Advisory isn’t just a nice to have, but the key to driving growth
When the majority of Australia’s high-performing accounting firms are seeing more growth from advisory than traditional accounting services, you know the times are a-changin’.
The Australian Financial Review has just published its Top 100 accounting firms list in conjunction with Chartered Accountants to get a sense of who’s who in the zoo, and to get a handle on what’s driving their growth.
Not surprisingly, the big four firms of PwC, Deloitte, EY and KPMG had a great year (for the record, PwC came out on top with revenue of $2.35 billion on the back of annual growth of 10.8 percent).
The other members of the big four also managed near double-digit growth.
All 100 firms, in aggregate managed growth of almost 10 percent against growth of 1.5 percent against the broader industry.
Here’s the kicker: what’s driving growth is that 80 percent of firms in the top 100 list said advisory and consultancy services are the fastest-growing segment of their business.
Of course, this isn’t anything particularly new.
They’ve been branching out into all sorts of things for years now, even buying up creative agencies.
Meanwhile, for firms that drove revenue above 10 percent – M&A was the key.
“There are lots of tuck-in style acquisitions going on, so overall organic growth is much lower,” industry consultant David Smith was quoted as saying.
“Generally, in all sectors, it remains difficult to achieve high growth from core compliance services although 2018 has been a stronger year for most firms.”
The report also noted that spending in R&D, beyond the big four firms, simply because they don’t have the capacity to invest.
So, in summary:
- The top 100 firms are using advisory and consulting to drive their revenue
- M&A may be great for business of a certain size, but it’s the sort of investment smaller firms may not be able to pull off
- There’s little capacity for smaller firms to invest in R&D to drive their business forward over the next five to 10 years
It’s getting harder and harder to drive organic practice growth simply by finding new accounts and undertaking compliance work – which doesn’t exactly paint a rosy picture for smaller firms on the face of it.
The good news is that it’s never been easier to add more advisory to your firm’s plate.
Tech driving business transformation
What’s allowed the likes of the big four to split into all sorts of directions in search of revenue growth is that tech is driving efficiencies in compliance work.
As the AFR report notes:
“The future of accounting has never looked more intriguing. With the advent of artificial intelligence and robotics, some human services will become redundant, while the range of business advisory services will continue to grow.”
Firms are finding it difficult to find growth in compliance simply because tech is making that compliance work easier to do – making it more difficult to put a premium on simple compliance work.
After all, clients aren’t silly.
If they’re seeing that compliance work is becoming easier to do and then you try to charge them more for that work – they’re probably going to turn up at the firm down the road pretty quickly.
The good news is that by applying clever tech to your compliance work, you can free up time and space to move into the higher-value advisory game.
Advisory is where experience comes into play.
Even if you’ve been doing nothing but compliance work for a decade, you probably have rich insights borne of years of looking at other people’s businesses that you can use to move into the advisory space.
You’ve been at the coalface of their businesses for years, talking to your clients about solutions to their problems.
For example, they, like a lot of SMEs, may have an issue with cash flow.
Putting together a cash flow report and using that to open up a conversation on how they can start to remedy any difficulties they may be facing can be the start of offering that client advisory services.
Once upon a time, however, putting together that cash flow report may have taken a huge amount of time and energy.
But with new tech, it becomes easier to put that report together – and an AI advisor can even help with the analysis of that report.
When a report comes out looking at the strategies the big four firms use to grow revenue, it can be hard to draw out any insights that help smaller firms succeed.
But tech is effectively levelling the playing field on compliance, making the future of accounting and bookkeeping much more about the ideas that help clients maintain and grow their businesses.