RSS feedsRob Lambden, founder, Online 50, the forward thinker
Q: Do firms make enough of providing value added services?
A: There is a challenge to accountants to work out what services they’re going to offer. We run a service proposition workshop, which helps the practice look at what your strengths are and what is it that your clients and prospective clients need. Lots of accountants do compliance work and there is some value in that, but how do you differentiate your compliance work from somebody else’s?
Most businesses don’t understand what has to be done for compliance work; they care that it is done and that it is done to a proper standard, which is why they go to a qualified accountant. Beyond that, they don’t really care.
So you’ve got to find out what it is that your clients want and how you can differentiate yourself from other accountants by offering a service that they understand and that they can see the value in.
If you’ve given a service that they’ve had value from, there’s no reason why they shouldn’t pay.
Now, I guess the jury is still out; lots of accountants are looking at moving to regular monthly billing and agreed scope of work. There’s regular billing that goes through for that and the clients are expected to pay monthly.
If accountants are prepared to take things like this on, change the mindset of the practice into looking at regular billing, regular collecting of those debts and making sure they’re matching services to the clients’ needs.
If you’re providing services that the clients don’t understand, they are
going to resent paying for them.
So, you’ve got to break this barrier with the client; you’ve got to make your
services are relevant.
To use a phrase, you’ve got to scratch where they itch.
James Money, restructuring and recovery director at Smith & Williamson; business recovery expert
Q: Should, and can, firms build up their restructuring muscle in response to the after-effects of the credit crunch?
A: Accountants have a huge amount of skill that they probably don’t realise they’ve got and, with a little bit of assistance, can turn their hand to a degree of consultancy work under the wing of an insolvency practitioner.
There may be a large number of people who have been audit-based, but will now be learning new skills if they move into their insolvency departments. Finding good insolvency practitioners is fairly difficult at the moment, so those practices that are looking to beef up their recovery and restructuring departments are finding it quite tough because it has been a while since we last had a downturn in the economy.
There are no immediate signs of the downturn that the press, certainly, is fairly determined to predict. I think that one of the major reasons for this, which is going to apply to a lot of [firms] at the moment, is that clients in the mid-tier and the smaller practices are not exposed to the highly-leveraged and the highly speculative deals that are actually the subject of all the press talk at the moment.
Clearly, any decent practice is now looking to ask themselves, where are the particular areas that are at risk? I think everybody here is aware of the fact that a number of people involved in transaction services are taking an enforced holiday from their jobs at the moment and that corporate finance is proving to be fairly difficult.
Those practices that haven’t got all their eggs in one basket, then, with careful cash management and good provision of services to their clients, should be able to weather this particular downturn in the same way as they weathered the dot.com bust and the downturn during the early 90s.
David Thomson, MD Close Invoice Finance; financing expert
Q: What are clients’ concerns in the current tough climate and what should their accountants do for them?
A: We thought it would useful to do a proper survey of exactly what sentiment was out there in the SME sector, which we called the small business finance barometer.
The largest issue of concern, which we looked at in some detail, is the credit crunch, whatever that might mean to an SME. I think there is a vague preconception as to what that actually is in terms of how it affects the SME. Certainly, we read a lot about how it’s affecting the banking sector.
What I found really interesting was that bank charges which we’re seeing a lot about in the press, how banks are under pressure in terms of their charging was not an issue of concern, and yet the credit crunch was, so there seems to be a bit of a conflict there in terms of how they’ve interpreted that question.
What I find absolutely fascinating is that the accountants that we generally come across are very professional individuals who do a good job in the SME sector. They go out and very competently advise their clients of their options and the routes through to building a potentially successful business. And yet, as you rightly point out, behind the scenes they often struggle to look internally at some of the issues affecting their business.
Clearly, accountants are incredibly important and most of the SME sector sees them as a very good source of information, advice and guidance, both in terms of raising capital, releasing cash from within their business, and in terms of business planning.
Accountants need to be up to speed with all the potential [financing] options available to SMEs, and that’s a myriad of possibilities.
Phil Shohet, director of Kato Consultancy; practice expert
Q: Are practices helping clients without looking closely enough at how to organise their business in the wake of an economic slowdown?
A: Accountancy practices have got to get their own businesses into shape and run them as businesses. So, the first aspect of all this is getting their own internal management into shape and then looking at the problems that their own client base has got and how they might struggle in the future. Whether it’s cash generation or anything else.
Some of the warning signs have been there for some years because the less well managed practices that don’t want to be managed have got masses of lock-up, huge debtors, huge work-in-progress, and not necessarily transaction-based lock-up; this is on pure compliance work. The basic premise is that a lot of partners still don’t want to be managed, so they elect a managing partner at best, but he has no mandate to manage the practice.
Very few people in our profession have got the experience to manage their practice as a business, but there are firms that are very well managed. The owners have bought into the ethos of the practice and the view, in terms of where the business is going. I recently visited a firm where they have a quite robust insolvency side and the insolvency practice is actually helping the customers of some of their clients, some of the people that are paying very slowly to their own client base. They’re actually going in and trying to sort the clients’ clients out by asking: is there a problem?
So, there’s a domino effect; here we have the practice, here we have their clients, and here we have the customers of their clients paying very slowly and creating a horrendous cash flow problem. The firm brings in its business recovery people, two or three tiers away from the main client. That’s the thought process that’s going on in some of the better firms.
23% of firms chose insolvency as the most important service line to bloster
66% said clients going out of business was the biggest threat to their firm
45% said cashflow was their clients current biggest concern
Chaired by Kevin Reed
The seminar can be accessed at accountancyage.com/webseminars
