The Commonwealth Bank has recently released its first edition of the Accounting Market Pulse for 2017, developed by Beaton Research + Consulting. Drawing on in-depth quantitative data gathered from 36 firms across Australia, the report takes a close look at the industry trends currently shaping the nation’s accounting firms.
While accountants continue to face challenges in an ever-changing operating landscape, the research has uncovered a renewal of confidence across the industry. In fact, 72% of firms surveyed expect their revenue for this financial year to exceed their FY16 results.
This upsurge in optimism is not only thanks to a slowly recovering marketplace, but also the initiatives put in place by firms seeking to improve efficiency, build stronger client relationships and diversify their operations.
Here are three key insights from the report.
1. Tech investments are paying off
As business conditions start to pick up, accounting firms are realising the benefits of investing in productivity and efficiency initiatives. Even as tech advances continue to disrupt all manner of professional services industries, accountants have shown a particular aptitude for embracing new digital opportunities.
For instance, three in four accounting firms are investing in a range of new technologies – from internal collaboration tools to cloud-based data-sharing solutions. This approach is now paying off, with 45% of firms reporting a return on their tech investments.
But that doesn’t mean business leaders can afford to stand still. As accountants increase their investment in innovation, it’s essential to harness the power of new technologies effectively.
Trust and understanding are central to the value accountants provide, and the next step will be to use technology to build on and deepen their client relationships. By driving efficiencies in their back-end processes, accountants can free up client-facing time to focus on offering strategic advice.
2. New revenue streams are the way forward
With outsourcing and automation on the rise, it’s no secret that accountants are facing a decline in their bread-and-butter tax and compliance work. The good news is that many firms are actively finding new ways to diversify their business and create additional revenue streams.
Shifting their focus to higher value-adding services, accountants are now building a broader offering for their clients. For many, this is the first stage of their transformation into consulting firms with multiple service lines and specialisations.
Business advice is a key area of growth for many accountants – with 61% offering these services, up from 30% in FY16. And now, almost half of firms now include wealth management and financial planning in their service offering.
Superannuation is also front of mind for many accountants, particularly in the wake of new licensing rules around the provision of SMSF advice. This is a key focus area for small firms, with 60% saying they plan to grow their business’s superannuation arm. Meanwhile, the larger firms are driving a surge in management consulting, an increasingly valuable area of activity.
3. Pricing and staffing challenges persist
While many firms are successfully adapting to the new landscape, others are still facing major hurdles when it comes to business growth. In an increasingly competitive environment, more than half of firms reported challenges in winning new business. This may be because cost-conscious clients are embracing cloud software and alternative models that allow them to trim their spending on accounting services.
The result is the steady downward pressure on pricing. Of the firms surveyed, 42% say that price negotiations with clients continue to be a significant challenge.
On the positive side, many firms are responding by revisiting their pricing models and moving away from traditional time-based billing. Forward-thinking accountants are now implementing value-based pricing structures with fixed or capped fees, or else flexible hybrid models.
But the greatest challenge reported by firms continues to be recruitment. According to the research, 13 out of 20 firms claim that finding and retaining quality staff is a serious business challenge, up from 8 in 19 firms six months ago. In an effort to reduce staff churn, larger firms are rewarding high-quality staff with non-salary benefits, such as increased workplace flexibility and professional development opportunities.
So while 2017 isn’t without challenges, it’s inspiring to see how innovative accountants are finding ways to build stronger businesses for the future.