Just over a year ago, we were starting to learn about a strange illness that was causing people to die in a number of countries - China, Italy and then, in small numbers at first, the UK. If you Googled “challenges for public practice” back then, you’d find copious articles that outlined issues that are, in many respects, much the same as those that pertain today. Of course, the major difference is that today everything is filtered through a Covid-shaped lens… Essentially, and even if your firm has done better than most in the last year, the challenges that face most of those in public practice can be grouped into three, overlapping but distinct, areas. These are:
Business-related, endogenous challenges stemming from the pandemic.
Ongoing and increasing exogenous challenges (external, government forces).
The impact of technology on the profession.
Obviously, the extent to which these affect your business depends on the size of your firm and the areas in which you specialise. Those who are CTA/tax experts will have a different focus from those who cover more general accounting work, while firms that specialise in working with contractors have to contend with the “excitement” of IR35.
No matter where your firm is located or in which areas it specialises, the pandemic has resulted in many clients (not to mention accountants) struggling at best, or, in the worst cases, going under. A circular and cumulative downward spiral has been set in motion, resulting in practices losing clients (hands up who wants retail/hospitality clients just now?), losing money as a result, and having to lay off their own staff while not being able to/having the resources to seek to back-fill the loss of clients with new ones.
The rise in unemployment across the economy as a whole (with more to come) will continue to affect everyone. In addition, cash-flow is and will continue to be, an increasing challenge, while making provision for bad debt is already a stressful task for many public practice directors. Bearing in mind that accountants advise their clients on these issues, this ought to be an area where your knowledge and experience come to the fore, but, as we all know, the real world does not work like this…
The other area of major challenge for everyone is around working practices. This, as we shall see, dovetails with the technology challenges, but basically, it comes down to a simple question: will you change the way you previously worked and offer more flexibility and home-working, or will you follow the example of Goldman Sachs boss David Solomon, who said, about home working. “It’s not a new normal. It’s an aberration that we’re going to correct as soon as possible.”?
Add in the immense pressures on businesses to be compliant with continually changing diversity, equality, and inclusion requirements and there is a lot more to do than simply putting a sticking plaster over the wounds that have lacerated your business last year. Bear in mind that diversity and inclusion are increasingly shown to be a competitive differentiator (as well as being the right thing to do anyway), one of the benefits that accrues from them is having an enhanced corporate reputation, which in turn will help attract the top-tier talent that you are increasingly going to need in the years ahead.
Indeed, that last point is one thing which (and yes, I would say this, but it doesn’t make it wrong) is arguably the last great internal business challenge. As we know only too well at Cedar, a common problem facing the accounting sector over the last few years has been finding the right talent to sustain the growth of firms at every level of public (and private) practice. In particular, this is a concern for smaller and medium-sized firms, made even harder by the above-mentioned financial pressures so many are feeling at present. Gaining new business/clients today requires not just technically-gifted accounting professionals, but also people who understand and can deliver the highest quality of customer service – probably the single biggest difference between successful and unsuccessful public practices.
Who would want to be the Chancellor just now? No, didn’t think so. Neither would I. Unsurprisingly, Mr. Sunak is on manoeuvres to try to recoup some of the rather large sums of money spent on bailing out the economy. The plethora of loans, grants, furlough payments and other subsidies that have kept the plates spinning have all added to accountants’ responsibility and duty to advise their clients properly. To complicate things at times, as with SEISS, the government has deliberately prevented them getting involved on behalf of their clients: on other occasions, such as the introduction of the domestic reverse charge for construction or the implementation of IR35 to the private sector, public practice firms can be of great assistance. This is going to be a worrying time for contractors and many will benefit from your professional expertise.
Although the budget (March 3rd) is not expected to increase taxes massively, there are changes (a rise in corporation tax amongst others) that have been flagged and again the accountancy profession needs to be on top of this and able to react quickly to inform clients how individual changes affect them.
After the commercial upheaval of the last year, the next few years will see even more change in tax and financial regulations for both individuals and companies. Brexit, of course, brings its own set of challenges. For example, what may seem a relatively small change – the UK’s need from 1st January 2021 to become subject to its own sanction regime (the Sanctions Act) - is of particular importance for accountants, who must familiarise themselves with the new law to ensure any activity with a sanctioned country or entity remains fully compliant. Add in the changing circumstances for firms trading abroad, plus the fact that many exporters will seek to pivot their sales to the wider world if European markets are proving difficult (and will therefore want advice on tax and duties) and it’s going to be a very busy year just keeping on top of everything that emanates from government.
This is the elephant in the room. There has been a tendency for the professions at large to believe that their expensively acquired skills cannot be replaced by an algorithm. But why should accountants be immune? Well, the answer is that they probably will be – but not without embracing the power that technology brings.
Blockchain, data analytics, and far greater use of the cloud are already here and coming to your desk in the near future. The key will be knowing how to deploy AI and automation to do the heavy lifting, removing the pain from more tiresome processes to free up staff time for the bigger, most complex jobs where the human inter-relationships between accountants and clients are crucial. Technology already facilitates home-working (why didn’t we buy Zoom shares?), and I expect to see considerable developments in this arena in the years ahead. Consequently, training and upskilling are going to be an increasingly important part of personal development for the accountancy profession, if only so they can understand and evaluate the competing claims of what will be a long queue of tech vendors outsider their doors.
Similarly, there will be an increase in the recruitment of technology professionals in accountancy firms. In the States (from whence comes many practices subsequently adopted on this side of the pond), the trend toward hiring non-accounting graduates at CPA (Certified Public Accountant) practices is growing as firms seek technology specialists. There, non-accounting graduates constituted nearly one-third of all new graduate hires in public accounting in 2018, an increase of c. 11 percentage points over 2016. Here, I predict tech-savvy accountancy graduates will be in ever-greater demand and able to command a premium for their services.
Of course, the tech challenge is two-fold: not only do accountants need to get up to speed on the latest industry technology, but they also need to get their clients on board. My view is that as a result of lockdown and WFH, this will be far easier than it might otherwise have been. Firms in every sector have read the mile-high writing on the wall and realised that if they haven’t already upped the technological ante then it’s time to do so or be left behind.
The single biggest challenge?
For many, it’s keeping the plates spinning, the cash flowing and the clients happy, while somehow still finding time to lift your eyes from your computer screen and not only ponder how you can adapt and invest in technology, but actually find the time and money to do so. However, not doing so is not an option.
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