Accounting firms must avoid a tunnel-visioned perspective after recording record-high industry turnover and continue to focus on culture, process and innovation, according to Julie Matheson, partner in the regulatory and professional discipline department at Kingsley Napley.
“Focusing purely on turnover is unwise for any business. It can impact on culture, which can in turn damage staff morale or create an environment where ethical issues, misconduct or mistakes can arise,” says Matheson.
“Any firm which pursues growth in turnover to the neglect of sound management practices will open itself to risk and potentially find that path unsustainable.
“It’s important to invest back in training, processes and innovation to ensure healthy industry standards are followed and that the business remains fit for the future,” she adds.
According to data from the Office for National Statistics (ONS), turnover among the UK’s accounting firms increased to £36.6bn in 2021, up 15 percent compared to the previous year – the largest revenue on record for the sector.
Matheson went on to argue that an increase in turnover should be seen as an opportunity to progress in other key areas, and must not be pursued simply in the name of profitability.
She also cited talent retention as another key area to focus on, noting that higher revenues can enable accounting firms to offer financial incentives to top performers.
However, there are other methods that industry leaders can use to retain top talent.
“The so-called Great Resignation trend has highlighted staff prize flexibility, work-life balance and employers willing to innovate and give back,” says Matheson.
“Leaders who are not addressing these issues and [not] maintaining a positive culture within their firm may well find they lose talented staff to competitors or even other industries.”
The outlook in 2022
The ONS data also showed that accounting industry turnover was keeping pace with the overall UK services sector which grew by 14.8 percent to £2.3trn in 2021.
“These stats reveal the breadth and depth of the accountancy industry in the 21st century,” said Mike Suffield, director professional insights at ACCA, pointing out that “it goes well beyond audit”.
Suffield argues that sheer demand has been responsible for the significant uptick in turnover, with the pandemic necessitating advisory services more than ever before.
“We’ve seen healthy annual results from the big accountancy firms, with robust growth due to demand linked to M&A alongside the expected bounce from a recovering economy,” he says.
“SMEs have also needed advice from their accountants over the pandemic, so this has probably added to the record-breaking results.”
He also cited audit as a key revenue driver, explaining that income has been increasing in line with a focus on enhancing quality.
His sentiments are shared by Matheson’s analysis, who argues that the sector “can be fairly resilient” in times of economic crisis.
“Project work often relies on change, be it good or bad change,” Matheson says. “Change drives revenues and consultancy arms of accountancy firms will have benefitted from clients looking for advice on managing their business in the uncertain times of the pandemic.”
Audit is also a critical area for Matheson in rationalising the rise in revenue. She noted that the legal requirement for audit means that fee income is guaranteed, and that fees themselves may have expanded during the pandemic due to heightened risk.