2016 – ACCOUNTING PRACTITIONERS FACING THE BRINK – MAJOR DECISION TIME!

Time to decide

I recently received a very strongly worded email from a practitioner who complained that my views as to the demise of compliance work in accounting firms was completely wrong! I replied explaining that I have never held or expressed that view.

So long as we have politicians there will always be compliance work and we have reason to get excited every time they use the word ‘reform’ of the tax system because inevitably it means more work for us and of course more tax being paid!

HOWEVER, what I have been writing about is the need for change in fully adapting to a fast changing world where there is no ‘business as usual’. The evidence is in and in this last year especially many signs have emerged of practitioners facing some very big decisions …now…not sometime in the future. This is definitely not a time to be complacent, procrastinate or be a laggard – refer Diffusion of Innovation Theory and graph below:

 Early Adopters V Laggards

As you can see from this graph 50% of businesses and practitioners tend to be ‘late’ or ‘laggards’ when it comes to innovation and change. All too often we are just too busy being busy to notice change!

One practitioner phoned me just before the Christmas break and expressed surprise that this year he expected he would have his tax lodgement program finalised by Christmas for the very first time. He was stressed though as to what to do with his staff for the next six months. A recent national survey has revealed for the first time a downturn in a number of KPI’s including revenue and has concluded that greater efficiency is now apparent in the processing of compliance work and this has created capacity. I agree completely and this is a trend that can only continue and compound.

HUGE OPPORTUNITIES

For decades I have been ‘preaching’ about the huge opportunities and potential for accounting firms and I have been referring to these as a ‘field of diamonds’, i.e., at least 20 support services that practitioners can and should be providing to clients. A recent survey carried out by ourselves discovered that many, if not most, firms have a list of services highlighted on their website but ALL of the surveyed firms agreed that they were not actually providing these services in any significant way. By far and away the bulk of revenue is earned through compliance activity (including tax, audit, super funds, etc.) with about 10% described as ‘consulting’ or ‘special’ but arising from existing compliance activity. One firm did point out that it was just part of their service to provide inter-generational asset transfer support and advice but simply viewed this as part of their ongoing year-to-year support…without any specific processes or check lists.

Over a period now of around 30 years I have specialised in providing ‘future directions and solutions’ to accounting firms’, facilitation ‘practice makeover’ workshops, acting in a role of part-time chairman of many firms and generally supporting firms in practical ways. Prior to that I was for many years a practitioner, a senior equity partner, in Australia’s largest accounting firm. With this experience I have had the opportunity to make a number of important observations and one is that simply adding on or tagging on a new service to your practice rarely works. I have personally made this mistake in my own practice. I believed strongly (and still do!) that we need to constantly reinvent ourselves and look to new possibilities. I loved succession planning so in my practice I began to develop this as a service for the firm, rolling out processes, templates, etc. and before long referrals were coming in from banks especially for large assignments – let’s face it even today very few practitioners offer this service and I suspect I was the only practitioner in my region, at the time, actually doing something about it! Subsequently I left the practice to start what was known for many years as ‘ANZAN Professionals’. As I understand matters this succession planning service was dropped by my old firm because they either didn’t want to provide it or didn’t understand it! I have heard versions of this story in many firms many times over. It is now apparent to me that unless a new service is fully embraced by the entire firm with complete processes ready to go you may well be wasting your time.

So, what to do? “When circumstances change, leaders must themselves be able to see things in new ways”They must move beyond having their two feet stuck on the ground and lift themselves above the ground to see what is unknown. This is an easy statement to make but it is psychologically very difficult to do…Steven Segal. Many accounting firms have been established in an era of stability and growth and now they find it impossible to adjust to an era of disruption and destruction.

We need only consider the current changes to providing investment advice and the time limit placed upon practitioners of 30thJune next to comply with RG146 or face a very challenging time in servicing their superannuation funds for example. Accountants also have a professional and legal duty to provide their client with all necessary information on managing business risks. This will inevitably lead to the accountant informing the client of the need for various forms of insurance, such as Director’s and Officer’s insurance. Accountants are still obligated to advise what insurance is required to mitigate those risks and why but not what specific insurance products. I suspect that there is much confusion among practitioners in this area.

WHAT NOT TO DO!

Financial Planning is an area where pressure has been applied for change and urgent change by accounting practitioners and I fear that many have missed the opportunity already.

Strategic Planning, Succession Planning, DuPont Analysis and forecasting, Advisory Boards, Outsourced (insourced!) CFO services, Waste Audits, Balanced Scorecard, Coaching and Mentoring, Human Resources (HR), Business Turnaround, Due Diligence, Purchase and Sale of Business, Mergers and Acquisitions, Valuations and much more, are all services with much potential but the biggest. Most difficult decision would be what NOT to do!

Over many years I have completed countless independent valuations for practices and overall I would suggest that returns are not as good as many practitioners believe. When ‘commercial’ adjustments are made for salaries (currently considered to be around $200,000), interest on current accounts, ROI (allowing for realistic valuations of Goodwill, etc.) ‘profit’ is reduced significantly and often does not exceed 5%. Investors in listed ASX companies have an expectation of a return of between 15-20% or the share value is marked down.

So this raises an important question in my mind – should practitioners, and I refer to ‘general’ practitioners or ‘compliance’ practitioners take on these new services at all? I refer again to my observation above re rolling out an all-of-firm supported service with fully established check lists and processes in place. One of the very positive developments in the last 2-3 decades has been the growth of specialist support services for accounting firms. As a further observation, in current times an 80/20 share of revenue seems to be a reasonably accepted share of revenue with these specialists (there are many variations of course). They get 80% for rolling out the service for your client and your keep 20% (including capital gain) effectively for the referral and you don’t have to stress about keeping up to date in yet another area of expertise, developing processes, training of staff and so on.  Medical GP’s have been doing this for decades perhaps it is time for the accounting profession to fully embrace the concept.

Many practitioners are currently anchored in everyday experience and cannot see new possibilities emerging and are taken off guard by change. Few are willing to leave their comfort zones and thus to stay in tune with the way circumstances are constantly changing. Leaving one’s comfort zone is an act of choice – a choice many practitioners are reluctant to make.

We have established Practitioner Networks across Australia and New Zealand as a means of enabling practitioners to keep up to date with change, for peer review, and for assistance in implementing change. Go to 2016 Advisory Thought Leadership Program.

The more we resist the changes that are constantly occurring, the more we marginalise ourselves, paradoxically leaving us outside of the main-stream in which change is occurring.  It is no longer possible to defer change in your practice – decisions must be made now – 2016 – and we have the systems and processes at the ready to assist you in determining your firm’s future.

I would love to receive your feedback – either leave your comments here below or email or phone me direct. Let me have your thoughts? Do you agree or disagree?

CONTACT US TODAY

David Connell, Co-Founder, ATL Network

Mobile: +61 428 00 2010  |  Office: 02 69 22 6565

Email: david.connell@atlnetwork.com.au

Accounting Practitioners – What’s your plan?

Whats your plan

The average age of Accountants in Public Practice is 58 and getting older. Less than 20% of all practitioners have a documented exit or succession plan. So while many practitioners are thinking about retirement and life after their current business few are planning for it.

Like most things in business and life planning and preparation are critical. The value of your business is probable a key to your future so it is time to take a little time focusing on NOW.

Some questions you might be asking yourself are:

  • How can I exit my business on my terms and on my timetable?
  • How can I maximise the value of my business?
  • How can I ensure financial security for my family when I exit the business?
  • How can I ensure my business goes to the party of my choice?

Consider:

  • Is succession a viable option?
  • If I just ‘put it on the market’ will there be a buyer and what would they pay?
  • How long can I keep working in my business if I cannot sell it?

The importance and need to have well structured exit plan is essential for all practitioners. For many practitioners, their business is a large part of their ‘net wealth’ so improving business value improves their future. As a business owner you want to know how to:

  • What do you need to do so it sells for more rather than less?
  • Who can help you sell your business effectively?
  • How do you exit on your terms and your timetable?

We can help. Call us 1300 79 66 27.

How many accountants will make the cut?

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A number of years ago I headed up a national network of consultants, most of whom were accountants in public practice. We ran annual conferences, and in one particular year I decided to engage a firm to carry out personality profiles for all those attending the conference. While it was hugely successful and created many great conversations, it was also notable for another reason.

Before the conference I met with the managing director of the personality profiling firm to give him some background on what we did and where our members came from. Our goal was, essentially, to develop business ‘facilitators’ and make them better business advisors as opposed to compliance accountants. As I explained this I received a look of astonishment from the MD. When I asked about his response, he explained: “I have done a lot of profiling of accountants over a number of years and this has shown me that, only 15-20% of accountants have the profile to be successful as facilitators. So either my stats are wrong or you have been successful in attracting a large portion of accountants with the ‘right’ profile into your network”.

When we did the profiles it was clear that the latter was true. Just over 90% of those who attended the conference came within the profile he nominated as being required to be an effective facilitator. While I don’t put too much faith in profiles – people can’t be put in boxes – this was a result that made me sit up and take notice.

How many accountants, I wondered, are going to be able to make it in the new world?

Technology is driving changes that are disrupting the structure of accounting practices, now and in the future. This has particularly impacted compliance services – the core work of most accounting practices. As prices drop through technology-driven price competition and as technology is able to reduce the requirement for a visit to the accountant, revenues and profits continue to drop.

In response, accountants have cut costs trying to protect profits. They’ve taken work offshore.

Others have adopted a more progressive strategy: to grow fees beyond compliance work by developing ‘value-added’ services and moving into business advisory services.

Many services of professional service firms, and the accounting profession is no different, are based on the professional adviser, being the ‘expert’, solving ‘technical problems’ for their clients. The basic communication style appropriate for this type of problem-solving is called ‘advocacy’ – the professional adviser advocates the best or the ‘right’ decision. The dentist tells you what is wrong with your teeth and what you need to do to resolve it. While you may seek a second opinion your role is to make the decision as to whether you want to go ahead or not. Apart from keeping your mouth open, you have a small role in the final solution. The dentist solves the problem for you.

Accountants who move into business advisory services encounter clients with a different type of problem – adaptive problems. Adaptive problems do not have such clearly defined solutions – what works in one organisation may not work in another; what works today may not work tomorrow. Staff loyalty is an example.

Adaptive problems are ‘evolved’ rather than ‘solved’. Once a tooth is filled the problem is solved; staff loyalty is worked on each and every day.

Adaptive problems are evolved by a facilitator who uses an inquiry conversational style.

The inquiry conversational style involves more than asking questions; it requires a different skill-set than what most accountants are used to. There is a key shift: while experts solve technical problems for their clients, clients solve adaptive problems (under the guidance of the facilitator). Adaptive problems not only require a different conversational style but also a different way of thinking about value, problem-solving and how the service is delivered.

By Warwick Cavell, Associate Advisor, ATL Network

Why networking doesn’t work for a lot of people — and the solution for it.

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For many business people and professionals, networking is their primary source of business, while many others frequently claim to put a lot of effort into networking without seeing much return. What’s going on here? Why does networking work for some people, but not for others? What about you?

Networking, according to those who are successful at doing it — meaning they actually can attribute significant new business from the activity of networking — is NOT about finding people who may be good prospects for your products and services. It’s NOT about looking for potential new clients and customers for your firm. It’s NOT!

 Successful networking is about finding and developing ongoing relationships with “advocates” — people who will refer you, recommend you and introduce you to potential buyers of your products and services. It’s “who you know who knows who you want to meet”.
Good networkers do not view the attendees they meet at an event as their prospects. That is unless an attendee says, “I should probably hire you!”
 
Remember, those attendees are at the event to grow their own business.
If anything, attendees  at networking events, conferences, cocktail parties, etc. are potential referral sources. They know hundreds perhaps even thousands
 of other people and may potentially connect you to your next prospect
and maybe even many more prospects after that.
Don’t get me wrong. I’m not saying you won’t ever find a new client or customer while you’re out there doing a bit of networking. In some cases, you will. I’m just saying it won’t happen as often as you would like. Nor am I saying that your networking associates won’t ever buy from you. Some will, but not not nearly enough of them.
The reality is the lion’s share of your future new business will NOTcome directly from the people you meet in a networking environment. It will come indirectly as a result of those people talking about how great you are to the people THEY know. This word-of-mouth advertising advertising leads to a referral — your best, most profitable source of new business.
 
So here’s the rub. If networking is not working for you it means you don’t have enough advocates out there dropping your name and bragging about youand your business totheir friends and associates.
YOU NEED MORE ADVOCATES!
Foranyone that claims to put a lot of effort into networking without seeing much return, there’s a paradigm shift that needs to take place if they’re going to get the results they’d like to get. That shift is to move from looking for “prospects” to looking for “advocates”. Meaning, if you’re focusing solely on finding your next client or customer, you’ll miss out on making a lot of valuable connections who can refer business your way.
If you have no interest in establishing relationships, and you just want to sell to the people you meet, you are missing the opportunity to discover whether or not they might be useful advocates for you and your business. It’s your loss!
To make networking work for you, think beyond this person as a client/customer for me or can this person hire me when you meet people. The person you’re talking to may not need your services but someone or several some-ones in their network may. The idea is to develop a trusting relationship with the people you meet by following up and staying in touch with them. Over time you want to ensure that they know what your products/services/solutions are, what problems they solve for what type of people and the typical results you tend to achieve for your clients. If you get the relationship right — it takes time; one cup of coffee is never enough — and you have a good enough message about your offerings (i.e. it’s easily understood), they will happily refer you and recommend you to the people they know. And if they see your product or service as a solution to their problem or the means to achieving their goal, they’ll happily buy from you too.
Remember it’s “who you know who knows who you want to meet”.
 
Think of every person you meet as someone who could refer
business your way or help you gain valuable information.
 
Build relationships with people so that they will refer
others in their networks who need your services.
 
 
DON’T MAKE THIS BIG NETWORKING MISTAKE………….
 
It’s easy to dismiss people after talking to them for 60 seconds if they don’t fit the profile of our perfect client or customer. It’s easy to think, “I should cut this conversation short and move on. This person doesn’t need what I sell.” It’s easy to forget that this person knows a lot of other people. For example, their best friend maybe the owner of a business that is an ideal prospect for your services. Instead of eliminating this person, you can build a friendly rapport with them and have a warm referral (or even hot personal introduction) to a great prospect.
AND REMEMBER THIS………….
 
One of the biggest turnoffs at networking events is people that are solely there to build their own businesses. Don’t get me wrong ― that’s a reason we’re all there! I’m talking about the person who is keen to talk about what they do and explore how you can help them but they never ask about what you do and how they may reciprocate. The most successful networking conversations are win-win, give-and-take encounters. By focusing on how you can help others, people will be drawn to you and want to help you back. It’s human nature.
Those who are successful at networking don’t
build relationships to “get”, they build them to ‘give”.
 
So think referrals, think introductions, think word-of-mouth recommendations. Think about who can make those happen for you. In other words, focus on finding and meeting potential advocates — and if you find a good prospect for your firm, that’s a bonus!
 
An advocate may be the CEO of your local chamber of commerce. S/he may be in the marketing, finance or human resources department. They might be another business owner or professional. They might be responsible for sales or business development in a non-competing company. They might be a supplier to your business. They may sit on a committee at your surf club or head up a not-for-profit. Typically, they are well-connected and well-regarded.
Advocates may not buy your product or service today, or ever, but in time they may put you in touch with numerous others who could.
One advocate can bring you 5, 10 or more clients while if you pursue one potential prospect you will often end up frustrated and with zero new sales. Successful networking requires a shift in focus from trying to meet prospects to trying to find and meet advocates.
Approaching networking in this way takes the pressure off you to “sell” and means the other person feels no pressure to “buy”. You won’t be “elevator pitching” your products and services to everyone you come into contact with, trying to make a sale. You won’t be spraying your business cards around like confetti. And you won’t be turning people off. Instead, you’ll be better received, you’ll make better connections and, ultimately, you’ll have much more success in winning new business.
If you just go looking for clients and customers, there is always that
tension that you are sizing people up and down, trying to
figure out if it is worth investing time in someone.
 
I have said it repeatedly; networking is all about building relationships. I’m not trying to directly sell my services to “potential clients”; I look at networking as attempting to build relationships with people who could refer me business. I don’t have to sell directly to people I meet because if they need my services, they’ll find find me; they’ll let me know.
Take the stress out of your conversations altogether. Rather than
looking to turn your contacts into clients, look to
turn THEIR relationships into clients.
 
The real power of networking is in
who THEY know: there are many more opportunities there.
Remember, it’s “who you know who knows who you want to meet”.
So who are your potential advocates? Think about the businesses, the people who are in regular touch with your ideal clients or customers. How will you find them and when you do find them how will you approach them and what will you say to connect with them? Then how will you go about building a relationship right with them and ensuring they understand the value you bring to the table so they will want to refer you and recommend you? It takes some work and patience, but it pays off BIG TIME!
Ron Gibson, Associate Advisor with ATL Network.
Ron can be contacted on 0413 420 538 or gonetworking@iinet.net.au