Most Accountants I meet believe that there are opportunities for additional business in their current client base. However, they don’t seem that active in discovering the opportunities nor promoting the services. I think it is a BIG dis-service to the client if you do not promote new ideas and new services.
We recommend that you ‘stay close to the numbers’ with your service offerings. That way you can leverage the delivery of the services to other team members. By all means offer high level consulting however typically that means that very experienced (read expensive) people need to deliver them.
One of the reasons Accountants do not offer additional services is because they are unsure what the client will say and they doubt if they have the knowledge base to deliver the solution.
You have to differentiate between coaching and consulting. Consulting is where the provider comes up with the answers, coaching is where the client is guided and the answers are coached out of the client.
Financial coaching is the way to go. We recommend that your service categories fall in 8 areas. We call it the Awesome 8! It’s what your clients are interested in – over and above compliance services.
If you follow the Awesome 8 then here are a dozen new services you could create:
- Revenue enhancement – product & service
- Cash flow analysis, forecasting & monitoring –product & service
- Profit improvement program – product & service
- Debt re-structuring
- Receivables management service
- Inventory management service
- Book keeping (serviced from lower cost countries)
- Virtual Management Accounting
- Cloud conversions
- Sort out the numbers program
- Planning session
- Monitoring & Accountability program
At the end of the day every client should be buying every product they need that helps them achieve their goals!
That should be your goal.
Disruptive area # 3 – Clients are using the internet for your advice
It seems we use the internet everything we need to know!
Addresses/ companies / people / products/ concerts / store opening times / weather / golf handicap / cycling routes / friends whereabouts (or what they are eating – yuk) and the BIG one…‘how to do’ everything. The internet seems to be our first port of call for anything we want to know or find information on.
Whatever happened to the Yellow Pages, asking people personally, the Encyclopedia Britannica or a Catalogue? All (or nearly) GONE!
Social behaviour is indicating we need(?) to be connected to our device. And the device rules supreme. A few weeks back I was at an airport lounge and my travelling companions had a ‘device bag’ full of connected gadgets.
The world is connected and it is getting more connected every day. Currently we go to our device (pick up a phone or tablet) and tap in the requested search. We can also talk to our device (the annoying Siri in the iPhone as a good example) and she/he can help us. Or talk to our car and another annoying voice (but very proper diction) will give us directions to your destination.
Does this give us an enhanced human experience? Probably not. But it sure is efficient.
Mobile technology is booming. It’s what consumers want. They want information at their fingertips. Tap tap tap and hey presto – I have the answer and now I am an expert.
And that is an issue for anyone in the advice business. AKA Accountants!
Let’s say I wanted to learn about borrowing money through my pension scheme to buy a property. I could ‘Google’ that and find the answer in a few seconds. What if I wanted to work out how to improve the profit of my Winemaking business? I could go to a LinkedIN group and discuss that and get an answer. What if I needed a payroll or tax question answered? I can search it and go directly to the government portal and get the answer.
Uncle/Aunty Google has all the answers it seems.
The IBM super computer ‘Watson’ is an extraordinary piece of engineering. It can beat humans (really smart ones) at Chess and Jeopardy (proven) and ‘some say’ he/she is so smart he knows what the President of any country will say next! OK…I made the last bit up.
You get the idea. Watson is a supersmart supercomputer.
IBM have announced this year (2014) to >$1BN investment to develop Watson into a usable resource. There are >2,000 people in the Watson team and their job is to enable Watson into the world. One of the cool ideas is to create ‘Watson for business.’ Think of it as ‘Siri’ (iPhone fame) for business. You have a business question, talk to the device and it gives you the answer. BOOM. Great for the user – not so great for you.
You see, Watson is a sponge like a human. It can absorb / disseminate / translate / organize/ conceptualize any information and then send it back in a usable format. Pretty much all of the worlds ‘texts’ (as in manuals, books and all forms of content) are accessible on the internet. But the internet is a bit of a mess. There is a lot of content to absorb and disseminate. Watson can do sort it out and give it back to you in a usable format.
I got interested in Watson a few months back by the following line in a newsletter I received…
“This is the start of the end of professional services as we currently know it”
WOW. WOW and more WOW!
Does that mean the super computer can replace the Adviser? For repetitive and systematic information absolutely YES. And there will be ‘an app for that’ very soon.
I don’t mean to scare you but I do. This is real and it is happening right now and the Accounting profession is in the firing line for massive disruption. Without notice and appropriate action these 3 ‘disrupters’ have the capacity to wipe out a (BIG) chunk of revenue / profit / business value in the profession….QUICKLY.
Disruptive area # 2 – Labour is being sourced from less expensive countries
Manufacturing companies have been using low cost labour in developing countries for decades to produce their products. Just look at the clothes on your back. I bet very few of them are made in your current country!
The reality is that (because of escalating labour costs) most western countries have priced themselves out of markets by attempting to produce the product locally.
Up until a few years ago it was primarily ‘hardware’ based companies using this resource. Now we are seeing ‘services’ companies embrace the trend with fully resourced teams.
Most people think of this as outsourcing where in actual fact the correct term is offshoring.
Outsourcing is where you get someone else to the task who does not exclusively work for you. Accountants are a classic outsourced service. You work for many clients and they send their work to you because you are better at it than them.
Offshoring is where you set up a team (maybe starting with one person) off shore and they exclusively work for you. The banks and airlines have been doing this for years. They get themselves an office in a developing country, fill it with desks/chairs/computers/phones, hire & train some people and viola they have an office that can support their customers.
For one off projects outsourcing is the way to go however for larger ongoing tasks offshoring is the way to go.
Accountants have recently embraced the idea very quickly and are hiring people in developing countries with some degree of vigor right now.
I went on an offshoring study tour (in the Philippines) and the opening speaker said 2 things to me that got me excited;
- “Any job that can be done over the phone or behind a computer we can do for 50% – 90% cheaper, faster and often better”
- “I have been a virtual assistant for 5 years for a university professor in New York. I have gotten to know her job so well that I now mark her student papers for her”
I thought WOW. There are smart, hard workers, there is an abundance of them and they are relatively inexpensive.
If you think about an Accountants day. Most of it is spent on the phone or behind a computer. Most of the day is spent dealing with client queries and processing Accounting work. The technology products will take a lot of the processing work away and the balance can be done by cheaper labour off shore.
What is left are team members who are customer facing and adding value. The Accounting firm of the future has a local team who are customer facing (nurturing, sales and advice) and everything else (back office and processing) is done offshore.
There are 3 compelling reasons why this makes sense;
- An abundance of labour
- A labour force who are supremely qualified
- A lower cost structure.
Let’s take the Philippines as a case in point. It is estimated that circa 1.3M work in this space. It is growing every day. Their English is fantastic, the schooling system is very good, they are very family orientated, the time zones are reasonable and the government is right behind the initiative with infrastructure. They cannot build the office towers fast enough.
The table below highlights the salaries (March 2014) that Accountants in the Philippines are being paid. These are considered ‘middle class’ salary levels as the cost of living is so inexpensive. Compared to western salaries they are very reasonable.
You can set this model up one of 3 ways:
- Hire people directly who work from home.
- Go through a serviced office business (called a BPO) and hire the people through them.
- Incorporate a company and set up your own office – viable if you need 20+ people.
When hiring someone you do it via video conference (Skype, Google hangout, Go to meeting etc) and you do it the same way you already do. Place an ad, go through a recruiter, receive resumes, cull them out and hire the best for the job.
If you go through option 2 then the BPO (stands for Business Process Outsourcing) will help you hire the people. The training is up to you – again vide video conferencing or personally. They are your employees and they need to be trained in your systems and your way of doing things. They become part of your team so they need to be treated as so.
As an example my Australian team had a cooking class the other night. My team in the office in Manila did one on the same night in their city. My Australian team does daily huddles and they Skype in our team every day in the Manila office. What we do in one office we do in another.
Some people have a problem with this idea. “We must keep the jobs in our country” I hear. “What will our Accountants do if we send the work to a team elsewhere” is also another one. “What would my clients think” is a common one. Well, most Accounting firms will have different nationalities employed already. What’s the difference? You just have a team working for you in a different country in your office.
If you pare the comments down often they are either racist related comments or the person saying them has inadequacies and hang ups that their job can be done by someone else for a 10th of their salary.
All of this is globalization and a change in social behavior. I think the concept got off to a bad start with telemarketing companies calling you at home and you could not understand what they are saying. It also got off to a bad start because the term ‘outsourcing’ was created and many Accounting firms sent jobs off shore and because the person worked on the job was not working 100% for that firm there was a lot of re-work needed.
As a disruptive trend we are seeing Accountants use the available resource in the following way:
- Hiring marketing people to do the marketing work for the firm. I know of an Australian $4M firm who has 8 marketing team members offshore.
- Hiring client service coordinators to handle data collection and job set up from clients.
- Hiring book keepers to do book keeping work for clients – on charging clients @ $20 per hour and making a 5 times margin.
- Hiring data integrity people to sort out client data before it gets to the Accountant.
- Hiring technical people who can do ‘cloud conversions’ and other software help.
- Hiring product development people to create product for the firm.
- Hiring administrators to do document scanning, corporate secretarial, debtor collection, filing etc.
- Hiring Accountants to do the accounting work that does not involve client facing meetings.
Now here is the BIG one.
Businesses (your clients) are being directly targeted by Accounting firms (offshore or local ones who have an offshore team) offering accounting work from $8 – $25 per hour.
This is escalating at a great rate of knots.
As a consumer of accounting services why would I pay $200 per hour when I can get it for $20? There has to be some compelling reasons as to why I would continue paying for something 10 times as much!
The profession has to be real as to how long you can hold your prices when technology is commoditizing compliance and global markets are offering lower cost labour direct to your clients.
To hold prices you will have to add value, add value and add more value to remain relevant in the future. Accountants will have to offer valuable commentary to the data in front of them and move much more into business advisory services.
My view is that as an Accountant if you are not adding value to the data that is in front of you then your days are numbered!
This is a big disruption to the labour force of Accountants in western countries. It is also a great opportunity to capitalize on. The world is changing fast. Are you ignoring it, embracing it or hoping it will go away?
Disruptive area # 1 – Compliance is being commoditized by technology
The adoption of Internet (commonly called cloud) based technology is growing at a rapid rate of knots. You can’t stop it happening. There is social behaviour /change in action (people want to access their information on their handheld device) and there are massive technology companies investing huge sums of money to drive the change – if they don’t they won’t be in business.
The applications that are used over the internet are very sophisticated, very accurate and can connect to other internet systems. For example the Accounting system can connect to the client management system, which can connect to the stock control system and the distribution system. At the client end inexpensive applications can ‘talk to each other’ and give real time information to the business leader.
Here’s an example in action.
A customer (of your client) buys a product / service by whatever means. It is scanned using the bar code and automatically registers the sale into the online accounting system. Bank accounts, income statements and balance sheet data are automatically updated. The action also updates the inventory management system that there is one less product. The client management system (assuming the customer used a login/user name/loyalty card to identify the customer) and the buying habits of that customer are updated and now can be tracked. A real time report / dashboard is automatically updated/sent and the leadership of the business can see the trends or reports immediately on their smartphone or tablet. They might be on a private island at the time sunning themselves and the report comes through or they can check when they choose.
This level of automation (all driven through the internet) enables the business leader to make instant management decisions and run a better business. It’s happening right now. No spreadsheets manually updated. No paper filing and updating. No need for a meeting to tell me the numbers. No waiting. No people. All real time. All automated.
It’s exciting and it is happening right now. In my business I have had this level of automation for 2 years.
Let’s look at the accounting process.
Previously it used to be on a spreadsheet, server or hard drive and kept at the client’s premises. A bookkeeper (or spouse of the owner) did the data entry using manual key strokes. At the end of the year a file was saved and sent to the Accountant with supporting information. There would be questions and queries back and forth and the Accountant would then prepare a ‘set of accounts’ and present back to the client some 2-9 months after the initial data was received. The preparation of the historical data was a necessary evil as it had to be done to comply with the government authorities.
However, the data was old data. It was redundant. What help is it when you tell me ‘I should have done this and that’ 9 months after the fact? No help what so ever!
Enter internet based accounting systems. The products available offer real time information that do not need people to do the data entry. With these systems the data is more accurate (super computers are doing the processing not people) and there are less mistakes. As well as that the accounting systems are offering excellent reporting and data analytics which were only previously offered by Accountants as a management accounting package. Revenue I used to spend with you is now delivered by technology.
As well as that because the information is more accurate and the systems only have one version the time spent at your end to prepare annual accounts is far less. In fact we are seeing anything from 30% – 60% time reduction at the Accountants end (in year 2 onwards) for accounts preparation work. What do you do with that time saving? Do you reduce your price? Unfortunately for you the technology companies are directly promoting that ‘you will be more efficient working with your Accountant when you buy our product’. You have been selling ‘hours’ for all these years and more efficiency means less hours and less hours should mean a cheaper price. That’s what the business community is thinking.
We are seeing more price pressure on compliance than ever before and it will only escalate.
Let me add one more to the mix before we get onto solutions. One click lodgment. With all the internet data (which is much more accurate) already in the internet accounting system how long will it be before the government authorities get their systems ready and allow direct lodgment? The government authorities do not care about the intermediary called an Accountant. All they want is their tax money! The reason the majority of the Accounting profession exists is to make sure that the government gets the correct amount of tax money that it is owed.
One click lodgment is not far away and it will bypass Accountants and eliminate a big chunk of their revenue.
Technology is disrupting the industry and there is more to come. Is your firm ready?
The vast majority of Accounting firms operating systems are server based rather than ‘cloud’ based. This has not been an issue up until now because the vast majority of team members in a firm have been ‘office bound’ and any access to data was from the desktop in the office. Having everyone bound to a desk is very last century thinking. The world is flat and with cloud based operating systems you can have team members anywhere working real time with no synchronization or terminal server issues.
Take my business for example. My business is a professional services firm like yours. I have a regular office in Brisbane with 11 team members who live locally. On top of that myself and co-director, Colin, go into the office around 1-2 days per week only. The rest of the time we are ‘away’. I have a full time person Darwin, 1 in Vancouver, 3 (soon to be 7) in the Philippines and 1 in India. That’s 5 permanent locations. Both team members in Darwin and Vancouver were relocating from Brisbane and instead of having them leave the company (both are excellent at what they do) we set them up locally and they continued to their job form their new location.
All team members wherever they are only using 1 database, 1 accounting system, 1 project management system, 1 document management system, 1 document creation system and many other cloud based applications to help them to their job. All systems are linked together so we can see real time what is going on. No speed issues, no dropouts (unless the internet goes down) and improved productivity. The management team get an automatic KPI report every morning that is generated by the system. It just turns up and it shows the heartbeat of the business.
We have team meetings with each person on video on the big screen and other than touching them it is like they are with us in the same room. My cloud based system has been up and running for 2 full years and we could never ever go back to a server based system. The old system was just too restrictive for workflow, collaboration and overall efficiency. Remote people seamlessly working together is just one of the advantages. The biggest thing for me as the CEO is the access to management data no matter where I am.
For an Accounting firm the ideal cloud based ‘practice management system’ needs to be able to do the following as a minimum:
- Everything the current server based system does – tax, accounting etc except for 1 database only!
- Relevant KPI reporting – Revenue, Profit, WIP management, Debtors, cash balance, average hourly rate (AHR) all hours, AHR on job by job basis, productivity etc
- Pipeline management – not current workflow but sales pipeline / opportunity management
- Client relationship management – ability to know what clients are buying what services and the ability to create marketing campaigns to existing or prospective clients
- Run your firm based on best practice – no charge rates ($1 per hour), hours budgets on jobs not $ budgets, pricing up front etc. Link to your clients who are also on the cloud so you can have the heartbeat of your clients
The bonus ‘wish list’ items like document management, document creation, project collaboration can be sourced through other applications that do not require additional client databases to be created. To help you choose the right system for your firm, and to learn about what cloud solutions can and can’t do I am presenting a 1 day seminar with a range of speakers around in 14 locations in March & April this year. For more information and how to register go towww.cloudseminar.com.au.