The annual 2016 Good Bad Ugly – Executive Summary Report has just been released and there is some interesting news on the Compliance front.
The Business Fitness team have pushed out some revelations contradicting the current thought that compliance is dead.
In an interesting twist this year, the report indicates that while accounting firms have introduced other services into their business offerings, compliance still seems to be the bread and butter for most firms. So compliance revenue still seems strong at 60% of a firm’s earnings (versus 76% a decade ago), and it seems some of this dilution is attributed to newly introduced revenue streams, and not so much the death of compliance.
With the global market now in reach as a result of technological advances and the cloud, getting work out the door faster and cheaper is critical. Outsourcing offerings assist with shortfalls in resources, regardless of whether deployed as a temporary or permanent measure.
This year some 39% of firms engage in outsourcing, with continued growth expected and another 5% of firms expected to use these services over the next 12 months.
Certainly outsourcing is amongst the list of things mentioned, with interestingly SMSF compliance and audit comprising a whopping 54% of services outsourced, with tax and accounting taking 17%, bookkeeping and data entry 16%, admin/pa’s 3%, marketing 1% and other 9%.
This is worth taking some time to digest. If the majority of SMSF audit (27% is being outsourced due to increased regulation and removal of Chinese walls), then SMSF compliance (27%) is the next largest outsourced service. SMSF compliance is usually outsourced by smaller firms with little inexperience in this specialist area. It could be expected this is made up of firms with sub 50 SMSF’s, which would make up the standard 2 partner firm in this report.
Looking at the 17% tax and accounting, we expect this is light due to a lack of outsourcing offerings. There are still limitations in the offshore workforce being able to provide 3-5 year experienced tax and accounting compliance staff.
Bookkeeping and data entry surprisingly sits at 16%. This low number must reflect the impact of automation and cloud on this area of outsourcing.
What is surprising is the lack of outsourced marketing (1%) and admin/PA’s (3%). It’s expected that should be mainly due to a slow uptake by accountants, though it may also be due to poor servicing by onshore/offshore outsource providers.
The challenge remains for accounting firms to develop services and offerings that are superior to the quality assistance a Google search will never yield. Whilst compliance isn’t dead, there is a continued need for Australian accounting firms to shift focus from compliance to new business streams, and outsourcing is now fast approaching the 50% tipping point.