Safety in numbers...accountancy firms lead the way
I work with CEOs, MDs and FDs across many different industries. A client engages my company, to review and transform their sales function and enable growth by implementing a sustainable sales system© that will mitigate risk and maximise profit.
The future and the economy are always top of the agenda and I think this presents a great opportunity for accountancy firms who want to differentiate and grow their business.
News articles are appearing daily about the rapidly changing business world and point to an uncertain future. My experience with business owners and entrepreneurs shows they are looking for structure and substance to enable growth and confidence.
Growth and expansion
Accountancy firms may choose to focus their efforts to work with clients who are looking for growth and expansion because these clients have the most need of business and financial advice.
Business growth and business confidence stimulate work for everyone. Business owners are far more likely to invest in premises, machinery, IP, staff etc if they believe growth is achievable and will give them a competitive advantage in their market.
The challenge for many accountancy firms, is the difficulty in showing a clear differential between themselves and the competition, when they both offer Bookkeeping, HR, Tax and Audit in their stable of products.
Business advisory
Rebranding the firm as a business advisory is not the answer. It’s important that any new products or services you add to your offering don’t detract from your bread and butter products or destabilise your client base.
Your firm may already offer growth advisory services as well as traditional accountancy products. The accountancy profession offers a solid foundation for the addition of specific growth advisory services. Your offering may already include advice on financial decisions, auditing accounts and providing trustworthy information about financial records.
You may also report on taxation, audit, undertake forensic accounting, manage corporate finance including business recovery and insolvency, reviewing accounting systems and processes.
Professional services
Whether your firm is interested in growing your audit business, or introducing additional business growth and financial advisory services, accountants are perfectly positioned to differentiate from other professional service offerings.
Accountancy qualifications, training and experience are great assets, giving your services credibility and integrity. Whichever strategy you employ to achieve your firm’s objectives, you must assist with your clients’ business growth and this will include focusing on areas where they are underperforming.
As ways of doing business grow more sophisticated, firms need to embrace technology and find new ways of interacting with businesses to stay relevant and add more value to their existing clients while attracting new ones. It’s important to understand that winning new clients requires a sales skill-set and mindset, with energy focused on prospecting and winning sales using a sustainable and systematic method.
Technology
However, technology is the future, whether we like it or not. Chasing growth and profit will continue to ensure businesses outsource basic compliance activities to number crunching lower paid/lower value facilities and rely more heavily on financial and business advice.
I’m interested to see that cloud-based accountancy software platform Xero has developed technology that is transforming the way accountants are interacting with their clients. We all know that change requires continual education to ensure real value is delivered.
Xero has developed playbooks to educate their ecosystem of users. The accessible playbooks provide advice and guidance, with each playbook focused on a specific area such as cashflow, retail and professional services. *
Accountants are able to specialise in any industry and firms may have a portfolio of varied clients including public practice, commerce and not-for-profit and public sectors. Whichever industry you or your firm is in, the aim is always to maximise profitability for your clients. Maximising profitability means re-focusing their sales effort and ensuring their sales function is driving the growth they want.
A clear focus on a client’s own revenue and profit aspirations will have an immediate impact on the firm’s success/growth plans. Your advice must be able to achieve the growth they’re looking for with a corresponding increase in their sales and revenue. If you can do this, your accountancy practice will grow along with each client you advise. It makes sense - if they grow, so do you.
My journey to a streamlined accounting process
Back in 2003 when I first started out in an accountancy practice, things were pretty much done how they’d always been. Sure, we now had digital systems, but a reliance on paper was still prevalent. And, what drove me crazy in my first role, was that data from two systems couldn’t be passed electronically. It had to be printed out and re-entered.
Other parts of the process also started to grate as I took on more responsibility and was trusted to prepare statutory accounts for clients who had used well-known software to prepare their records.
For instance, the fact that producing a trial balance report and entering it into the account production stage was a print out and data entry affair, even though the products were from the same software provider. Such a waste of time!
Yet to surface
After qualifying, I moved into a business where I could finally look at how to streamline our processes. But, bank feeds had still yet to surface yet so I wasn’t where I wanted to be in creating smoother, simpler accounting processes.
Then came 2011, which saw the days of cloud software providers. I was back working in a practice, and our company went for a hybrid of using QuickBooks Online and Xero.
One provider
When the time came for me to start my own outsourcing business in 2015, I decided to focus solely on accounting software and to work with one provider.
For this I chose Xero because you can use it to integrate client’s core bookkeeping accounts with a huge range of different software to help with reporting, forecasting, time tracking, bills.
While systems continue to innovate and while data entry still exists (albeit in a much less significant capacity) – the difference between what can be achieved in smaller timescales now to when I first started is almost hard to compare.
How to create a winning exit strategy
In business, nothing quite beats that warm inner feeling that business owners experience when everything is going swimmingly and the money continues to roll in as expected, day in day out, week in week out and month in month out ... with no surprises upon approving and signing off the year end accounts.
They confidently, and perhaps smugly, review another successful year of trading and look forward to a repeat performance in the subsequent year.
From your aspect it’s a satisfied client and a “nice” bill paid promptly.
Ongoing upgrades
Many SME owners have already made the majority of their investment into their business some years previously and with the exception of ongoing upgrades and maintenance of buildings and plant there are few, if any, demands for a substantial cash injection over and above anything that can be met comfortably out of retained profits.
Sometimes the business owner reflects upon the current value of a lifetime's work, usually in their own mind or perhaps because they have received an unsolicited approach in the post from a business transfer agent seeking to drum up business.
The thought of selling up is usually a fleeting one which is soon brushed aside by the notion of losing a steady and reliable income.
Entrepreneurs
There are typically two sorts of entrepreneurs and where they are on the scale will likely determine their approach to selling.
First, there is the serial entrepreneur who may be starting-up or buying and reselling businesses every few years, typically after turning around a problem company or consolidating.
Secondly, comprising the majority of successful businesses, are those founded or built up by an individual over a period of decades and are the main focus of their owners’ lives. Within this category are people with two divergent needs.
Most common is the business owner who will be selling with a view to retiring, there being no "next deal" nor any participation in the labour force or wealth creation, but there is also the one who has enjoyed their time at the helm but is too young to retire and fancies doing something less demanding, what we now refer to as a lifestyle business.
Crux of the problem
Here's the crux of the problem that is responsible for so much lost sleep.
When is it time to hit the big red button and bale out, whatever one’s ongoing income requirements?
Let me be clear on one point here. I am not discussing a case of "calling the top of the market", where there is a frenzy of consolidation taking place at eye watering multiples. Such scenarios are often quite simply almost always "no brainers".
The heart of this discussion is through the lens of making sure the business owner has not left it too late to extract maximum value out of their business.
But what is meant by too late?
Let's start from the aforementioned premise that we are dealing an SME built up and developed over 25 years by its owners without any outsiders in the boardroom. It is turning over £3m per annum and yielding a net profit before tax of £0.7m with a balance sheet worth a net figure of £2.35m.
Very nice indeed but as with everything else nowadays the world is changing quickly and the old certainties have never been less certain in a shorter timeframe. Like their competitors this business has to run hard just to stay still and survive, let alone find ways to innovate and adapt in order to continue thriving.
So what is this business actually worth on the open market?
Balance sheet
Assuming a healthy exit multiple of 4.5x it would fetch a very handsome £3.15m for its owners which is in excess of the balance sheet.
But that would mean an instant end to the income of £0.7m per annum so our business owner will be sucking hard on his or her teeth and reckoning that it's probably worth waiting another 2 or 3 years THEN banking the £3.15m.
After all, what sort of return will £3.15m generate? A pedestrian 1.5 per cent on deposit or a heart-stopping racy but riskier 10 per cent if reinvested in another venture. Either way a far cry from the current 29.8 per cent return on capital employed being enjoyed.
Surely a fair assessment?
However, how certain is the business owner that the coming years will see profits maintained in the face of external headwinds? Brexit, Political earthquake at Westminster, Tariff Wars, Sector disrupter.
I am sure you can think of more scenarios to keep you awake at night. Not forgetting that our business owner is in their early 60s and not quite got the same drive and energy as in former years to keep thing running at full pelt, let alone grow earnings.
Okay, so perhaps these doomsday scenarios won't happen.
But in a few short years he or she will be heading for 70 and health tends to worsen with age, not improve as it would with a good Scotch.
Industry circles
So let's take a compromise view and hang on for 2 more years then and see how things look, while making tentative enquiries to business brokers and keeping a closer ear to the ground in industry circles.
Let's say in the intervening two years the steady rise in profits splutters, even just slightly and profits come in at £0.68m and £0.595m respectively . Nothing major has occurred on the macro economic front, just the loss of a couple of good contracts and the failure to replace them.
Well, the owner's lifestyle certainly won't have felt the dips but prospective buyers will certainly have taken notice.
We get to market 24 months later and the offers are coming in for what is a fundamentally sound business but the multiples offered are dropping to 3.75x 3 years average earnings - £2.47m . Not too bad because we've had the benefit of the two years' worth of earnings in the interim.
Fair enough, so let's tweak our scenario. The storm clouds have gathered on the economic front as well and profits come in the next year at £0.425m. Oh dear.
Trend of profitablity
Now the trend of profitability is heading south in an established pattern and best offer is coming is at 3x the average of the past 3 years net earnings - £1.7m. OK, so our resilient business owner looks back and sees that he or she has still come away with more overall - £3.4m instead of £3.15m.
Now let's chuck in a wildcard. The owner’s health has suffered as a result of the stress of falling profits and market uncertainty.
As the deal stretches out and it becomes clearer that the seller is getting much keener to "do the deal and be done with" , the due diligence will throw up all sorts of "issues".
And eventually our seller will be taking a multiple of 2.5x net profits, which, by the time it comes round to signing the contract have, fallen yet again to £0.295m and the average profit over three years has now dipped to £0.438m .
The proceeds from the sale are now £1.095 . The total over three years is now £2.665m against £3.15m but what if there is no buyer?
Remember – buyers face the same storm clouds and may have battened down their own hatches.
Far fetched
Far fetched? Not in my experience but why not ask your clients what they think?
Nobody knows what the future holds and often if pays to keep going but eventually there comes a point where that no longer holds true.
So, the take home here is to understand that just when you don't need it to happen, events can and do move against businesses to create the perfect storm. Many buyers out there specialise on sniffing out such opportunities and pouncing just at the right time. Our SME owner may no longer be “in the money” and possibly no longer “in the game”.
So perhaps when it comes to "calling the top of the market" sellers need to look much closer to home. That’s where sound advice from a trusted outsider, such as an accountant comes into its own.
Planning the exit for a business is always going to be more of an art than a science, with a hefty dose of good fortune but it pays to have the conversation with clients sooner rather than later, even if simply to get it on the radar for a future conversation, because you don’t want to be “too late”.
The table below uses the figures in this article and the yellow background is where the seller will reinvest at 10 per cent, the red being proceeds put on deposit at 1.5 per cent.
| Multiple | Proceeds | Income | Income | Income | Total | |||
| Sale time: | Of sale | Year 1 | Year 2 | Year 3 | ||||
| Now | 4.5 | 3.15 | 0.047 | 0.048 | 0.049 | 3.294 | ||
| 0.315 | 0.347 | 0.381 | 4.193 | |||||
| End Year 2 | 3.75 | 2.468 | 0.680 | 0.595 | 0.056 | 3.799 | ||
| 0.680 | 0.595 | 0.374 | 4.117 | |||||
| End Year 3 | a) | 3 | 1.7 | 0.680 | 0.595 | 0.425 | 3.400 | |
| b) | 2.5 | 1.095 | 0.680 | 0.595 | 0.295 | 2.665 | ||
How accountants can help to smooth out a business sale
When a client announces that they are selling their business, many accountants feel pressed to get the accounts up to date quickly or perhaps feel the need to prepare management accounts and projections ASAP.
There's nothing wrong with that as such... but therein also lies the problem.
They can be so focused on these jobs that they fail to grasp how important their role has finally become.
No longer are they compliance clerks who churn out annual accounts and prepare the tax return... now is their chance to shine as the lead actor!
Tales of woe
Confused? Let me share some tales of woe with you - problems that could have been avoided or at least dealt with better had the company’s accountant taken a more proactive role in the run up to their client putting themselves up for sale.
Remember that usually the accountant is the first to know of their client’s intentions, but sometimes can be one of the last. This tells you all you need to know about their client relationship!
Interested buyers who are serious and keen to do deals walk away in the following common scenarios, which with advance planning by the accountant could be nipped in the bud or mitigated. In other words, you need to be first at the party before your client approaches a business broker. You need to be the first professional responder once the idea of selling is floated.
Lucrative earnings opportunity
Not only is it a matter of giving your client the best service you can, you are also missing out on a lucrative earnings opportunity, one which your client will really appreciate, unlike your annual accounts bill. Here are five scenarios that illustrate what to look out for...
- Excess stock – the buyer noted the very high stock figure, amounting to four months worth of sales. As a competitor she knew that there was no way this level of stockholding was necessary. It made her have serious doubts over the efficiency of the operation and she walked away, but not before making a derisory offer. Word spread quickly and other likely buyers all gave the firm a wide berth.
- Obsolete stock – the seller just couldn’t bring themselves to make the necessary stock write-downs over a period of 20 years and needless to say the accountant just accepted whatever they were told. Crunch time came during due diligence by a buyer, who subsequently slashed what had been a good offer.
- Debt collection – the balance sheet was showing six months of sales tied up in debtors. The buyer asked if we were selling a bank or a manufacturer! Upon closer inspection it transpired that 75 per cent of the debtors were not recoverable. The buyers said they would sit it out until the seller went bust and mop up the customers themselves.
- Margin variations – this is probably the most common problem. In the year prior to selling, out of the blue the gross margin improves noticeably. Amazing isn’t it? No amount of explaining will persuade a buyer that something funny hasn’t gone on.
- Excess margins – everybody makes 43 per cent gross margin but your client is consistently making 51 per cent . Buyers scratch their heads and when advised that the firm’s director has been sourcing very keenly and is a crack negotiator, they start to wonder how they will manage once your client retires and the buying wizard has performed her last act. Once again interest slowly evaporates.
These five scenarios, and others besides, should be on the radar of the accountant.
And when you have the discussion about exiting, you need to get in your car and head straight down to your client’s operation, get a feel for it and look at it closely just like a buyer would.
Let your clients benefit from your professional expertise and experience in dealing with a variety of businesses.
Work hand in hand with them to groom the business for sale and extol the virtues of the exercise.
FRC stats illuminate the accounting profession
I thought I'd share this informative article by Kevin Reed, a freelance journalist and consultant at practice advisers Foulger Underwood
There is little fanfare around the Financial Reporting Council’s ‘state of the accounting profession’ annual stats. This is, perhaps, because they show movement in accountancy – whether the number of students or ratio of the big firms’ audit to non-audit fees – as somewhat ‘glacial’.
However, the lack of reporting of the Key Facts and Trends in the Accountancy Profession’s statistics means that interesting and important indicators of the profession can be overlooked.
And for practitioners, understanding the direction of travel of the market beyond anecdotal evidence must be useful. You are numbers people, after all.
There’s a lot of ground to cover, so I’ll undertake this project in a series of articles. Firstly, let’s look at the institutes.
Studying the stats
The ACCA has grown 17.6% in member numbers between 2013 and 2017 in the UK*, compared with 5% growth for the ICAEW. However, the ICAEW still has many more UK and ROI members, at 126,560 compared to the ACCA’s 94,622.
But while the ACCA’s overall numbers have skipped up, it has negative growth (-3.7%) in UK students over that period, while the ICAEW has upped student numbers by 35% between 2013 and 2017.
Globally, the ACCA has by far the upper hand. It has 414,562 students worldwide, compared to the ICAEW’s 27,866. Notably, CIMA has increased students worldwide by 4% to 127,241 during that period.
Attaining membership
There has been much work on both the ICAEW and ACCA qualifications during recent years, but it’s interesting to note that the ICAEW has seen a decline in students attaining membership in the last two years – down 2.7% in 2016/17. The ACCA has increased its number by 5% in the last year. While difficult to create a link between quality of students vs. quality of training and qualification, it’s an interesting set of numbers nonetheless.
And where do these students and members work? While the UK is, anecdotally, a big stomping ground for the ACCA in smaller practices, globally more than 60% of its members are in industry and commerce – just 21% in practice.
Practice v Commerce = Students v Members
In contrast, more than three-quarters of ICAEW students are in practice, which falls off to under 25% following qualification. Though we know that the big accountancy firms see qualifieds move into industry, there’s clearly an opportunity for smaller practices to consider how to attract them following their studies.
The ICAEW’s female member numbers have stayed stubbornly low – at 28%, compared to 46% for the ACCA. So, if looking at the gender balance in your practice then – based on those factors - there will likely be more ACCA members on the jobs market, than from the ICAEW.
The ICAEW has improved its proportion of female students – to 43% in 2017 from 39% in 2013, which will have gone towards the small improvement in female member numbers.
Age gap
The ACCA has a younger member/student distribution than the ICAEW – more than a quarter are under 34 and a further 25% are under 44. Only 38% of ICAEW members and students are under 44.
However, there is another important aspect when it comes to time: how long has the student been studying? Worldwide, more than a fifth of ACCA students have been studying more than five years, compared to 5% of those with the ICAEW. Does this mean ACCA students aren’t as good as the ICAEW’s? Again, caution must be taken in what to read from these figures. We don’t know the background or circumstances of these students, and the FRC itself notes that there is “no common basis” to determine the length of time between registering as a student and achieving the requirements for membership.
Turning to technicians
Finally, let’s take a look at the ‘technician’ qualification offered by the Association of Accounting Technicians – a qualification that can provide a route into the other accounting organisations. These numbers have dipped across the board.
Growth in member numbers for the UK and ROI was -5.2% between 2014 and 2017. Student numbers fell 9.3% during that period.
Under-25s represent the majority of AAT students, at 35%, while more than 30% are in the 25-34 age bracket.
Conclusion
At a time of unprecedented technological and client-focused change upon the accounting profession, understanding where the next generation of accountants is coming from, how long they take to study, and which bodies are producing them, is vital.
Does audit experience matter for your practice? Or time spent in commerce? Do you think younger students and institute members are more important than experience?
And, finally, do you need qualified accountants? Are you better hiring people with broader or more 'people'-focused abilities? A topic for a future blog of mine, for sure.
These considerations, among others, will determine the profile of potential candidates for your practice.
Kevin Reed is a freelance journalist and consultant at practice advisers Foulger Underwood.
Accountants chat to win more clients
Accountancy is a well-established profession that provides an important service. With the clear opportunities this situation presents, also comes challenge. The more essential a service and the bigger the customer base, the more difficult it is to compete.
Expertise, quality, diligence, integrity have to this point been the key ways in which one organisation positively distinguishes itself from another. That’s what a client requires when they use the services of an accountant. These aren’t going away and nor should they, but what does the modern consumer look for beyond these? What do accountancy firms need to acknowledge has changed about today’s customers? The answer? Expectations.
As technology moves quickly, so does the expectation level of a customer. Think of the mobile phone market. In a short period, the expectation of a customer looking for a mobile phone has changed to the point where “making a call” is one of the last things they consider. It’s simply a given and their decision is based on a myriad of alternative features driven by technology.
Customer expectations
Is it complacent to suggest that “making a call” is not comparable to the expertise, quality, diligence and integrity of an accountancy practice? Of course these traditional features remain vital, but a mobile phone company adapts to the expectations of its customers in exactly the same way an accountancy firm must.
So where can accountants find competitive advantages to match the rising expectations of their customer base?
As with many other business improvement strategies, the answer lies with technology. What are customers looking for beyond the “given” of a quality product or service? How can accountancy firms improve the business side of their operation? Can these questions be successfully responded to in a financially viable way? They can, in many ways, through Live Chat.
Instant benefits
Live Chat is a feature currently used by less than 10 per cent of businesses, but those that are incorporating it, are seeing instant benefits to their services, external customer perception, data analytics and to the size of their customer base. Why? Because Live Chat solves problems by positively reacting to the expectations of the modern consumer. Here’s how…
Customers expect speed of service. They want to visit a website and have their questions answered immediately, not by having to suffer through call centres or unanswered emails. Firms using Live Chat instantly upgrade their customer reaction time compared to those that don’t.
How many customers are accountancy firms losing by having substandard data intelligence on their website visitors? Who is visiting regularly without committing? Where are they based? What questions or problems might they have? Answers to these will often never be known without the intervention of a proactive “can I help?” appearing as they search your site. Once again, imagine one company using Live Chat and another not?
Need to run a call centre as part of your organisation? However large or small it is, the telephone operator can only handle one call at a time. Imagine the capability of a Live Chat operator working on several chats simultaneously, gaining valuable data and insight as they do?
Live Chat not only enhances your customer service and your customer’s experience, it also does it in a way that’s more cost effective than the clunky, traditional models of 90 per cent of other businesses.
It’s time to think beyond the traditional measurements of a successful accountancy practice, it’s time to start thinking of these in the same way a customer does, as a given. It’s time to think about Live Chat.
Change the question to get a different answer
It’s frustrating when you want to help a client improve their business but they just won’t take your advice.
The explanations I hear range from “they don’t want to pay for it” to “they’re just not interested” but, while I accept that some clients aren’t really business people at all but simply workers doing a job, I don’t accept that the majority of a typical client base fall into this category.
We see business as important and so we see the advice that we give clients to improve their businesses as very important. However, clients don’t necessarily see it the same way.
To many, their business is not a priority in itself but more a means to an end.
Other dreams
They work hard at their businesses in order to fulfil other dreams. Typically these will be related to their family and to creating a better world for them but could equally be for a collectable car, a sick relative, a change of lifestyle.
Giving the client things to do within their business has little impact if their goals lie elsewhere. Indeed, they can be seen counter-productive to the client, taking up more time and money that they want to spend instead on other personal things.
To get a more positive response, you need to link your advise to what really matters to them so that they can see where the true benefits end up.
Business goals
For example, rather than asking a client about their business goals, ask instead what matters to them more than anything else in the world. Get them talking about their lives and sharing their personal goals. Then, by understanding those, you can introduce their business into the conversation but within the context of their personal world.
Advice to improve their cash flow becomes more about the money they can spend on the family holiday. The strategies for effective management become more about spending time with the kids.
The most effective strategy we ever used for ‘converting’ clients to a more business advisory mindset was to show them how to manage their resources in order to get a family holiday the following year. When advice equals tangible, meaningful benefits then clients will pay and come back for more.
Get to know their personal world, not just the business one.
The backbone of accountancy
Accountancy practices are advisory practices. Not sure? Just ask an accountant for advice and see for yourself.
As Elaine Clark says: “I guess the only fault about compliance accountants is that, generally, they do not shout about how good they are at what they do and the services that they provide. They just do it!”
As I travel around talking to small practice accountants I find them inquisitive, knowledgeable, dynamic, literate and caring.
They use all these qualities for the good of clients, their clients’ families, their clients’ staff, their own staff and their own families, and I think it fair to say the good of the country as a whole.
Quiet majority
We are the quiet majority that actually make the system work for millions of taxpayers – and HMRC and HM Treasury.
We are the backbone of the profession, we deal with the nitty-gritty of the system, we handle the day-to-day interactions and we even take the flak from clients when things go wrong (even though very often what has gone wrong is out of our control).
I’d go so far as to say we are the backbone of HMRC as well, and I’m not exaggerating. Just imagine how much harder their job would be if all the errors they made that we put right had in fact to be resolved by them rather than us.
Heartbeat of the profession
While we are the backbone of the profession, we are also its heartbeat – we feel the pulse of businesses throughout the land, we help make the adjustments that save many from problems, and also help them drive forward their planned growth.
It’s what we do, it’s part of our DNA, and no one who has never been in practice will have experienced the highs and lows that we experience, not just from our own practice but from the businesses and taxpayers that we help.
They can look on from the outside and cheer us along, but they will never feel what we feel, they will never enjoy the successes we have, they will never will develop the bonds with clients and their families that we have.
Twittersphere
Yet the so-called ‘twittersphere’ and ‘blogosphere’ are full of all sorts telling us that compliance is dead and we can only exist as an advisory practice.
This statement alone shows exactly how little they know about what we do and how we do it. It shows their ignorance of the work of thousands of accountants across the UK who work tirelessly and with great professionalism and ability.
They are already advisory practices, but just happen to be advisory practices that don’t use the software or systems that they are trying to sell us.
‘Compliance disparagers’
We are accountants, we are important, we understand our clients. Do the "compliance disparagers", as Elaine calls them, "understand us?
The answer is for me a resounding no – and yet they feel it is perfectly reasonable to tell us what is or is not the future, simply because they give themselves a fancy title like "futurist" or "commentator".
And, of course, because the internet allows for self-publicity on steroids they constantly shout loud and long about how easy accountancy would be “if only…”
Supporting you support your clients
The ICPA supports accountants in practice: our motto is “Supporting you support your clients”. We know how important you are, we know how hard your job is, we know how hard you work and we will never disparage what you do.
We are the backbone of the profession, and while others talk about accountancy we just get on with the job of being the very best accountant we can be.
This is always worth remembering – the naysayers will actually never be that because they are not accountants.
Jargon-busting: speaking the language of your clients
A shift in the accounting industry has caused widespread reverberations. With changes to the typical client offering, and an increase in fintech solutions, today's world of accounting is a far cry from the pencil pushing stereotype.
But what has remained intact is the importance of establishing, and maintaining, good client relationships. Formed on a basis of communication and honesty, these relationships determine the character and reputation of your firm.
In order to have these conversations, it’s necessary to avoid using too much jargon - or overcomplicated language. But how do you avoid it? And how do you listen out for the everyday concerns of your clients?
What is jargon?
Linguistically, jargon can be defined as a sociolect - which means that it’s a language used by a specific class, group, or profession. So, by very definition, accounting “jargon” ostracises those that don’t speak it.
For most accountants and bookkeepers, it’s second nature to use technical language when talking to colleagues or clients. And using acronyms just keeps things moving faster, imho. In a lot of ways, jargon can be a good thing.
But, being aware of the language you use is important, just as it’s important to know your audience.
Feelings of confusion
It’s this language that can lead to feelings of confusion and disillusionment for your clients. This, in turn, can culminate in less engagement with you, your firm, and most importantly with their numbers.
It is the curse of knowledge that can often lead to the use of highly complex language. Terms that are commonplace to you, even particularly simple, can alienate a client. For some, when you use technical terms, you may as well be speaking in tongues.
In the past, maintaining the position as a financial savant was accepted - even encouraged. Clients wanted to know that they were in safe hands with someone that knew what they were talking about - even if they didn’t.
But the world has since moved on. Relationships between accountants and clients are now becoming more balanced and business owners no longer wish to feel distanced from their numbers.
How better communication can help your clients
Having a simple conversation with your client about their business, their finances, and their stresses, can be incredibly illuminating.
Being the trusted adviser means being an active member of your clients' financial team. Spotting corners to cut, and cash-saving skills, are no longer enough in the world of modern accounting.
Instead, accountants must read between the lines for concerns over payroll, making it to the end of the quarter, and everything in between.
Speaking the language of your client can often mean that you understand their concerns before you even lay eyes on their forecasts or projections. It is essential to understand that speaking your clients’ language is a form of data collection that can’t be replicated in any kind of cloud-based app, never mind a spreadsheet.
It’s natural to want to be heard and understood. So make sure that your clients understand everything that’s being said to them. Don’t let miscommunication be your lingua franca.
Changing role of the accountant – how to prepare
There is change in the air — have you noticed it? A focus on technology, as well as soft skills – combined with accountants’ quest to add more value to their clients – is catapulting us right into 2019. So, what’s happening now and how can accountants prepare for what’s ahead?
Cloud, AI, real-time data…
Cloud, AI, real-time data… just a few words to get your head spinning? According to a recent Thomson Reuters report, 95 per cent of accountants surveyed state their role is likely to change due to technology. Making tax digital (MTD) plays an important role of course, but other traditional tasks such as bookkeeping and data collections is expected to be increasingly automated over the next 10 years.
Technology including cloud software, automated tools such as chatbots, driven by artificial intelligence or statistical modelling software will be the norm in a few year’s time. Many businesses will feel overwhelmed, looking to their accountants for trusted advice. Hence, accountants need to be at the forefront of these changes to understand new technology and properly advise their clients.
I’d encourage you to embrace the changes brought by technology. After all, it can help free up your time so you can focus more on areas which it can’t replicate, such as strategy, relationships, emotional intelligence and trust.
Moving on from the role of the ‘traditional’ accountant
With many tasks being automated by technology over the next years, new opportunities are opening up, pushing accountants to go beyond their ‘traditional’ role. Many of the accountants we are partnering with are embracing this trend and started to add new services to their portfolio, aiming to become a one-stop-shop for financial needs. .
As the accountant, you know your clients’ financial situation and can provide consulting services linked to new business opportunities. For example, you can make recommendations on how to invest, when would be the best time to grow the business or whether extra funds might be needed to bridge the gap in receivables. Ultimately, by offering additional services, clients don’t see their accountant just as the ‘number cruncher’, but as trusted business adviser.
New skills for new times
Conquering the new tech challenges and expanding into advisory requires a new set of skills. In their recent report Professional Accountants – The Future, the ACCA hit the nail on the head: “All professional accountants will be expected to look beyond the numbers. They will need to collaborate and partner with people in other parts of the business and outside the business; interpret and explain the numbers; provide insight and information; help organisations to achieve short-term goals and longer-term objectives; think and behave more strategically and become more involved in decision-making than before.”
Ask yourself the following questions: Are you embracing new technologies? Are you thinking beyond your current remit to add more value to your clients? Do you have the necessary soft skills to succeed and retain your clients? The holiday season will give everyone some well-needed respite to reflect and recharge, but there is also room to think about how to tackle challenges and embrace opportunities.
So, how could you get a head start? Here are a few tips I’ve picked up from accountants recently:
- “Go to network events and talk to peers in similar situations. For me, that’s the best way to find out what’s happening in the market.”
- "Brainstorm with colleagues on the skills that are missing. Maybe your employer can organise a team training?”
- “Accountex and Accountex Summit North are the go-to-events and the perfect opportunity to learn all about the new tech available in the market. Definitely sign up to these.”