Accounting is falling behind other professional services – here’s how it can catch up

Accounting is falling behind other professional services - here's how it can catch up

Tim Wakeford of Workday says that accounting is behind other professional services when it comes to innovation, but there are ways the sector can take control and embrace the changes taking place

Accounting is falling behind other professional services – here’s how it can catch up

Digital disruption is sweeping across the professional services industry, and accounting firms are not being spared. While accounting is a relatively stable sector in the overall professional services industry, which has experienced robust growth for several years, the landscape is changing quickly. Changing customer behaviour, emerging technologies, as well as the need for transformational services and delivery models, are creating dramatic shifts for businesses. In particular, expanding their offerings to include more consultative and advisory services, is requiring accounting firms to recruit different skill sets and often gives rise to the need to upskill staff.

The challenge for accounting is it’s struggling with the pace of change. Service Performance Insight (SPI), a global research and consulting organisation, compiled some troubling data in a recent report. This report showed that the majority of the key performance indicators for the accounting industry lag behind the rest of the professional services industry. In particular, the results highlight significant issues with operational efficiency, revenue leakage and retention. All areas that need to be explored and tackled if the accounting industry is to catch-up with the digital and cultural standards of its peers.

With this in mind, here are a few ways accounting firms can begin to move in the right direction.

Re-assess business practices

Today, many customers are turning to automated technology as it relates to accounting. Having these alternatives available puts them in the driving seat. And, in order for firms to keep their focus on profitability, they need insights into their own business practices, such as efficiency and billing.

The accounting sector has a tendency to over-manage detailed transactions – such as work-in-progress and revenue – with aggressive write-downs and charge adjustments in its billing practices. In fact, many firms still bill based on a rack or gross rate, but depend on back-end adjustments to get the figures down to an invoice the customer will accept. In many ways, this is inevitable given that accountants are driven hard to bill, while partners and leaders are pushed to make manual adjustments, so that their firms will be able to meet rising customer expectations.

Although it is understandable that firms should want to achieve both profitability and customer satisfaction, these billing practices will not provide them with the foundational data they need to plan and gain insight into the effectiveness of their operations.

Businesses who want to get a more accurate look at their operations, and the resulting growth opportunities, must consider weaning themselves off of discounted or net rates and instead scope project work based on hours dedicated and attach realistic rates to these. They must also pay careful attention to project overruns as well as anything that’s being written off and why.

Companies that begin to implement adjustments such as these stand a far better chance of effectively tackling operational efficiency challenges, such as reducing project overruns, which are currently 25% more than the cross-industry average. As well as resolving revenue leakage caused by error-prone invoices (accounting has 18% more revenue leakage than average) and bolstering revenue (revenue per employee in accounting is 10% lower than average).

Put people first

As automation and other technologies eliminate certain tasks, the majority of work carried out by humans will focus on deep advisory expertise. Combine this fact with the knowledge that this consultancy is what will create lasting customer relationships and it’s clear that attaining and retaining a skilled, personable team is what will differentiate one firm from another.

To retain talent in a sector that has famously high attrition rates – the five-year industry average hovers above 17% – it’s vital that accountancy firms consistently check the pulse of their employee base. For example, at Workday we survey our employees every Friday with two quick questions relating to their work, their managers, or their overall employee experience. By doing this, we can identify what employees would like to experience more or less of – for instance, training.

Regularly checking in with employees will also help businesses demonstrate that they value and want to engage with staff, generating broader business benefits. According to an Accenture report on the employee experience, companies with highly engaged workforces are 21% more profitable than those with poor engagement. In other words, it pays to engage, develop, and empower people. The firms that don’t will cede ground to competitors, or automation.

Only embrace technology that will deliver a strategic advantage

Technology can deliver significant competitive advantages for companies but only if the innovations implemented are appropriate for their specific business needs.

Instead of being swept up in the hype of the latest solution on the market, companies should consider what the pressures on their business are and what needs to change now. Having an end-point strategy is wise; however companies need to start by focusing on the first 18 months.

During this process they should consider whether there are any emerging technologies that could  help them transform their entire business. For instance, whether there’s a chance to leverage learning or teaching technology for not only internal operational improvement but also external customer opportunities.

Although companies shouldn’t just introduce the latest tech for the sake of it, high-impact technologies must be factored into their strategy – cloud and machine learning are key examples. Cloud can add fluidity to internal business processes by making it easy to make changes according to needs, while machine learning facilitates expense automation, anomaly detection analysis, and business process framework automation freeing up employee time for more advisory roles.

In addition to considering the type of technology they want to implement, organisations must consider whether they have the knowledge and skills, as well as the culture, to embrace change. If the answer is no, it’s critical that they introduce a continuous innovation plan to help their firm move forward.

Change is happening now, so businesses must react

There’s a lot of uncertainty in the modern professional services industry, thanks to the fast pace of digital and cultural change. Accountancy can either allow itself to continue to be left behind, or turn the developments to its advantage to improve their operational efficiency, revenue leakage and retention. Re-assessing their business practices, putting people first and only embracing the technology which will deliver a strategic advantage are vital steps for businesses that want to catch-up with their counterparts in the professional services industry. But change is happening now, so the faster they take control the better.

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