I can recall my father telling me when I was a youngster, “Son, you will learn in life that you either go forwards, backwards or stand still.” The fact is after starting my first business (I have been the founder of four businesses and one charity) I learned that I needed to change the thinking that my parent had installed. I realised that you can either go forwards or backwards – to stand still is, by my definition, to go backwards. Why? Simply because the carousel of progress is moving everything forward and that momentum is increasing.
Michael Hammer (1948-2008) an American management author wrote in 2002, “Face it: The dream is dead. The 1990s are not just over — they are so over, they never happened.”
He then went onto say “Operational innovation isn’t glamorous. It doesn’t make for amusing cocktail-party conversation, and it’s unlikely to turn up in the world of glam-business journalism. It’s detailed and nerdy. This is old business, this is a new business, this is real business. Get used to it.”
In my first forward to basics blog I looked at a few high-level changes impacting the profession and suggested that while there has been relative stability in compliance-driven revenues our service models are in the process of evolving as we move from:
- Historical to real-time reporting
- Technology companies being our ‘friends’ to being our major competitors
- Computerisation to Cloud
To contextualise Hammer’s statements for the accountancy profession – a tsunami of change is taking place during the years 2018 to 2022. [Comment – that certainly became true in March 2020 when the world went into lockdown] The business model that has served members of the profession is dead. It is the old business; the new business lies ahead. Get used to it!
There are a number of aspects that I could address but will only mention in passing before shining a laser beam on one aspect of the operations in an accountant’s office.
Your own view of the marketplace
How do you see the marketplace in the country in which you practice?
How do you see your services responding to the technology oppathreat?
How do you see your economic model changing?
What does your exit/succession look like? Many older practitioners I know have little appetite for managing all this change – “life is so much more complicated now” is a comment I often hear.
“I am still thinking what to do.” While time is on your side, don’t delay your strategic / business planning. Changing the modus operandii is not going to be easy as there are likely to be so many options that could be pursued.
“My clients aren’t interested” Maybe, maybe not, but the point is that when the UK changes from historical reporting to real time clients will have no option – they will have to decide how to comply. Non-compliance is not going to be an option. Fail to comply and fines and interest will be automatic. I recently read how one person leaving the Bristol Mercure hotel incurred parking fines of £320 for overstaying by 2 seconds. While late filing or late payment fines may not be incurred at that rate – they can nevertheless be significant – and painful to pay. No matter how you place the responsibility on the client the accountant still has to reckon that the automatic real time environment will have attendant responsibilities and risks.
The one thing
Contrast the business model of an accountant with the technology company.
The accountant will
- Study for 2000 hours, pass exams and [perhaps] become an accounting firm owner
- Keep up-to-date with laws and regulations
- Give a good service and maybe look after clients until they no longer require an accountant
- Charge whatever you can and so long as you do a good job the majority of clients will accept your pricing
- Market and serve clients in the community.
- Enjoy a high return for all the above
The technology company will
- Invest “millions” developing a platform
- Keep the platform up-to-date
- Market at great cost – direct to the end user
- Establish a market-driven price and build a potentially vast customer base
- Install a helpline and maybe even have “professional” advisors
- Probably incurs losses for 3-5 years but the VCs are OK with that
Now, there is one, not so small, factor that has been omitted from the above and it is this:
- Historically [in the UK] has ‘enjoyed’ on average between 7 to 9 months to prepare and file
The technology company
- Filing is [relatively] instant
The one thing: Timeliness
“ My client’s just do not give us the records when we want them.” As the finger is pointed at the client remember there are three pointing back at you! Further, I have always believed that it is processes that should be fixed in business – not people.
The point is this – timeliness is going to be mandatory and so planning to become more timely now is mission critical.
Lesson from the flight deck
When learning to fly a plane the flight instructor makes a statement to the student that can be heard in every cockpit – yes, including the on the flight deck of the A380 and Dreamliner – “You have control.” In response to this the flight student after a moment of exhilaration that control of the plane is now theirs responds back “I have control.”
Lesson from the car dealership service desk
Book your car in for a service and you will agree to bring your car in at a specific time and on an agreed day. That’s just the way the system [process] works.
Contrast that with what happens in some accountancy offices where one day the client turns up, probably unexpectedly, with the records – which may or may not be complete.
Why does this happen? The fact is that once the year-end has passed the client is focussed on the here and now of the first and succeeding days of the New Year. While collating the records for the accountant is on the “To Do” list it is probably not very close to the top.
Here are some steps to ensure a timely delivery of records that put you [more] in control:
- Three months before the client’s financial year-end. Write to the client detailing the records required. This should be a client-specific list. In this letter you should state the date the records should be received. Key point: Make a time and date for the records to come in just like the car service manager
- One week before the records are due in. Send an automated text message to remind the client that the books and records are due in
- On receipt of records. Check that all the necessary records have been received. If not then have saff responsible for record chasing
- When the job starts. Have staff contact client so that they know from whom they can expect a call when further information is required
- Diarise appointments with all those who are involved in signing off the job. Manager. Partner. Client
Key point: Just like the car service department make sure you have staff ready to “service” the client’s records
- New clients. Include these processes in the Letter of Engagement.