Sole Survivor: Firms failing to adapt to clients
Charting the rise of the online accountant and what it could mean for the traditional high-street practitioner
FIGURES PUBLISHED by the Office for National Statistics tell a sorry tale of death and destruction in the UK’s accountancy industry. In 2008, as the global economic downturn first began to rear its ugly face in the UK, 3,580 accountancy sector businesses failed. The following year there were 3,985 accountancy sector ‘business deaths’, 3,520 the year after and 3,360 in 2011 (figures for 2012 are not yet available). I believe that most casualties have been small high-street accountancy firms, and there are many reasons why they have collapsed.
The first is high failure rates among their clients, of course, while aggressive competition from larger rivals hasn’t helped. Inability to reduce overheads any further has also signaled the end for many small high-street accountancy firms. And while many cash-strapped small businesses have opted to look after more of their accountancy needs in-house, another factor has been the emergence of the more keenly priced online accountancy firm.
I am well aware of this, as I am the owner of one of the new breed of online accountancy business owners. I started CheapAccounting.co.uk in 2007, and the network now has 20 franchisees in England and Scotland, providing accounting services to some 1,500 businesses.
Small businesses have been demanding lower prices and better value in all areas – including accountancy. Many small firms need to minimise their costs just to survive, let alone grow. They’re now looking at their accountancy costs and asking themselves whether they could get better value. And that’s not going to change, with predictions that current economic difficulties could last for another five years or more.
Too many traditional accountants remain complacent about fees; despite losing clients, many expect to carry on pretty much as before. But I believe that it’s a case of change or die; cost-plus-based pricing models just aren’t sustainable – increasingly, the market won’t allow it. Clients expect cheaper fees and better value.
Many simple accounting tasks can be made much more efficient by clients using software, with data stored online using cloud-based solutions, available as and when the accountant requires. Business process time savings can be passed onto the client in reduced fees.
With HMRC going heavily down the online route, accountants really do need to wake up and smell the coffee. Online is the way to go and accountants need to fully and aggressively embrace technology.
It is time to look at what has happened to other businesses on the high street – many really big names, too. Times are tough and clients expect cheaper prices and better value. They’re no longer prepared to pay for their accountant’s expensive premises – we simply don’t live in that type of world any more.
Elaine Clark is a chartered accountant and MD of accountancy practice cheapaccounting.co.uk. She blogs on the issues facing smaller practices and their clients
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