The biggest challenge facing the accounting profession is the vast technological change coming from cloud technology. This means that all firms, but particularly accountants, will have to adapt to this 21st-century phenomenon. If not, like so many industries, part of their business will be lost, and they will be less efficient and less profitable as a result.
Compliance work diminishes as clients embrace cloud technology, completing it at lower cost and without the drudgery leavings accounting firms with a diminishing pool of commoditised work, with the consequent downward price spiral becoming an increasing concern.
Historically many simple services have been shrouded in mystery, making it essential to access them via a specialist, which can now be easily performed by anyone. A great example is “Company Formation” which historically would have been performed by a specialist, who would, in turn, sell his services to accountants, who then sold the service on to clients. The cost to form a company could typically cost anything between £250 and £1000 to form and take several weeks to do, whereas now, anyone with £25 and five minutes to spare on the internet can immediately form a company.
Embracing The Cloud
But this “Cloud Technology ” has a very precious silver lining for accounting firms who are prepared to embrace it, to sell a wider range of added value services which leverages the inherent abilities and knowledge that is already present within firms.
Whilst the Cloud is an enabling technology which performs the mundane and mechanical aspects of work, that is often only half of the task. For more complex tasks, the cloud acts as the plumbing bringing together all the different elements, but the outputs still need interpretation. Accounts packages enable users to create accounts that balance, and are accompanied by beautiful dashboards and graphs, but do not provide intelligent analysis based on skill and experience.
At ProForecast we have built an amazing forecasting tool that is sophisticated, easy to use and enables complex business models to be built in a short space of time with minimal effort. The real beauty though is that complex “What If” technology is built into the DNA enabling users to easily model multiple scenarios and test multiple business strategies. This gives accounting professionals the opportunity to exercise their skill sets to interpret the outputs and effectively become a virtual finance director. Clearly, this adds value, enabling firms to substantially increase charge out rates.
So for those accountants who embrace the cloud, it is clear that there is going to be a huge increase in the value of advisory work. However, in a recent survey involving 32 suppliers who, between them, have over 14,000 accountancy firm clients, it was found that the five biggest challenges that they face in adopting cloud technology are:
Fear of not being able to correctly advise clients – This is something that is most relevant to those new practices that are starting up and are scared that they don’t know everything. If they have a potential new client come to them and ask for a service and they don’t know how to best to do it, they could potentially lose this person’s business.
Fear of losing clients – This can be caused by several diverse ways by taking on too much work, failing to keep promises. If the accountants could advise the clients on the forecasts and organise quarterly meetings to discuss the progress or potential directions for future growth, it would really allow the clients to be happy with the service because of the extra value your adding. Also, if they had regular meetings scheduled there would be the obvious additional charge, bringing additional revenue into the accountant’s practice.
Fear of the big clients leaving for different practice’s– If the practices can advise the companies on a month by month basis they wouldn’t want to leave because there is no guarantee they would be able to get the service from all accountants.
Fear of not being able to differentiate their service – what sets them apart from the next 1000 accountants? They need to be able to differentiate from all the other accountancy firms in the area.
Fear of a fees race to the bottom – As cloud technology makes it easier for clients to do their own books, fees are under pressure
As one respondent said “Cloud technologies may be commoditizing tasks such as bookkeeping, invoicing and bank reconciliation, but this is a good thing. Your real value as an accountant lies in the advice you offer on top of your technical expertise”
In Conclusion, for those individuals and practices prepared to embrace Cloud Technology, there is no need to fear the future, but a huge opportunity to add value and increase fee income.
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