SERVICING the needs of large corporates remains the Big Four’s heartland. But the top four firms are increasingly attempting to disrupt the smaller reaches of the business market.
In the 18 months since KPMG made a £40m sally into the SME market with the launch of KPMG Enterprise, a small business cloud accounting service, rivals PwC and Deloitte have, with varying degrees of fanfare, reached out to the more than five million small and medium-sized enterprises in the UK through strategic partnerships with Sage.
So, how has the market responded to the Big Four’s push to become the little guy’s friend?
A signal of intent
While the three of the Big Four firms that spoke about their SME ambitions were keen to stress that they have always serviced smaller companies in some way – EY’s Debbie O’Hanlon says “the firm’s SME approach is not anything new” and a “continued focus” – clearly, KPMG’s announcement of significant investment in the area is a signal of shifting intent from the largest players.
Ben McDonald, partner and head of KPMG Enterprise for the London region, says its investment has enabled the firm to recruit heavily and develop a full compliance service technology platform.
“We can produce their accounts, do all their tax returns, run their payroll, do Companies House filings for £200 to £400 per month, which is very different from what you would have expected from the Big Four in the past,” he says.
It is an offer around 2,000 small businesses have found compelling enough to sign up to in the last 18 months. A criticism of smaller practices is that the Big Four’s SME service would provide a “sausage factory, one-size-fits-all” solution, but McDonald says the service offers real-world support in the form of a dedicated accountant for each customer.
“While the technology grabs the headlines, a lot of our clients place the greatest value on having that,” he says.
Similarly, PwC has ploughed “significant” investment into recruitment to support My Financepartner, the technology platform it launched in September last year using Sage Live to offer cloud-based accounting.
The service offers fixed-rate subscription fees for day-to-day accounting services, handled by one of the firm’s Belfast team. Locally, the firm has a network of finance partners around the UK, who deliver advice when needed.
Tony Price, partner at PwC and My Financepartner lead says it is an example of how the firm capitalise on providing a “service level that wasn’t really available without technology.”
To date, it has attracted 120 clients. “You could say, ‘well some competitors have 2,000 clients’, but they’re not delivering the same service level we’re delivering,” he says.
O’Hanlon, EY’s senior audit partner and south market segment leader, says the firm uses technology to create platforms that provide cost effective services that add value to the client but it won’t “replace the personal service that is at the heart of making sure you really bring the best of all services to a client at really different stages of the growth cycle”.
Nevertheless, technology is proving a game-changer for professional services. From revolutionising audit at the sharp end of the market, the advancement of technology has created a cloud service for small clients at the opposite end of the market that simply didn’t exist before.
“The SME market, for a lot of the big firms, looks like virgin territory,” says PwC’s Price.
“Like all businesses, we look at what our business is going to look at in five, ten, 15 years’ time,” he adds. “I think the universal acceptance of the profession is it’s going to look different. The services we provide to clients, how we service those clients, will all change.”
What technology is doing, though, is making smaller accountancy practices sit up and take note, explain’s Bobby Lane, partner at entrepreneurial specialist Shelley, Stock and Hutters.
“What’s happening in the market is forcing firms to look at their technology and look at the platforms and services they’re providing their clients, and it’s forcing mid-tier firms to evolve as well. It’s bringing competition, but it’s also bringing improvements to service provision.”
KPMG’s McDonald agrees there has been a reaction with mid-tier firms starting to look at similar solutions, and the Big Four doing similar things to varying degrees, but warns that advancement in cloud technology could open up the market to new competitors.
“Eventually, what we might find is businesses that aren’t even in the accountancy profession will start to look at solutions. The more these become technology enabled, the less there’ll be the need for traditional accountancy skills. I think there’s the realisation the world is changing.”
This may be the shape of the future, but cloud can only do so much. All the firms emphasise the importance of the ‘real world’ elements of their SME services and it is here that Lane, like many smaller practitioners, believes the mid-tier firm has an advantage.
“If they don’t start seeing the businesses that are growing and going to be the next stars of the future, they may say, ‘this isn’t a core market for us and it’s not a main focus’,” he says. “I don’t believe those big firms are set-up to service SMEs.
Lane claims SSH has clients coming through the door that have dipped their toe into Big Four waters and decided what was on offer is not for them. With that in mind, he says there will always be the opportunity for mid-tier practices to pick up work “if they’re providing the correct services at a reasonable price”.
We look back on the journey so far to tax digitalisation, examining the government’s digital objectives and industry concerns, and explore the key issues for businesses over the next three years
Stephen Franklyn of Lithium Systems discusses why accountancy firms should prioritise cyber security and how they can take steps to protect both data and their reputation
Gavin Disney-May, chairman of MyFirmsApp, compares technological developments and their take up by accountants in the UK and in America
Following recent issues with HMRC’s personal tax computation software, Brian Palmer of the AAT questions whether the government’s implementation timeframe for Making Tax Digital is realistic