Opportunity for firms servicing at risk industries
Accounting firms servicing industries at a high commercial risk also face a similar risk of financial distress, according to a new report.
The SV Partners Commercial Risk Outlook Report August 2017 showed that the top five industries in Australia facing high commercial risk included construction, accommodation and food services, retail trade, professional, scientific and technical services, and manufacturing.
SmartFee managing director Adrian Jenkinson says there is a correlation between the risks facing an accounting firm and the industry they primarily service.
“What is fascinating is that despite the fact that we now have cloud technologies and the ability for an accounting firm to interact virtually with their clients much easier than ever before, the majority of a firm's business is directly tied to the geography of where they are,” said Mr Jenkinson.
“For example, if you were in a region in Australia that had a high proportion of construction clients, that would mean your firm would have significantly more risk than the average.”
However, Mr Jenkinson also believes accountants servicing high commercial risk industries have an opportunity to grow their practice by addressing those concerns in the flagging business.
“The flipside is it also represents opportunity for an accounting firm because it means there is a chance for the firm to look at what their client mix is,” he said.
“If they have clients in high commercial risk, then they can be having conversations with them about what their firm can do to help those businesses turn around or exit gracefully.
“If they are in an area of lower commercial risk, then the accounting firm is in a position where they can be working with their client to ensure that they actually stay strong.”
The industry snapshot by SmartFee also showed that the state of the accounting industry remained stable with 78.9 per cent of firms in the ‘low to minimal’ risk categories as compared to the national average of 74.9 per cent for all industries combined.