Become A Virtual FD Or Retire

Is the traditional accounting model past its sell-by date? Clients continue to pay for historical accountancy and audit services to achieve regulatory compliance, but with price pressure increasing, many firms now believe deskilling is the only way to survive.

Yet the accountancy firm is perfectly positioned to respond to a massive market need. With SMEs increasingly looking to outsource to drive down costs and proactively searching for financial expertise to help survive in a turbulent economy, the accountant should be the professional services partner of choice.

Combined with the explosion in proven, cloud based book-keeping solutions that streamline processes and facilitate the provision of a real time accountancy service, there is no reason to persist with an outdated and increasingly unsustainable business model.

As the role of book-keeping begins to change fundamentally it demands greater visibility, intelligence and automation. Through this, accountancy practices can exploit real-time information combined with business expertise to provide a true virtual Financial Director service to clients, from tracking performance indicators to attending bank visits and supporting investment decisions.

Time To Change

The accountancy profession is fast reaching a tipping point. With clients under increasing financial pressure, accountants are seeing revenues drop and profits eroded. Many clients are beginning to question the value offered by typical accountancy processes.

Companies know whether or not they have made a profit – an accountant simply verifies the details, many months after the event, and ensures regulatory compliance. There is little commercial value in that service – and savvy SMEs are pushing back on price as a result.

The situation is being made worse by SMEs reducing internal staff numbers. With clients increasingly struggling with their accounting function and often unwieldy book-keeping software, accountants are spending more and more time correcting mistakes and repairing book-keeping errors. As a result, many accounting practices are resorting to deskilling – employing less qualified individuals to handle this mundane yet essential error correction task.

But there are other options. Rather than trying to make money from disruptive book-keeping services, accounting practices need to embrace market demand and exploit valuable, highly qualified expertise. SME organisations need financial advice today more than ever before.

They need an up to date position on cash flow; they need to reduce debtor days; and understand the best way to approach the bank for better finance. They don’t need – and in today’s cloud-based technology era, should not even consider – just basic book-keeping.

Valued Partner

Instead of spending time correcting historical information, accounting practices should be looking to exploit cloud-based book-keeping solutions to take a far more proactive role in each client’s financial affairs.

Unlike traditional book-keeping software solutions, these systems combine a degree of self-learning with integrated workflows between the accountant and SME, fundamentally transforming the way SMEs and accountants can interact on a day to day basis. In addition to being a cost-effective option for businesses, with a pay as you go model, a growing range of customised solutions delivers vertical market specific book-keeping to add further value.

For the accounting practice, the cloud model delivers real time access to this client information, enabling continuous review and immediate remediation of problems. This real time accountancy process delivers a number of benefits: at the most basic level, a VAT return can be completed in a second because the information is already in place and verified.

There is no need to spend extra time checking that figures are accurate, in the right period and that accruals are correct – that process has already been completed. Similarly, the end of year accounts process is virtually seamless, providing significant cost savings for the accounting firm.

Critically, this approach can transform the value of the service offered to clients. Rather than low profit book-keeping, firms can offer a range of services that essentially fulfil the role of a virtual Financial Director (FD).

From reducing debtor days by undertaking credit control, to delivering Key Performance Indicator (KPI) tracking or even attending a board meeting to provide an up to date financial position or a meeting with the bank to discuss financing, it is these services that both exploit the expertise and experience of the accountant and meet the needs of the SME business community.

For those organisations large enough to retain a dedicated FD role, the real time accounts process provides unprecedented insight into financial performance. From KPI monitoring to working capital optimisation, the practice can work in conjunction with the FD to drive business value, creating a relationship that is a far cry from traditional debates surrounding the accuracy of postings.

Fundamental Business Change

However, while the technology components are in place, and the SME market demand is clear, accountancy firms will need to make significant changes to existing business practices if they are to realise this vision. The first step must be a move away from deskilling towards actively employing individuals with business experience who can add value to the accounting skills.

The move is likely to be supported strongly by younger partners within the firm who are keen and confident to embark upon new business practices and exploit technology innovation; individuals who recognise that the next 30 years of their working lives will not be sustained by traditional accounting models.

It is also essential to change the way the business interacts with clients. Using online services to offer a dedicated client portal provides not only up to date accounts information, but also KPIs and information about the end to end services on offer. Firms must also be far more transparent about costs, with end to end service provision options based on transaction volumes to provide clients and prospects with an immediate estimate of potential cost of these added value services.

The demand for change is certainly strong. Accounting and financial advice is without doubt one of the most important professional services, especially for the SME that cannot justify a dedicated, board level finance expert. There is now a real opportunity for accounting practices to take control, evolve beyond book-keeping and exploit existing expertise to create and deliver an end-to-end service portfolio.

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Barbara Kroll is the Managing Director of Twinfield UK, a brand of the Wolters Kluwer Group. Prior to her appointment at Twinfield UK, Barbara was the Segment Vice President for Wolters Kluwer Tax & Accounting in Europe. Previously, she had roles as Vice President in Wolters Kluwer’s Corporate Strategy Group and Director of Online at McGraw-Hill Construction, both in New York. Barbara started her career as a strategy consultant with L.E.K Consulting in London and Chicago. She holds an MBA from the Harvard Business School, an MSc from the London School of Economics, and an MA in Economics from Cambridge University.