Drivers for change in an accountancy practice
Written by Greg Gillet: Many of us find change challenging. We rationalise our caution by quoting the popular saying, “If it ain’t broke, don’t fix it”, which provides an easy justification for personal and organisational inertia.
But sometimes, change is unavoidable. Here are the main drivers for change that affect modern accountancy practices.
The economy
There’s not a lot you can do to stop the economy nose-diving. Or expanding, for that matter. But there are things you can do to protect yourself against the worst effects of a slowdown and exploit the opportunities offered by an upturn. New attitudes, new working practices and new technology should be an important part of your response.
Laws and regulations
Laws and regulations have a profound effect on how accountants work. GDPR, Making Tax Digital and FRS 102 are just a few recent examples of this kind of change. Be prepared to change the internal procedures and workflows within your practice together with your software and other IT systems in order to keep up.
Client demand
Over time, new clients will make new demands on you. Even long-standing clients will expect you to offer them more services, or expect you to deliver those services differently. Online accounting; mobile access to financial data; secure client portals; a social media presence… What technology will you need to meet these demands?
Staff expectation
To be the best, you have to employ the best, so your practice needs to be able to hire and retain talent. As well as flexible working, better work / life balance and a range of interesting and challenging assignments, staff these days want to be able to broaden and deepen their technical skills. They also expect to have access to the latest technology to help them do their job. Better make sure you’re providing it!
Self-development
Your staff, partners and managers aren’t the only people who may look for opportunities to extend their technical and other skills. Over the course of a working life you will naturally look for new challenges, both to develop your career and to explore your own potential. This kind of self-generated pressure can be an important driver of change.
Competitive pressure
Imitating your competitors is not always a winning strategy (“Tax returns for a fiver” anyone?) but neither is ignoring genuine competitive pressure. How will you respond if another accountancy practice offers something that you don’t, or can’t? These days, technology is often the key to unlocking new markets and opportunities and getting back your competitive edge.
Technology
As soon as any new technology becomes available, someone somewhere will exploit it to their advantage to do new things, or to do existing things better, more quickly, more cheaply or some combination of the three. The most radical technologies reshape the way we see the world – the iPad, for example, grew from a desirable consumer novelty to become a valuable business tool. What paradigm-shifting technologies await accountants in the near future?
Growing your practice
Even if you don’t want your practice to get any bigger, you need to continually take on new clients just to replace those you lose. To expand, you’ll need to take on even more, perhaps by employing more staff or by working more efficiently. To increase fee revenue, you’ll need to charge existing clients more for the work you already do, or get them to buy additional services from you. Better software can help you pursue these growth strategies.
For tax and accounting professionals, change is a constant fact of life. At some point – for any one of the reasons described above or a combination of many – the pressure for change in your accountancy practice will become irresistible. Your best chance of success in periods of rapid transition is to find a technology partner who shares your vision of future success.
'Anti phoenix' companies - HMRC clarify the rules Tax Assist
Blog 2 -
Payments made to shareholders are deemed to be distributions and taxed as income. Payments made to shareholders under liquidation are not distributions rather being taxed as a capital gains tax disposal of an interest in shares. This will be the case so long as the company has been liquidated for genuine commercial reasons (e.g. cessation of the business or following the sale of the trade and assets to another entity that is under substantially different control) and particularly where the liquidation is not motivated for tax reasons.
However in recent years, the beneficial CGT treatment has led to an increased use of tax-driven 'phoenix' arrangements whereby a company is liquidated, shareholders withdraw profits receiving a capital distribution (often enabling a claim to CGT entrepreneurs’ relief taking the tax rate down to 10%) and then the shareholder sets up another company in a similar field and the process is repeated.
The Finance Bill 2016 introduced the Targeted Anti Avoidance Rules (TAAR) to counter this practice and tax the distribution as income rather than a capital gain should four conditions apply:
- Condition A: the shareholder held at least 5% of the shares in the company immediately before the liquidation
- Condition B: the company was a close company at some point during the two years ending with the liquidation
- Condition C: the shareholder continues or is involved with, the carrying on of the same or a similar trade within two years following the date of the distribution
- Condition D: it is reasonable to assume that the main purpose (or one of the main purposes) of the winding up was the avoidance or reduction of income tax
Condition D is assessed by reference to intentions at the time that the decision was made to wind up the company. HMRC will also treat events occurring after the winding up as evidence and will want to look at all available evidence when assessing the main purpose.
Condition C has proved to be the main restricting condition not least due to the lack of clarity from HMRC. However, HMRC have become aware of schemes that have been devised whereby promoters claim to counter Condition C and in the past year have issued updates to its guidance on the TAAR in its Company Taxation Manual and last month published "Spotlight 47" entitled "Attempts to avoid an Income Tax charge when a company is wound up". "Spotlight 47" acknowledges that such schemes claim to circumvent the TAAR legislation by artificially modifying those arrangements which the rules target. An example would involve the selling of a company to a third-party company rather than liquidating. The third-party company pays for the target company by receiving a dividend from the target company; the individual shareholder carries on trading but using a different vehicle. The idea is supposed to work on the basis that no liquidation has taken place (and therefore 'phoenixing legislation' is not in point) and also because the transactions in securities legislation does not apply because the sale is to a third party.
HMRC consider that these schemes do not work, and as well as quoting the TAAR rules have confirmed that they will consider whether the General Anti-Abuse Rules apply, which could result in a 60% penalty. "Spotlight" states that for arrangements entered into on or after 16 November 2017, HMRC will also consider whether an 'enablers' penalty could be applied to anyone who has enabled the use of this type of scheme. The penalty amount will be equal to the amount of consideration received for enabling the arrangements. The user of the scheme may also be subject to penalties for filing an inaccurate return, with penalties of up to 100% of the undeclared tax.
Accountants' guide: Where to start with marketing (Tide)
You’ve taken the leap, left the safety net of your full time job and started your own business. You know your product or service inside out and everyone you know tells you it’s a great idea.
Then it starts to get sticky.
You need a website, you’ve signed up to ALL social media sites, a friend has done some business cards and told you that you need to be better at marketing if you want to be a success.
That’s when you start to panic.
Marketing.
First Things First
Well, the clue is in the name: MARKETing… it’s about understanding your market.
Do you understand your customers?
Facebook promotions, Instagram posts and ads in your local paper are all tactical outputs of marketing, but they should all flow from the starting point of understanding your customer.
Success Starts With Strategy
The first step to marketing nirvana is to create a marketing strategy. Strategy conjures up images of huge documents, board rooms and dour consultants. You can take this approach, but for most start ups, I’d advise against it.
Instead, to create a marketing strategy, just answer these three questions in as much detail as you have:
- Who is going to buy what you’re selling?
- Why are they going to buy it?
- What are your SMART objectives?
When you’re answering these questions use your own experience, but also talk to people to get their input.
Avoid family and friends, they’re usually the least critical audience you’ll ever have. Instead, get groups of people who fit the profile of your customers and talk to them about the problems they have and how they solve them. Talk to customers (and potential customers) to understand their pain and how you can fix it.
SMART objectives are also crucial, they’re not just a line from a bad management handbook. SMART stands for Specific, Measurable, Attainable, Relevant and Time-bound and they help sense check the assumptions you’ve made about the target market. They’ll also help you budget and understand what you need to sell to stay in business.
And finally, make it visible. Put the highlights on a wall in your office, see who you’re talking to every day and know what your objectives are – it helps keep the customer at the heart of what you’re doing.
Move Fast And Break Things
Facebook once had a motto of move fast and break things, which is useful, to a point, for your marketing.
Once the new marketing strategy is stuck on the walls, many small businesses are left paralysed. They are overwhelmed by the plethora of channels available and end up doing nothing.
I can’t tell you if your marketing strategy is right or if your marketing strategy is wrong. But I can tell you that if you don’t implement your strategy, then it will never work.
Get started. Look at the analytics. Review what you’ve done. Track where the sales are coming from. Ask your customers how they heard about you. Use this data to improve what you’re doing. Don’t be afraid to kill things if they’re not working.
Tide Banking <> Andi Jarvis, Strategy Director and Founder of Eximo Marketing
A day in the life of Accountex Norths' sales manager
This post introduces Accountex and Accountex Norths' sales manager Rachel Gregory. Here she talks about what she gets up to on a daily basis. Read more
Accountants face client software challenge
Research highlights a trend of accountancy firms struggling to move clients to digital bookkeeping. IRIS has found three in five (61%) practices believe the greatest challenge is to move clients to software.
Given the conflicting reports on the readiness of UK SMEs in the run up to MTD, it is now clear most accountancy firms will continue to provide core compliance services. The IRIS survey revealed nearly two thirds (60%) of practices will provide bookkeeping services – especially those using paper receipts and invoices.
Nick Gregory, IRIS chief marketing officer, says, “Regardless of the countless reports on the readiness of eligible businesses, accountancy professionals are still relied upon for core compliance services. Many SMEs are worried about the time and cost of adopting a digital approach to tax and compliance. As a result, they have - and will continue to - ignore pleas from their accountant and HMRC until absolutely necessary.”
There can be several reasons why businesses resist adopting a digital approach to tax compliance. Matthew Rawles, senior manager at GCSD Accountants, has found a huge lack of enthusiasm from owner/managed clients. “Especially in family-owned businesses, it’s often a non-IT literate parent, sibling or close relative who undertakes the bookkeeping. As the company evolves, they are reluctant to let go of the reins, especially when change is imposed at a cost.”
However, moving clients to digital bookkeeping is not akin to walking through treacle for every practice. Business leaders who have grown up with IT see the digitisation as positive, especially in areas such as bank reconciliation and receipt capture. Rawles continues, “the younger generation of business owners are used to IT systems, so love the idea and convenience of digital bookkeeping.”
IRIS has identified a knock-on effect in practice investment with over two-thirds (66%) of respondents investing below £1,000 to become MTD ready. Two in five practices (39%) have not changed practice technology and will be relying on bridging software; and almost half (48%) have invested in accounting software for use by clients.
Linda Gibson, director, Gibson Whitter, constantly evaluates practice technology and believes bridging software is a temporary measure. “We always look to improve our practice technology. Our firm is growing quickly, so it’s logical to identify efficiencies and increase productivity wherever possible. Especially when it comes to compliance work; using solutions such as receipt-capture software is a no-brainer. However, we have steered clear of bridging software as much as possible, as it’s a short-term fix. We wouldn’t advise taking any client down this road in the long term.”
IRIS Software Group also asked accountancy professionals if Brexit has impacted business plans and practice investments. Nearly three quarters (73%) of firms surveyed said Brexit has not impacted business plans and 87% said investment has remained the same.
Both GCSD and Gibson Whitter agree that Brexit has not made any day to day difference in their respective firms. Matthew Rawles says, “There are a few clients who we know will be impacted, but we cannot provide any specific advice until we know the outcome; if of course, there is one.”
Nick Gregory concludes, “Accountancy firms can make commoditised work pay and liberate fee-earners to add more value. Given the MTD news in the Spring Statement surrounding the light touch approach to penalties in the first year, we see opportunity for everyone.
“Bookkeeping software will be a fundamental tool in the future, so practices should use the ‘soft-landing’ period to encourage as many clients as possible to adopt a digital approach. This will free up time for the practice, allowing them to build on compliance services and capitalise on unexplored revenue opportunities.”
IRIS Software Group surveyed 231 accountancy professionals in early March 2019. Two-thirds of practices surveyed have 250 clients or under.
Accounting looks to a digital future
The entire business world is going digital and accountancy is no different, driven by advances in technology and constant changes in regulation.
The role of an accountant, once perceived as a number cruncher, has already evolved to encompass new skills, with even more of a focus on technology and relationship management.
To further explore the pace and impact of technological change over the next decade, in June of this year, Thomson Reuters commissioned research into the views of senior-level accountants in practice. Most of the 345 respondents work for an accountancy practice with fewer than ten staff and just over three quarters hold a senior level role within the firm.
In addition, Thomson Reuters also invited a range of experts to share their views on the findings for their Accountant of Tomorrow report. The report explores accountants’ needs, wants and visions for the future.
The findings
Over 95 per cent of accountants surveyed stated that their role was likely to change due to technology. Some 74 per cent of these understand this change to be very likely; displaying an acceptance that technology will indeed continue to play a pivotal role in the future of accountancy.
Stephen Pell, founder of Pell Artists Accountants and one of the selected experts, sees technology as a positive for the profession. He said: “Technology is going to make life much more enjoyable and rewarding for an accountant, only bringing benefits to them as an adviser, and to their clients.”
However, many are concerned about the challenges that come with the digitisation of accounting over the next 10 years. A significant 25 per cent of participants were concerned about the digitisation of the tax authority, in particular Making Tax Digital, the government’s recent digital tax system. Some 16 per cent were extremely concerned about choosing the right software, while almost half (47 per cent ) were somewhat concerned with their software choices, giving the impression that digital tax is still a grey area for accountants.
Within the report, Thomson Reuters commented that with the significant progress in the next 10 years to move clients and practices online, cloud technology would be the most significant driver of change in the role of being an accountant. The report went on to comment that, in the same way as the anticipated requirements for Making Tax Digital, one of the consequences of cloud accounting would be the use of real-time data and more in-depth analytics.
Reflecting this, when asked which three specific advancements in technology would change their role in the next ten years, 67 per cent of accountants cited cloud-based systems, while 52 per cent highlighted the use of real-time data and more in-depth analytics. Also featured on the list of advancements were greater integration between the applications we use and artificial intelligence (AI), or machine learning.
But how will this digital influx directly impact services, and will digital free up accountants’ time – or will it impede day-to-day tasks?
When asked if participants’ time spent on standard tasks would be more, less or stay the same, most agreed that compliance exercises would see a very considerable reduction in the time required per task. Bookkeeping was viewed as the task that would most benefit accountants through digital technology. Personal tax and company tax were tasks considered to be eased the most following digital changes, whereas accounts preparation and VAT review and submission, albeit slightly less, were also deemed to be those that could be ‘digitalised’ in order to free up accountants’ time.
Automation is key
Since the introduction of digital processes, many have fought with the emergence of technology – and have been arguing that ‘robots will take our jobs’. Instead of feeling threatened by automation, it should be embraced as a means to spend time on more challenging (and chargeable) work. As Freddie Faure, co-founder at CooperFaure Accountants, argues: “Machines can only do so much, but they can’t think and they can’t interpret information. You would still need an accountant to do the critical assessments and understand how you can use that information to help the business in the future.”
When asked which critical accountancy tasks are most likely to become automated by technology in the next ten years, bookkeeping came out top, with 78 per cent of those asked agreeing that it was the most likely. Other common choices for tasks most likely to become automated were data collection and tax return submission/filing. On the other hand, those tasks deemed least likely were client communication, business plan creation and auditing.
Each of these findings lead us to deduce that the introduction of digital software will not hinder an accountant’s workload, but will instead allow more time for advisory tasks, planning, business development and nurture of the client/accountant relationship.
While accountants predict that technology will indeed absorb more traditional accountancy tasks, those such as advisory services and business development will take more time – although accountants foresee advisory to be a critical knowledge area and one with the greatest potential for growth.
Integrate new skills
Participants were asked how their role would evolve over the next ten years. Almost all agreed that they would need to integrate new skills and capabilities into their role, that their firm’s business model would be different in 10 years and that they themselves would become more efficient due to technology.
Just over 25 per cent agreed that their firm would outsource more compliance work in 10 years time. Some see this as positive – tasks absorbed through technology will ease their workload, whereas others worry that fewer accountants will be needed as a result. One thing all agree on: the world of accountancy will change.
Jon Cooper, co-founder of CooperFaure Accountants, says: “We’re at the start of a pivotal 10 years, with the advances in technology and artificial intelligence only likely to accelerate. It’s a game changer that could cut down the headcount for both accountants and businesses with in-house teams.”
So how can the ‘accountant of tomorrow’ prepare for the future? They must be open to changing core elements of their firm, such as technology, processes and their business model. Keeping clients compliant will continue to be at the heart of their offering, but much of the work to complete these tasks will be automated. More accurate and timely data will provide opportunities to offer more forward-focused services, and could cause accountants to adjust their business model.
Software partnerships will also be key in the digital age. As technology facilitates the digital world, Thomson Reuters is already working on the solutions needed to take accountants through the next 10 years, with the increasing use of real-time data and ever-changing regulatory requirements.
Download the ‘Accountant of Tomorrow’ report.
Compliance is dead, AI is replacing jobs, accountancy is on the way out?
The news that Capitalise had raised £3.5m in Series A investment got plenty of traction in the financial media last week. This follows iwoca raising £150m and Go Cardless $75m for its US venture.
Last year Receipt Bank raised £50m, and recently announced that Adrian Blair would be appointed CEO. Mr Blair has a record of growing firms' digital businesses into global businesses - look at Spotify and Just Eat.
Last year we saw Futrli raise £4m with the hottest VC team in town, Notion.
We know that Xero has a fund of $300m to spend on the best apps within its ecosystem and beyond ... and that means that Intuit will not be far behind.
Oh, and I almost forgot that IRIS completed a deal with Hg Capital that was worth about £1.2bn. Sincere congratulations to you all.
So why, when we see the stories of doom about the future of accountancy, are all these investment funds ploughing money into the sector?
Because it’s booming and it’s here to stay!!
The above list is just a small part of the tale. Apologies to those firms that have been missed off the list, I’m sure there are many more and I’m sure of some additional funding to come in the short term, for those that are listed above and those not.
Yes, it’s a sector that is ripe for disruption and is being disrupted... but that’s great news. Technology is an enabler in this process, but what the above stories show is that accountancy and accountants are going to be around for a long time.
It’s great news and a great time to be an accountant.
Yes, you have to learn new tools and approaches, but funders employ the sharpest brains and these folks are showing massive faith in the sector.
Yes, there will be change - in some areas significant change - but that is happening in all areas of life. I’ve used the example of parking to illustrate change before. In my time we’ve gone from men, with a Woodbine hanging out of their mouths, sitting in a tiny office taking cash for the car-park to automatic barriers, to self-service machines, self service machines that give change, to phoning automated numbers, to texting, to apps, to automated number plate recognition.
In fact, park at Stanmore tube station today you have most of the above. But the man in an office, has been replaced by local residents encouraging you to park on their drives, if you haven’t pre-booked another service online.
If you need a hand to understand the modern world and the choices in it, then there is plenty of help. Accountex brings the whole industry under one roof for two days in early May, where you can meet friends old and new. And bring to life those that you only know through LinkedIn.
You’ll even get the chance to hear me speak about the Smart Digital Practice.
It’s a wonderful time to be an accountant, go make hay!
Feeling overwhelmed? Cloud, Apps, advisory, MTD and GDPR causing you headaches? Looking for a cure to the above issues and then grow your firm, whilst spinning all these plates.
I can be contacted via LinkedIn, @LangdonHamblin or [email protected]
FRC to be replaced by new accounting watchdog
Business secretary Greg Clark has confirmed that the UK's accounting watchdog is to be scrapped after a highly critical report.
The Financial Reporting Council is to be replaced by a stronger and more coherent body that will, it is hoped, bring the Big Four auditing groups to heel and prevent further scandals like Carillion.
Clark said on Monday that he would follow the recommendations made by former L&G chief and top civil servant John Kingman in a report published at the end of last year.
Sanctions
Kingman was drafted in amid a growing feeling that the FRC was a spent force that was too slow to look at misconduct and whose eventual sanctions were too soft.
Win Bischoff, FRC chairman, said: “In line with the consultation document, we believe the speedy implementation of the recommendations can help increase public confidence in audit in the UK. We will move forward to implement the agreed proposals as soon as possible.”
Audit controversies at big companies including Carillion, BHS and Patisserie Valerie have raised worries about the FRC.
New audit regulator
Kingman added: "As I set out in my review, we need a new audit regulator with a clear and precise sense of purpose and I am pleased that the government shares that vision.
"I look forward to continuing to work closely with the Secretary of State as the Audit, Reporting and Governance Authority is established.
Direct changes
According to officials, the new regulator will for the first time:
- Be a statutory body with powers such as those to make direct changes to accounts rather than apply to court to do so, and more comprehensive, visible reviews for greater transparency.
- Have strategic direction and duties to protect the interests of customers and the public by setting high standards of statutory audit, corporate reporting and corporate governance, and by holding companies and professional advisers to account.
- Regulate the biggest audit firms directly (rather than those being delegated)
- Have a new, diverse board and strong leadership to change the culture and rebuild respect of those it regulates
Clark added: “This new body will build on our status as a great place to do business and will form an important part of strengthened public trust in businesses and the regulations that govern them.”
Interesting to see how this one works out...
Let's have a chat at Accountex!
Engaging, joining, participating – that’s three elements that if carried out successfully, would constitute a pretty successful Accountex 2019 conference, right?
Hi, we’re Melu, which handily, is Javanese for “engage, join, participate” (our chat widget code uses JavaScript, just to keep the symbolism flowing). Our business is built on the premise that engaging, joining & participating are key to the success of an organisation, just as they are to the success of an exhibition. The most effective (and evidence-based) strategy we’ve seen to increase all three, is through managed Live Chat, which is why we set up the service following our long history of web design businesses in Oxford.
We’d like to highlight the word “managed” and explain why this differs from industry standard Live Chat. In short, we provide fully trained, Live Chat operators to engage with your customers so that you don’t need to lift a finger. Our operators will be trained in your company ethos and your frequently asked questions, putting them in the most effective position to generate more leads for you.
Our objective is simple, we want to see our clients achieve dramatic increases in business successes resulting from people visiting their website.
In order to do this, we’ve strived to deliver the most efficient, resourceful and cost effective managed Live Chat product available today.
We see Live Chat as not just a way to engage with visitors to generate leads, but to also compliment the client and their business in providing an instant and easy way to communicate - in turn providing an exceptional level of customer service, far in advance of 90% of other firms (who, according to statistics, aren’t yet using Live Chat, to their detriment).
It’s precisely this vision that led to Lawrence King, a partner at accountancy firm, Critchleys in Oxfordshire to say "We've received more leads via Melu managed Live Chat in two months than we have via the website over the last five years!"
We’re very proud of this kind of feedback and we’re seeing it with increasing regularity, hence our desire to attend Accountex and spread the success stories of managed Live Chat.
Please do come along and discuss your business needs with us at Stand 1146. We’d be delighted to share more stories like Lawrence’s, just as we’d be equally delighted if you’d engage with us, participate with us and ultimately, join with us.
How to improve your practice’s workflow – one process at a time
What is workflow? Well, it’s the way work gets done in an office. These workflows are orchestrated and repeatable business activities.
Your practice’s interactions and activities...
For accounting practices, workflows represent all the activities that take place in each practice area, as well as the interactions that the firm has with its clients. Understanding all these activities and recording them helps a firm analyse processes and ensure it’s running smoothly.
But to stay competitive, firms need to ensure high productivity and be able to rationalise resources needed for a process. Workflow automation technology can help achieve efficient and compliant productivity.
We know work never stops, so to ensure maximum focus on each practice area while reviewing processes, the best approach is to review and improve one process at a time.
How to improve a process...
- Start with low hanging fruit – areas that appear to be most in need of help because of broken processes, high operating costs, low client satisfaction or paper-intensive operations.
- Appoint an in-house champion to coordinate the effort and work with the practice heads to understand the workflows and look for ways processes can be optimised.
- Use the opportunity to introduce digital automation technology that will help you move to a paperless environment, enhancing client satisfaction and employee experience.
- Choose a workflow automation platform that will accommodate your custom workflows, be easy to implement for each process and can integrate well with your existing systems.
- Choose a technology partner that can work with you to review, map and then move you to the digital environment. This can save costs on additional IT consultants.
- Last but not least, choose an automation platform that charges by process and not by number of users. This will reduce costs and allow you to deploy the workflow automation technology across internal as well as external users.
One Paper Lane is helping accounting firms of all sizes digitise workflow and automate their practice areas and client management work – one process at a time. You get more than cutting edge technology with One Paper Lane, with our willingness to work alongside firms, help them review and map processes and bring in custom solutions as needed.
Who we are and what we do...
We are One Paper Lane, the digital process automation and collaboration platform of the future. We are launching in the UK at Accountex on stand 490.
Our technology will enable you to streamline, automate and improve your processes. It can work together with your existing software, apps and tech tools. Our specialists also help you implement these improvements.
We have already helped accountancy and other professional services firms increase productivity and improve both the client and team member experiences.
Visit us and our UK partner, practice advisers Foulger Underwood, at Accountex. Alternatively, for more details, contact Julia Whistler at [email protected]