Year Ahead Q&A: d&t's Carl Reader looks to leverage HMRC change

ACCOUNTANCY AGE speaks to d&t director Carl Reader about the year ahead for his practice

Accountancy Age: In what way has the shift to online, cloud & mobile platforms changed the nature of client relationships & how is your firm adapting to disruptive technology trends?

Carl Reader: In truth, new technologies have been the making of our firm as it is today, and I expect us to continue being at the front of this curve.

Our hand was forced, in some respects, back in 2002 as we had a national client base yet were a small office with a handful of staff. Practically the only way to deal with the clients affairs, short of posting CDs through Royal Mail, was to use the early iterations of cloud bookkeeping services – bear in mind this was long before terms such as SaaS (Software as a Service) and ‘The Cloud’ were even known!

Nowadays, we have significant licence levels with both Xero and QBO, and it is a necessary part of our offering as we look to further systemise our internal processes. I was kindly invited by Intuit to their conference in San Jose where I managed to meet a number of vendors of new, innovative products. As we are fairly streamlined with our management structure, we can adapt pretty quickly with how we predict the market will go.

For me, the real change over the next few years will be the unbundling of practice management software. At the lower end, companies like IRIS waved the flag for integration above everything else. We now have a new technology platform in which packages can openly communicate via an ‘API’ (application programming interface) – meaning that the best in breed can be selected for each element of the practice.

I’m also excited to see how value-based add ons such as Spotlight, Fathom, Receipt Bank etc develop. These packages provide a platform for practitioners to develop their service offerings far beyond compliance. Certainly for us, they allow us to deliver on our vision of “adding value, not numbers”.

How do you view the growing legal service market for accountancy firms, and what is your firm’s approach to undertaking multi-disciplinary work?

Undoubtedly the market is there, but for me I believe it is too early for 99% of practitioners to jump into it feet first. While legal services offer us a wider share of the clients’ wallet, practically we need to determine whether it’s the market we want to be in, and whether it will simply be a race to the bottom.

I mean that particularly in relation to document management-style work – the legal equivalent of our bookkeeping, tax filing and accounts filing. Given the personal nature of a lot of this work there is certainly more scope, in my opinion, for “Tesco’s Law” than “Tesco’s Tax”, and given that as a profession we’ve struggled to commoditise compliance work, I fear we will simply be traded out by those who can.

There are also inherent management challenges – our business models (at the smaller end) have a relatively large percentage of recurring fees; there are cultural working differences between legal advisers and accountants; and over and above all this – for my firm in particular, it will take us “off piste” for our short term plans.

How will the reorganisation at HMRC – including the closure of 137 offices to be replaced with regional centres – and moves to digitally transform the tax administration affect your firm and clients?

It’s certainly something we are monitoring with interest. Some may lament the loss of the “local tax officer”, although I’ve already seen the changes in relationships with HMRC in my time in practice – there is now a much more systemised approach, with less officer discretion.

My view is that the digital changes are to be welcomed, as it allows compliance to become more automated and frees up both the adviser and the client. In fact, I feel that it will positively change the nature of the relationship between adviser and client, in that the adviser will have to demonstrate value, and the client will clearly benefit from advice, rather than compliance.

To what extent has regulatory changes to the large-listed and smaller company audit markets changed your firms approach to undertaking audit work?

In truth, audit is not our market – we are registered auditors with a good portfolio of smaller audit clients; however it isn’t a market are actively pursuing.

Which areas will be most important to the growth of your practice in 2016?

First and foremost, our franchise network accountancy services. We have a significant market share and are actually looking to double our franchisor numbers who provide our services to their franchisees. This will take us almost to saturation at franchisor level, and will solidify our already strong position in this market.

Combined with a beefed up marketing and sales team, this will allow us to continue building our franchisee client numbers at a rapid rate.

We are also actively building our technology solutions (such as multi-level franchise CRM, financial reporting and operational audit software). At the moment we don’t believe that there will be an immediate pay off through profit from this; however they will give us a platform to provide much stronger advisory services to both franchisor and franchisee than simply historic financial information.

We are considering this an investment in the future of our business model, and a diversification given the threat to compliance work. These solutions will also allow us to build on our international relationships throughout Europe, the US and Australia as the software solutions will be easier to export.