increasing numbers of business owners will want the convenience of more services under one roof. The Big Four approach, where one firm houses a variety of advisors, really does look like it is coming to small business.
What services would you add to your firm? How would you automate your compliance to maintain your margins in a competitive market? Evaluate all your options and find the best answer for your business at the Accounting Business Expo (March 20-21, Sydney).
