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Future Ready SMPs
The document outlines a guide to practice management for small and medium-sized practices (SMPs), organized into eight modules covering topics such as strategic planning, client relationship management, and technology implementation. Key implications for SMPs include specialization, networking, and adapting pricing strategies, particularly towards value-based models. It emphasizes the necessity for SMPs to embrace technological changes and enhance their service offerings to remain competitive in a rapidly evolving marketplace.
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Future Ready SMPs
- 1. Page 1 |Confidential and Proprietary Information EMPOWERING ASIA’S SMALL & MEDIUM BUSINESS HUB Robyn Erskine SMP Committee Member Future-Ready SMPs CA Sri Lanka-SAFA-IFAC SMP Regional Forum January 26, 2016
- 2. Page 2 |Confidential and Proprietary Information Practice Management—General • The SMP has developed resources to help SMPs in their practice management activities • The main resource is the Guide to Practice Management for Small- and Medium- Sized Practices • Other resources – Practice Management section on the Gateway: www.ifac.org/Gateway
- 3. Page 3 |Confidential and Proprietary Information Guide to Practice Management for SMPs • Organized into eight stand-alone modules – 1) Planning for your firm • Business and strategic planning processes & policies for development and implementation – 2) Practice Models and networks • Structural considerations and models, profit sharing and use of networks – 3) Building and growing your firm • Building a business advisory practice, coping with regulation and developing a firm culture
- 4. Page 4 |Confidential and Proprietary Information Guide to Practice Management for SMPs – 4) People power: Developing a people strategy • Leadership roles, staff retention, motivation and training – 5) Technology and e-business • Effective selection, implementation and management of tech – 6) Client relationship management • Development and ongoing maintenance of client relationships – 7) Risk Management • Framework for identifying, evaluating and acting on risks – 8) Succession planning • Valuation and pricing, mergers, internal and external buyouts
- 5. Page 5 |Confidential and Proprietary Information Implications for SMPs—Practice Management I • Specialization/niche – Develop capability to offer and market new services – Choose fields where firm has high degree of industry and/or technical understanding – Choose fields big enough to justify spending on marketing and gaining specialist knowledge – Consider offering your firm as an adviser to second-tier firms, whose clients want top-tier specialist expertise • Networking – Forge alliances/network with other practices
- 6. Page 6 |Confidential and Proprietary Information Implications for SMPs—Practice Management II • Pricing – Consider value over time-based – 77% Gateway poll respondents said it will be the pricing strategy of the future • Invest in people – Develop technical and soft skills (branding, marketing, selling, negotiating, etc.) • Marketing – Use social media (e.g., Twitter, Facebook, LinkedIn)
- 7. Page 7 |Confidential and Proprietary Information Opportunity, Threat and Challenge • Technology is part of step change in accounting • Technology = opportunity – the future of practice – Cloud computing can reduce costs and increase agility • Technology = threat – commoditization, DIY – Parliment of New South Wales Report – Accounting Clerks have a 94.8% probability of computerization • Challenge is how to implement technological change – Concerns over cyber-security Technology Developments I
- 8. Page 8 |Confidential and Proprietary Information Opportunities Presented by Technological Change • Profitable outsourced client accounting services (CAS) • Expand geographical scope • Real-time round the clock service • Time and resource available for analysis and advice • Rapid change and increasing complexity are driving up demand from clients for outsourced accounting services Technology Developments II
- 9. Page 9 |Confidential and Proprietary Information • The CPA of the Future” Dr. James Canton – Whitepaper sponsored by CPA.com • The business environment will be characterized by “unprecedented, massive, and highly accelerated change” through 2025 • Marketplace: innovation-driven, complex, always on, hyper-competitive, mobile, globally-connected • Survey of accounting firms: – 90% believe the digital future is rapidly approaching – 8% believe the CPA profession is future ready today Future Ready SMPs—Dr. James Canton
- 10. Page 10 |Confidential and Proprietary Information • What services to provide? – non-audit services (compilations, review, AUP), advisory (corporate, tax, business development) and data (analysis and implications) • How to render services? – embrace IT (cloud, analytics), forge alliances/collaborate, manage talent and change pricing/marketing model Future Ready SMPs—What and How?
- 11. Page 11 |Confidential and Proprietary Information References—Practice Management I • Attracting and Retaining New Talent: The Case for SMPs http://www.ifac.org/global-knowledge-gateway/practice- management/discussion/attracting-and-retaining-new-talent-case • Perspectives on Strengthening Small- and Medium-Sized Practices (SMPs): Parts Eight and Nine http://www.ifac.org/global-knowledge-gateway/practice- management/discussion/perspectives-strengthening-small-and-mediu-3 • Relevant Service Offerings—Practice of the Future (Part 1) http://www.ifac.org/global-knowledge-gateway/practice- management/discussion/relevant-service-offerings-practice-future • Imagine Tomorrow: A New World for Accountants–Part One: Your Visions http://www.ifac.org/global-knowledge-gateway/performance-financial- management/discussion/imagine-tomorrow-new-world • Is Your Accounting Firm Ready? http://www.ifac.org/global-knowledge- gateway/practice-management/discussion/your-accounting-firm-ready
- 12. Page 12 |Confidential and Proprietary Information References—Practice Management II • Guide to Practice Management for Small- and Medium-Sized Practices, 3e (incl. companion manual): https://www.ifac.org/publications-resources/guide- practice-management-small-and-medium-sized-practices • Good Practice Checklist for Small Business, 2e: www.ifac.org/publications-resources/good-practice-checklist-small-business • How to Build Your Business Advisory Practice article: www.ifac.org/publications- resources/how-build-your-business-advisory-practice • 7 Tips for Accountants on Supporting the Globalization of Small Business article: www.ifac.org/news-events/2013-08/7-tips-accountants-supporting-globalization- small-business • Social Media Marketing May Be the Key to Practice Profitability article: www.ifac.org/news-events/2013-10/social-media-marketing-may-be-key-practice- profitability • Tomorrow’s Firm and the Role of Value Pricing: IFAC Interview with Ronald J. Baker article: www.ifac.org/news-events/2013-02/tomorrow-s-firm-and-role-value- pricing
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Editor's Notes
- #3 Guide to Practice Management: Organized into eight stand-alone modules, the Guide provides SMPs with knowledge of practice management principles and best practice guidance on a whole range of practice management topics including: Planning, practice models and networks Building and growing your firm Developing a people strategy Technology and e-business Client relationship management Risk management, and Succession planning The SMP Committee are planning to update the Guide in 2016.
- #4 Guide to Practice Management: Organized into eight stand-alone modules, the Guide provides SMPs with knowledge of practice management principles and best practice guidance on a whole range of practice management topics. Planning for your firm The essential ingredient for success is for every firm to know its own strategy—the path that the partners and employees wish to travel. There is not necessarily a single right or wrong direction for a public accounting firm. Successful firms can be highly specialized or general, focusing on transaction or traditional accounting services or high-end advisory services. Module 1 examines the business and strategic planning processes and the more detailed policies that govern the development and implementation of the strategic plan within your firm. Practice models and networks If an accounting firm is built on a solid foundation of good decision-making, ethical and efficient processes, and a balanced team of committed leaders, it can be confident about its long-term future. Module 2 looks at the structural considerations inherent in owning or running an accounting firm, and the various models available. It includes examination of profit sharing and decision making within a firm and the use of networks to add value and grow profitability. Building and growing your firm Module 3 expands on the themes covered in Modules 1 and 2 by exploring in more depth the issues of developing a growth strategy, building a business advisory practice, coping with increased regulation and competition, pricing, marketing and developing a firm culture.
- #5 People power: Developing a people strategy The degree to which your firm can provide good service and be successful is determined by the caliber of your staff and your leadership. Module 4 examines key elements that will play a pivotal role in achieving your firm’s objectives—people. This module explores your role as a leader as well as the staffing issues that have to be addressed as your firm grows, including your firm’s ability to attract, retain, motivate, and train its employees. Technology and e-business In a climate of ongoing change, increased regulation and the emergence of global reporting systems, it is even more critical for firms to adopt best practice in respect to emerging technologies such as social media, smartphones and cloud computing. Module 5 examines the increasing role technology plays in the success of an accounting firm. Effective selection, implementation and management of technologies, as well as training employees to use these tools, are fundamental to the success of any firm. Client relationship management Strong and effective client relationships are the backbone of a successful accounting firm. The relationships accountants have with their clients is fundamental to the value of the accountancy firm. Increased competition demands that firms maintain and enhance client relationships. Increased regulation places more importance than ever on knowing your clients. Module 6 examines the development and ongoing maintenance of client relationships, and strategies to improve and cement your client relations including networks, referrals and other alliances. Risk management The concept of risk is familiar to practitioners. However, the issues of risk and risk management have increased in importance as the number and size of legal claims have increased over the years. Module 7 explores risk management and the specific impact it has on practice life. It provides a framework for identifying, evaluating, and acting on risks within a firm. It discusses ethical issues and safeguards which can be used to deal with ethical threats, the role of quality control systems, and additional risk mitigation such as insurance. Succession planning As professional accountants age, their thoughts inevitably turn to the value of their assets within a firm and their exit strategies from their firm and, ultimately, from the accountancy profession. Module 8 examines the importance of a succession plan that allows for the orderly exit of the practitioners, and the strategies that can be implemented to become succession ready. It includes discussion on valuation and pricing, and options for consolidations, mergers and internal and external buyouts.
- #6 The accountants role (as adviser, mentor, and coach) would be to work with “the businesses” rather than be mere one stop shops. This new role requires flexibility and an understanding of the context and cultural environment of the SME. Niche Focus on a specific industry sector or field of accountancy. Develop accounting specialisms linked for example to the music industry or environmental legislation. Networking Limited ability of SMPs to provide a full range of specialist accountancy services, it is important to become part of a high quality referral network. Some SMPs are already very active users of a trusted referral network. This is not universal and some did not actively refer clients for fear of loss of control or reputation. Firms have been developing networks and cooperating with other accountants and other professionals such as lawyers, corporate financial advisers, tax experts, executive and independent non-executive directors of listed companies, chartered secretaries and qualified valuers.
- #7 Pricing Ron Baker – Value pricing sets prices primarily, but not exclusively on the value to the customer rather than on the cost of the service or historical prices. Based on Tomorrow’s Firm and the Role of Value Pricing, Ronald J. Baker. For example, in the US increasing numbers of accounting practices are adopting Value Pricing over billing by the hour—both to better align their and their client’s interests and to avoid commoditizing their services. In a recent poll on the Global Knowledge Gateway 77% of respondents said it was likely or very likely that Value Pricing would be the pricing strategy of the future. While the results may not be globally representative, they indicate Value Pricing's growing popularity. People Staff are most valuable asset of professional services firm Key to firm success where clients met face to face (professions) Becoming more important than technical skills Marketing Build expertise and utilize website, brochures etc. Use social media – see Article “Social Media Marketing May Be the Key to Practice Profitability”.
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- #10 Groundbreaking new research from Dr. James Canton highlights the relentless pace of change and disruption in business and accounting. This change and disruption will likely transform how we sell, market, communicate, collaborate, innovate, train and educate. Dr. Canton’s “fast future” is characterized by speed, complexity, risk, change, and surprise. He described the marketplace of the future – on steroids - and the successful enterprise of the future. Much of this applies both to our clients as well as practices themselves. He advised us to nurture innovation, and reward experimenting with and getting others to experiment. Research, sponsored by CPA.com—a subsidiary of the American Institute of CPAs (AICPA), released in a whitepaper titled "The CPA of the Future." The research posed some searching questions of accountants working in practice. How ready for the future are we as a profession? How ready are we to understand, guide, and prepare our clients for the fast future that is emerging? What makes up the future readiness that could make a difference? What factors do we need to develop to increase future readiness? The paper outlines a number of fascinating, sometimes surprising, findings. First is that the business environment for CPAs and their clients will be characterized by “unprecedented, massive, and highly accelerated change” through 2025. Other more specific findings from the survey of accounting firms include the following: 82 percent need to better understand innovation; 80 percent have concerns about recruitment to meet future needs; 90 percent believe the digital future is rapidly approaching; and 8 percent believe the CPA profession is future ready today.
- #11 So what do SMPs need to do, or at least seriously consider doing, to be ready for this challenging future? SMPs need to consider what they do and how they do it. In other words offer different services and manage their practices differently. First offer relevant services – to help SMEs build and innovate. Services may differ to what we have traditionally offered. Audit has slipped away as the bread and butter offering to SMEs. In their place we have other services, such as reviews, compilations, and agreed-upon procedures, and advisory, a fast growing area for larger firms. Second SMPs need to look at how they render their services that is, manage their practices. For example they need to consider how best they can leverage IT, forge alliances and collaborate, manage talent, and use new pricing model. Talent is arguably most important. We need to attract, retain, nurture and enable top talent. Words of advice from the futurist Dr. James Canton on how we can make ourselves and accounting firms future ready? Get in synch with marketplace trends that will shape future markets; Understand emerging innovation faster; Create a competitive talent strategy; and Embrace globalization opportunities. Please read more about Canton’s advice in the article ‘Is Your Accounting Firm Ready?’ on IFAC Global Knowledge Gateway.