Last updated: 14 Aug 2023 09:00 Posted in: AIA
Monica Foerster, Chair IFAC Small and Medium Practices Advisory Group, examines the ever broadening horizons for the accountancy profession and how they can build a base for a thriving future.
Organisations of all sizes today find themselves in a fast paced, uncertain, complex and rapidly changing world. This undoubtedly creates challenges, but such challenges may lead to opportunities for professional accountants and accounting practices of all sizes if they can harness the knowledge and skills needed to help support organisations and clients as they navigate unprecedented environments.
The interaction of SMEs and SMPs
The role of the professional accountant not only remains relevant in such environments, but actually takes on added significance. Examples from the world of small and medium sized entities (SMEs) make this clear. Research by the International Federation of Accountants (IFAC) has found that, irrespective of jurisdiction, accountants – especially small and medium practices (SMPs) – remain the preferred advisors to SMEs.
The professional business advice which accountants provide to SMEs is associated with better performance, as demonstrated by improved rates of survival, growth, improved decision making procedures and superior financial performance.
Taking this into consideration, it is unsurprising that the remit of SMPs continues to grow. SMPs have crafted a role as trusted advisers and are being encouraged to stretch into less traditional areas, such as business development, training, employment regulation and strategic support. At the same time, the provision of core financial services remains strong, as do relationships and the eagerness for SMPs to help more and more to unlock value in SMEs.
Whilst this demonstrates that accountants hold an esteemed role for clients, and are highly respected, it is essential for the profession not to get complacent. Resting on past successes is no recipe for a thriving future; accountants must continue to make the best advantage of the unique relationships they can forge within organisations and for clients. SMPs must leverage the established trust with their clients to promote new ways they can be relevant.
Small firms can usually make faster changes in strategic direction to take advantage of new opportunities and significantly benefit from being more agile and adaptable. With the growth in digitisation and use of technology, it is clear this is something professional accountants need to keep on top of if they want to keep providing their organisations or clients optimal service.
Leveraging technology to improve your practice
When thinking about the increasing use of technology and the opportunities this may bring for SMEs, it is important for us to remember that the application of new technology is essential within accounting practices too. This not only improves efficiency and effectiveness within SMPs, but also creates the conditions for an appreciation of technology that will let people thrive and unlock their potential and aptitude.
The 2018 IFAC Global SMP Survey, which received over 6,200 responses, found that 38% of respondents view technological developments as a significant challenge (see tinyurl.com/ 3emahs8p). Technological developments significantly impact how SMPs manage their practices, as well as how they service their clients. Cloud technology has become a key part of the accounting industry with over a third of practices introducing or planning to introduce cloud options to their clients’ interface and servicing.
With cloud technology, practitioners are able to serve clients from anywhere (including other countries). There are examples of SMPs providing virtual chief financial officer (CFO) services to SMEs through the cloud, avoiding the fixed cost of a permanent finance director. IFAC recently updated the Guide to Practice Management for SMPs, which includes a new module on Leveraging Technology. This module covers developing a technology strategy, hardware and software options, technology risks, new and emerging technologies and leveraging technology for practice innovation.
Gloria Murray AIA Council Member, “In a fast-paced and ever-changing world, our organisations face challenges that we can turn into opportunities if we take the time to look. Professional accountants and accounting practices of all sizes have the potential to support and navigate unique environments through our work, unlocking great value for clients. ‘Small and medium practices (SMPs) have proven themselves to be trusted advisors. We can provide essential business advice that leads to improved performance. However, complacency is not an option. As accountants, we must be willing to embrace technology, leverage established trust, and forge exceptional relationships to thrive in the future.”
Technology for technology’s sake is not going to improve the practice. New technologies need to be part of both change management and larger strategic initiative in client engagement and relationship building. Transformation comes from more than just technology. It involves new business models, strategies, tools and training. It requires strong firm leadership as, for example, different key performance indicators (KPIs) are required as the business model needs to change.
Embedding technology
I have outlined the following five steps to help you embed technology in your practice.
The first step is to address the long term business strategy– and to look outwards and not inwards. First, think about what’s happening in the world and how it will affect the practice. There’s a wide range of environmental issues to consider when positioning your firm for the future, and technology underpins many of these issues. Think about how technology can help you to save time, lower costs, attract staff and maintain and add new clients. Second, ensure that your technology plan is aligned with the firm’s overall strategic plan, such as growth targets and service offerings. The firm may seek to harness technology developments in order to improve efficiency, client service or profitability. This could include remote access, document management and scanning, multi-screens or website improvements.
Do an environmental scan of the technology you currently have and the technology you want. Once you have determined your strategy, take the time to go to vendor events to educate yourself about the new technologies available and identify which technology is best for your strategy. Issues to consider when choosing a supplier include:
Your technology supplier should be considered a long term relationship investment.
Develop a bite-sized plan so that you can manage the process while savouring your small successes along the way. It is important to review the training, support options, costs and contract conditions as part of the decision making process.
Identify and position a passionate team member to take the reins in implementing the new initiative. Empower them to think through the process change and internal training that is required. They will need the support and guidance from the firm’s leadership to proceed with change.
Clients want to hear about developments that can save time and money. Involving clients in your new technologies and upgrades through video conferences and client portals will build confidence and trust throughout the journey. This approach creates transparency and highlights a long-term vision for all involved.
Technology in talent management Technology can play a key part in a broader solution for the attraction and retention of talent. Staff are the most valuable asset of any professional services firm. Yet globally, the results of the IFAC Global SMP Survey and much other work show that SMPs have difficulty in attracting next generation talent.
In my view, communication and soft skills are becoming more important than pure technical skills to the success of small firms. Staff interaction with clients, including face-to-face meetings, are critical to success. However, technological developments will also have an increasingly important role in impacting how firms recruit and retain talent. Practices need to think about how they re-tool their staff and train the accountants for the future through the development of new competencies for the digital economy.
Here are five technology-related initiatives for SMPs to consider:
New service offerings and digitalisation The current climate encourages innovation in many SMPs. Businesses are struggling financially in the global high inflation, and due to the high interest rate environments we see SMPs are actively seeking ways to operate more efficiently. Accounting and advisory expertise is needed more than ever. They are raising questions about government stimulus packages and adjusting their business models, as well as needing general insights on financial health and resilience. Accountants are helping current and new clients to navigate these challenges.
Since the pandemic, the global health and financial challenges have propelled many professionals and firms further into advisory services, and this need will continue – offering a great opportunity for the industry. During a crisis, SMEs need the counsel of trusted accountants who can help to challenge and advise for the future.
Technology can be a great supporting factor in such endeavours, as technological tools enable an opportunity to provide information to clients in real-time, improving efficiencies, quality and productivity. They can help to shift the focus from hindsight to foresight using data-drive insights. For example, advice could be provided on different sensitivity scenarios and best and worst case options explored for the operation and financial position in the next three, six or 12 months.
It is clear that, if it is used well, technology can support better decision making. The IFAC Global SMP Survey identifies that there are also opportunities for SMPs to offer their insights on technology in managing risk. Technology services, such as managing cyber security and IT risk, appear to be notable global trends.
SMPs need to embrace technology to better serve clients and attract and retain top talent. An IFAC survey of over 3,300 Gen Z’ers across G20 countries examined this generation’s views on public policy and the workplace (see tinyurl.com/ 4xr6h7d2). It showed that Gen Z expects that digitalisation and emerging technology will be a double-edged sword – both bringing new ways of doing things (and meaning new and more interesting jobs) but also driving the decline of traditional job roles and responsibilities. According to industry data, SMPs that embark on diversification (before digitalisation) tend to have lower productivity.
I believe that technology provides a significant opportunity for introducing added-value services to clients. Practitioners can be valued business partners for their expertise and insights from translating data into wisdom. Going forward, the higher value work will be future focused based on analysis, interpretation and insights, compared to lower value historical tasks such as inputting data, verification and conventional reporting.
Technology tools provide an opportunity to provide information to clients in real-time. For instance, visual dashboard reports can be easily and quickly generated to enable a meaningful discussion with clients on a monthly basis with current figures.
Conclusion
Now is the time for practitioners to adapt, embrace innovation and become part of the solution for their clients, and for their own future, as we enter a whole new world. I strongly believe that the unstable environments we find ourselves in mean that professional accountants must gain additional skills and deepen their knowledge of technological developments.
See the IFAC Global Knowledge Gateway for articles, videos and resources impacting the global profession. IFAC has also developed a Practice Transformation Action Plan that focuses on how SMPs can embrace change, leverage technology and manage talent.
Author biography
Monica Foerster is chair of the IFAC Small and Medium Practices Advisory Group (SMPAG) with 30 years’ experience in the accountancy profession.
"Now is the time for practitioners to adapt, embrace innovation and become part of the solution for their clients, and for their own future, as we enter a whole new world. I strongly believe that the unstable environments we find ourselves in mean that professional accountants must gain additional skills and deepen their knowledge of technological developments."
Monica Foerster, Chair IFAC Small and Medium Practices Advisory Group