The future looks...
The changing vocabulary of accounting offers an insight into the future of the profession. Notions such as cloud computing, automation, integrated reporting, shared ledgers and digital disruption will be increasingly in vogue as firms seek to grow in highly competitive markets while responding to clients’ needs.
David Hill, corporate finance partner at Deloitte Private, believes the future for accountants is bright, as long as they adopt digital platforms and other web-based technologies.
“Those who are able to embrace these changes have the opportunity to position themselves to provide significantly more value than they have previously provided,” he says.
And those who do not? “Those who resist the change will have significant challenges on their hands to remain competitive,” warns Hill.
The other game changers for the accounting profession have been the global financial crisis and ongoing economic volatility around the world. Fallout from these scenarios means accounting and financial reporting issues are dominating the international regulatory space. “That’s never been the case before,” says Andrew Conway, chief executive officer of the IPA.
This spotlight provides a significant opportunity to shape a new direction for accounting.
“Accounting as a profession is in its most exciting phase,” says Conway. He believes that accounting has become the must-have qualification for business leaders and board members. As a result, accountants are “the backbone of any business”.
“Accountants and accounting are very much at the core of business, and accounting is not just a business function – it is business in every form,” he says.
Conway expects three principles to guide the profession in the coming decade: value (how a firm analyses data and provides advice, enabling a client’s business to prosper); clarity (how that financial information is presented to clients); and diversification (how firms, big or small, must provide a full range of services).
On the last point, Conway says clients want from their accountants a one-stop-shop that includes services and traditional compliance counsel that also extends to broader advisory needs. “Clients are expecting more.”
[breakoutbox][breakoutbox_title]What are the biggest changes that will shape the future of accounting?[/breakoutbox_title][breakoutbox_excerpt]Roger Burrit, David Hill, Andrew Conway and Tony Markwell share their thoughts.[/breakoutbox_excerpt][breakoutbox_content]
Found director of the Centre for Accounting Governance and Sustainability
Accountants of the future must increasingly become problem-solvers in areas such as sustainability accounting, according to Professor Roger Burritt. To properly meet this need, however, he believes different education pathways will evolve, whereby courses in accounting and commerce are complemented by study in other disciplines that focus on the use of natural, social and economic capital.
Professor Burritt’s empirical research with 121 accounting firms in South Australia reveals that accounting firm managers prefer staff to obtain their sustainability accounting skills from universities rather than via in-house training.
“They want this public interest aspect, as they see it, to be part of the standard education and to be embedded in education at university level.”
Corporate finance partner, Deloitte Private
Clients are making the shift from the shoe box to web portals when they present business data and accounts, according to David Hill.
As firms rethink client interaction, he says, web-based solutions such as portals allow accountants to constantly engage and advise clients, while in specialised areas, such as SMSF, compliance work is being managed efficiently online.
Underpinning this digital era is the migration to cloud computing for shared-ledger accounting. Hill welcomes the change, saying it allows real-time advice that can help transform a business.
“You [move] from looking in the rear vision mirror and saying, ‘Oh, by the way, nine months ago it would have been good if you could have done this’. That’s not really helpful.”
Chief executive officer, Institute of Public Accountants
Andrew Conway says the focus is shifting to the education of accounting graduates. The IPA has been constantly reviewing its Master of Commerce (Professional Accounting) qualification to ensure students have appropriate skills for the digital economy. “Candidates will increasingly be expected to have a broader knowledge base and a broader academic base,” says Conway.
He also emphasises the importance of a “mentored experience” for graduates, whereby they learn from experienced industry professionals. “We have a strong focus on producing as well-rounded an accounting candidate as possible.”
As younger clients populate the business community, Conway says they expect to be able to text or tweet their accountant for advice – and get a quick reply. “You have to adapt to the way clients are functioning on a day-to-day basis.”
Senior partner, Grant Thornton Australia
Accounting firms have to get back in touch with the real needs of clients, according to Tony Markwell.
“Clients want real advice on how to run their business, how to become more profitable and how to interpret numbers so they make sense,” says Markwell.
He warns more traditional firms that they risk being superseded by a new generation of accountants unless they embrace shared-ledger accounting through platforms such as cloud computing.
“Gen Y accountants are really in tune with this technology. They are okay with this transition into live data and accessing data and producing reports in a way that the client can understand.”
While accountants will have significant business opportunities in the coming decade, they face a raft of tests and will need agile and flexible business models.
In short, the industry can expect increasing collaboration among accountants and third-party suppliers, more automation of basic tasks, greater attention to real-time data analysis as they act as business facilitators and problem-solvers, an evolving approach to building client relationships, and added emphasis on integrated reporting and business sustainability.
All of this will come against a backdrop of the rising burden of regulatory compliance.
Findings from a 2012 International Federation of Accountants Quick Poll of accountants at small and medium-sized practices reveal that the single biggest challenge facing practitioners is this mountain of regulation. The respondents see compliance as creating a huge workload while at the same time yielding little business value.
Conway expresses concerns about the capacity of smaller accounting firms, in particular, to handle this regulatory compliance issue and devote sufficient resources to it. “[This] is going to be an increasing area of focus, not just for accounting bodies but also for government,” he says.
He wants government to be conscious of the impost on smaller firms when considering regulatory reforms. “Our counsel to those making the changes is to think small first and consider how the regulatory change will affect a small entity before contemplating its rollout across an economy.”
There is also pressure in some quarters for the accounting profession to play a greater role in creating client awareness of environmental and social sustainability issues, such as carbon emissions and fair trading. Professor Roger Burritt, founding director of the Centre for Accounting, Governance and Sustainability based at the University of South Australia, says there is widespread industry awareness about sustainability accounting, although the global financial crisis has diverted attention.
“Everybody was worried about everything with the GFC, so perhaps it would have been a bit of a luxury to over-emphasise environmental and social issues at that point,” he says.
Professor Burritt encourages professional accounting bodies to roll out more career development courses, workshops and thought-leadership forums to promote sustainability awareness and skills among practitioners. He contends that integrated reporting on a company’s non-financial performance is in its “very early stages”.
Professor Burritt predicts a shift from a reporting emphasis to new accounting systems that better inform companies about their sustainability performance. “It’s the accounting systems themselves that have to deliver the information for the right decisions to be made socially and environmentally.”
The digital revolution is arguably the biggest and most exciting change for the accounting sector.
Hill notes that Deloitte Private, with a significant client base on its books, can aggregate industry data and use that sector knowledge to deliver superior advice to family businesses and other wealthy clients. While privacy must be respected at all times, Hill says such digital analytics let Deloitte’s clients quickly benchmark themselves against other market players and potentially lift sales and profitability.
This gives their clients extraordinary insights into benchmarking their performance against that of peers who are private companies and whose financial statements are not in the public domain, he says.
While compliance work will still be an important component of accounting, Hill expects smart firms to keep embracing cost-effective ways of automating this work while pouring more resources into value-added services for clients.
Cloud computing, in particular, represents an opportunity for greater engagement with clients and can help expand the advisory role of accountants. It presents a number of advantages: enabling access to real-time financial information for clients and their accountants, allowing instant delivery of advice over web and mobile devices, and facilitating greater reporting accuracy (as just one set of accounts is required).
In the latest BRW magazine list of the fastest growing accounting firms in Australia based on revenue, Grant Thornton ranks third, achieving revenue of $232.30 million for 2011/12, a rise of 52 per cent on the previous year.
As accounting firms seek to grow in the future, Tony Markwell, a senior partner in Grant Thornton Australia’s privately held business group, expects ambitious firms to pursue mergers such as his firm’s agreement this year with BDO to amalgamate its Melbourne and Sydney practices. At the same time, he says firms must also seek organic growth.
“Our future platform is for both,” says Markwell. “We think there is great organic growth to be had if you have the right services and you are getting into the right markets.”
Having the best people will be imperative, too. As economic markets rebound, firms that have paid attention to recruitment and retention issues will be best placed to succeed.
“The employment brand of any firm is a critical asset that needs to be nurtured and enhanced at every opportunity,” says Markwell. “Since the GFC hit, we really haven’t seen a war for talent like the one we are going to see in the next few years.”
While firms will inevitably pursue strategies based on the digital revolution and more sophisticated accounting software systems, Markwell says the truth is that good accounting firms will always require two principal elements: “Good clients and good people inside the firm. If you get those two things right, you can have a good practice.”
Where does this focus on specialisation, technology and people power leave small to medium-sized accounting firms as they compete with the major players?
Markwell says clients will increasingly expect automation of basic accounting tasks, at little cost, while being prepared to pay for market-leading advice and service in value-added areas such as capital gains tax rules. In such an environment, he believes specialists will come to the fore and general practitioners will come under pressure.
This need for specialisation makes collaboration with other firms or experts inevitable, especially for smaller entities. “They’ll need the upstream speciality services,” he says.
Hill agrees that collaboration will be especially critical for smaller firms, along with a capacity to be agile while implementing new price and delivery models. “What they have – and it’s incredibly powerful – is the ability to move fast,” he says. “So they will absolutely thrive, I have no doubt.”
At the same time, Hill says all firms must be conscious of other factors at play. “We know that many of the international providers in a digital world and a global world are providing services from other countries with an even lower cost of labour direct to Australian clients. So, we are all being challenged from every angle.”