Accounting industry challenges

Share

25th March, 2021

The accounting industry’s biggest challenges to growth at scale

Industry leaders and partners at some of the country’s top 25 firms reveal the biggest challenges facing growing accounting practices today, writes Adam Zuchetti.

Accounting firms, like any business, have their share of operational challenges and barriers to growth. Some are particular to the accounting profession; most amplify as the practice grows in scale and complexity.

Take a look into some of Australia’s mid-tier firms as leaders and respected industry commentators reveal the major barriers to growth for accounting firms as they scale.


Efficiencies brought by tech lost due to complexities


While intended to deliver efficiencies, technology can be a double-edged sword.

“Unless you can get a strong and deep adoption of whatever the software or tech that you’re looking to use, every piece of software is generally only utilised to 10 percent of its actual capacity,” said Kelly+Partners chief executive Brett Kelly.

“The potential for an outdated or overly complex tech stack to be a massive distraction and waste of time and profit destroyer is enormous. I’m seeing it regularly as we’re looking at firms to acquire,” said Kelly.

But that isn’t to say technology is the root problem, rather the need to try and support a wide range of niche tools that address specific challenges — sometimes resulting in more challenges than are solved.

“For example, I’m finding that every firm that relies too heavily on integrating a lot of third party tools onto a practice management software is making no money — the reason is because it’s hanging so many applications off that platform, the systems integration is hopeless. All of the promised savings and efficiencies haven’t been delivered.”

READ: Hidden growth opportunities for accounting firms

Other risks include duplication, uneven rollout across business divisions and – crucially – low uptake by staff and clients.

“You have to be able to take the client base with you,” said HLB Mann Judd managing partner Tony Fittler.

“With most changes, it’s pretty easy to get a third of your clients there, they’re just used to it; there’s probably another third that need a bit of assistance, but they can get there. But for something to be really effective, you want it virtually at 100 percent.

“It’s a challenge that’s not improving – there’s always new software coming in. How do you integrate it back into your existing systems? If we get efficiencies here, will we be impacting efficiencies already in place over there?”

Meanwhile Kelly highlights rudimentary systems creating inefficiencies.

“In many businesses, 99 percent of their people can’t even use the phone system or the photocopier to its full effect. That’s why the phone rings in an office, no one wants to answer it – they don’t know how to transfer the call,” he said.

“Very few people have had training on how to use them, and so the people and the firm aren’t getting the most out of even the most basic systems.”


Cybersecurity threats loom


Global cybersecurity provider CrowdStrike warned that accounting firms are “prime targets” for cyber criminals because of the wealth of financial and identity data they hold about their clients. COVID-19 amplified this threat as the industry ordered staff to work remotely.

The OAIC lists legal, accounting and management services collectively among the top five industries reporting data breaches – ahead of federal government agencies.

As more accounting processes become digitised, the task of ensuring data security continues to gain complexity.

“Good cyber hygiene includes educating all accountants in the firm on strong password protection; implementing multifactor authentication (including email and remote vendor support); connecting to secure Wi-Fi when working remotely,” CrowdStrike’s director services APJ, Mark Goudie, said.

“It should also involve ensuring all applications and software are patched and up to date.”

The need for being current and up-to-date at all times is a huge factor when it comes to data security, to the point that data storage also has real-world implications. And that means having a thorough understanding where and how your data is stored.


Skills shortages leaves clear talent gaps


Recruitment of accounting personnel, especially senior professionals, is another enduring issue for the industry, further exacerbated by the pandemic.

“We traditionally bring secondees in during our busy audit season to provide extra capacity to Australian teams, and we send secondees over to the US and UK and Canada during their busy audit season,” said Andrew Graham, managing partner – Brisbane at RSM Australia.

“With basically no secondees in the last 12 months, there’s been people under pressure because they’re having to do more.”

With hopes vaccines will address pandemic-related issues, leaders agree that longer term initiatives such as a greater intake of graduates as well as enhanced support and clearer career progression roadmaps are needed to help retain experienced accountants within the profession.

READ: The future of the accounting industry


Shifting to a decentralised workplace


As a more traditional industry with centralised workforces, the shift to remote working has been acutely felt by many accounting firms.

“I think that’s definitely the biggest challenge – how to rethink the operation of an accounting firm with a distributed workforce,” said Sholto Macpherson, editor of DigitalFirst.

“It’s not something that happens easily from a cultural perspective. And I have heard that some firms found it difficult from a technical perspective.”

RSM Australia’s Graham agreed that cultural concerns outweighed the technical ones.

“When COVID first hit, we sent approximately 1,300 people home within 24 to 36 hours … we were able to get them set up at home pretty quickly for business as usual. What changed was how we engage them.”

Graham said his firm implemented twice-daily check-ins, with a morning “game-plan” session for the workday ahead, and an afternoon welfare check, especially during lockdowns, as a means of replacing in-person touchpoints.

Meanwhile workflow processing tools such as Trello and other technology platforms became crucial for maintaining oversight of progress and productivity. This was also assisted by a move to daily timesheet recording.


Regulatory framework change continues to challenge advisors


“Overall, the biggest challenge is that we’re working within a tax system that is outdated and overly complex,” said The Tax Institute’s Robyn Jacobson.

“That’s been the case for decades now, but with the major economic upheaval of 2020, it’s become particularly clear that our system is creaking under its own weight and is in desperate need of holistic reform.”

Jacobson said both policy design and administrative burden combine to weigh on accounting businesses.

“Most practitioners have lost many hours to untangling red tape and understanding complex and inefficient systems, which results from the inefficient, inequitable and complex design of our tax and superannuation laws.”

She noted that, while many reviews and attempts at tax reform have been undertaken, “the enormity of the task from a political perspective has been a significant stumbling block”.

Whether you share Jacobson sentiments on the tax regulatory framework or not, you’ll know that changing laws over time requires changes to processes, and any accounting firm seeking to maintain a sustainable operation will invest in staying up to date as a cost of business.


Gaining clear visibility is half the battle


Far from being one-off events, these challenges facing the industry are ongoing and will evolve into the future.

Part of addressing them comes down to simple visibility: problems can’t be solved if they aren’t known or understood.

Accounting leaders are urged to review their operations regularly to identify how these issues are manifesting within their own business, and then implement management strategies accordingly.

Doing so means practicing what is so often preached to clients: “dedicate time to working on your business, not just in it”.