“Not many people understand the modern professional accountant. Perceptions of a solid, safe measurer and reporter of past historical data persist, when the reality is of an innovative strategic resource advisor.”
Alex Malley, Chief Executive of CPA Australia, made this statement recently. Mr Malley went on to say:
“And those most guilty of not having a firm grasp of this are accountants themselves. This places the profession’s future relevance and leadership role in a somewhat precarious position.”
“The accounting profession has failed to evolve with world needs and expectations. Complacency has hatched and spread through the profession, putting it at risk of losing its rightful leadership position in business and greater society.” Mr Malley said[1].
What do you think of his views? Do you think he’s right?
Another comment made over the last couple of weeks was made by Mr Marc Lehmann, CEO of Saasu.
“Accountants must educate themselves about the technology that runs their clients’ business systems, or face irrelevance,” said Mr Lehmann.
“More than 700,000 businesses in Australia sold products and services online and wanted accountants who understood e-commerce.”
“The person who owns a business that sells electronically is going to stop relating to their accountant as the trusted adviser and start thinking of them as the ignorant adviser,” Mr Lehmann said.
“A firm has to understand e-business right now and has to do it quickly because they’re going to lose clients if they don’t do it well.”
“Only 10 percent of the accounting profession had begun learning about business systems and it isn’t too late for accountants to start.”
“The digital revolution had made the systems behind a business more important than its primary service or product. Every company, including accounting firms, had to think of itself as a technology company first.”[2]
Traditional Tax Return Work Is Reducing
The Deloitte report, ‘Digital disruption – short-fuse, big bang?’, identified that accountants are going to encounter significant ‘digital disruptions’ over a period of time. It’s probably running now and going through to 2015/16. Deloitte predicted that this will amount to a 32% drop in business activity.
It’s worth repeating: 32% drop in business activity for professional services firms, under which accountants are classified.
The CCH report, ‘SMEs – the fine line between failure and success’, which was released in April 2013, identified key services SMEs want supplied by accountants.
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- Management of Costs
- Management Monitoring
- Preparation of Business Plans
- Assistance in Raising Capital or Loan Funds
- Expansion Advice
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Tax return preparation has been in the news again, with an interview with the Prime Minister Tony Abbott.
“Prime Minister Tony Abbott has left the door open to getting rid of individual tax returns, and the Australian Tax Office is working on “push” returns that they would fill out and send to people for approval.”
“Up to 4.5 million Australians with simple tax affairs could eventually be eligible.”
“Mr Abbott and his Parliamentary Secretary Josh Frydenberg have launched their “Cutting Red Tape” website, which will track money saved by reducing regulation.”
“Mr Abbott was asked whether he would also help households by getting rid of tax returns and if it was on the table.”
“At this stage, no, but watch this space,” Mr Abbott said.”
“As you know, we’ve got a tax White Paper that will be coming out within 18 months and this is obviously one of the issues that may well be dealt with in that White Paper.”[3]
It’s interesting to look at the situation of 4.5 million individual tax returns that might no longer be required.
A couple of years ago, the Tax Commissioner released a report, which indicated that, somewhere around 72% of Australians were using accountants or tax agents to prepare their income tax returns. This could equate to about 3.2 million tax returns, which would be worth approximately $280million to $350million per annum, that would be removed from the Australian accounting and tax agent industry.
What challenges does this present to accountants? What challenges does this present to your firm?
Surely, the people, who are already in the industry and are earning those fees, are going to look into alternative sources of income, as the tax return preparation market dries up.
If that’s not enough, accountants also have some competition from other people, mainly business coaches and consultants.
I recently received some information from a business coaching firm. The information that has been supplied, is part of the package sent to people to potentially become consultants for this organisation.
They were asked, “Weren’t accountants the ones who supply business consulting advice to SMEs?”
Their response is quite different and said, “Not so. Accountants work in the past and merely provide financial measurement of past performance. History in other words. In many cases, they operate up to 18 months behind. Over the years, they’ve used the catchphrase, ‘your trusted adviser’ and, whilst they are great people, they really are only servants of the tax department, specialising in compliance and providing a ‘grudge purchase’ to their clients. I would recommend that nobody should go to their accountant for business advice. Remember, every business that went broke had an accountant.”
I believe some of those comments are fairly harsh. Nevertheless, they do contain an element of criticism that is levied against a significant number of accountants, who are performing an historical record-keeping role, rather than assisting their clients in day-to-day business operations, to assist them to achieve their business objectives.
This is a rather confusing snapshot of the professional accounting industry, as it exists at present.
Accountants need to ‘evolve’, with a range of new services, to meet the needs of SME clients in 2014.
Some of these services could include:
Replenishing Revenue Streams
Deloitte recommended that every professional business should be looking into replenishing revenue streams. The Deloitte report indicated that a lot of traditional revenue streams are ‘drying up’. Isn’t this what’s happening with the potential withdrawal of the lodgement of wage-earner tax returns? Isn’t this happening with the general tax market, in any case, becoming more competitive and becoming more of a compliance product?
Cloud Technology
Cloud technology is creating tremendous opportunities for SMEs and accountants. Mark Lehmann from Saasu believes he’s going to put some significant pressure on accountants to be very much aware of utilising cloud technology for the benefit of SME clients. The challenge for accountants is to develop a range of service to meet the new market conditions that exist in 2014.
ESS BIZTOOLS has developed a range of services, which have been utilised by our subscribers throughout Australia and New Zealand. We have four modules that will help an accountancy business to prepare themselves to offer business advisory services.
If you would like a copy of our articles, ‘Chief Financial Officer Services’ and ‘Strategic Management Consultancy’, please send an email to [email protected].
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© Peter Towers, ESS BIZTOOLS, www.essbiztools.com.au
[1] State of Accounting: A Need to Regain Control, Alex Malley, CPA Australia LinkedIn page, 25 March 2014
[2] SMEs View Tech-Naive Accountants as “Ignorant Advisers”: Saasu, Sholto Macpherson, BoxFreeIT, 13 March 2014
[3] End is nigh for individual tax returns as Tony Abbott flags reforms, Tory Shepherd, Political Editor, The Advertiser, 17 March 2014
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