In the first of a series of managing partner Q&As, Simon Michaels says BDO wants to gain share in the FTSE 350 tax advisory market
Accountancy Age: In what way has the shift to online, cloud and mobile platforms changed the nature of client relationships and how is your firm adapting to disruptive technology trends?
Simon Michaels: Technology is transforming the accountancy profession and we are investing heavily to bring these advances to our people and clients. The term ‘disruptive’ has negative connotations; it is in fact a huge opportunity for those that have the confidence to invest in the future of their offering.
Data analytics, big data, benchmarking and insight tools will continue to be a big focus for us. In a world driven by technology, investment in the digitisation our services will allow us to add even more value to clients.
In the last year, BDO has launched BDO InTouch – a new service underpinned by cloud accounting technology – and BDO Advantage – a data analytics tool – to enable clients to be better connected to business performance and turn data into meaningful information to drive profitable growth.
How do you view the growing legal service market for accountancy firms, and what is your firm’s approach to undertaking multi-disciplinary work?
The UK has a world-leading legal sector; one that we work closely with in many areas of our business. A move into providing legal services as an add-on to our client offering is not something we will be pursuing as part of our growth strategy.
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?
HMRC is clearly continuing to invest in transforming the way in which it uses technology to improve efficiencies, improve customer service levels and improve its ability to deal with complex tax issues swiftly. These office closures and the creation of the regional centres is part of that digital transformation.
Unfortunately, this is likely to lead to some disruption while that transition takes place. Some of our clients are concerned that, in the short term, there could be a further drop off in customer service levels. However, they’re assured that the short-term pain will be balanced by the long-term gain.
Supported by a robust digital platform, HMRC will be better placed to deal with complex issues and provide businesses with improved access to knowledgeable people; these are two things our clients have been calling for for some time.
To what extent have regulatory changes to the large-listed and smaller company audit markets changed your firm’s approach to undertaking audit work?
The larger company audit market has been through significant changes in the last few years. While the Competition Commission addressed some of its flaws, we have always been realistic about short-term opportunities.
It will take some time for the changes to filter through in terms of winning FTSE audit work, however we’ve seen a huge uptick in the winning of non-audit services. Tax is a great example of that; we have the fastest growing practice in the top ten accountancy firms, with revenues increasing by 20% in the last financial year, and changes to the regulatory environment have been a big contributor to that growth.
At the moment, we do business with around a third of the FTSE 350 from tax to advisory services, and want to build this up to 50% over the next five years as large companies continue to get to know us and what we can do. But our core market isn’t auditing the FTSE 350. When we look at the EU Audit Directive we see it as good news for us but we are keen to ensure that the EU regulations are proportionate and do not over-regulate the mid-market. The introduction of the £100m cap in the consultation was a good sign.
Which areas will be most important to the growth of your practice in 2016?
We expect our tax practice to continue to grow impressively. Our strengths in serving the mid-market in specialist areas such as forensics, valuations, transaction services and risk advisory will continue to provide growth opportunities for us and our clients. In addition, the power of our international network – spanning 154 countries with revenues of $7.3bn (£4.8bn) – means we’re in a market of one when it comes to serving the mid-market across the globe.
Internally, we will continue to invest in our digital platforms, with cloud accounting being a real focus for the year ahead. Attracting and retaining good people will continue to be a priority too. There is a genuine war for talent in the marketplace, and we’ve got to make sure we remain a destination of choice for talented people.