We live in interesting times, but there is no denying disruption over the past 20 years since the internet and email burst onto the scene. Uber, Airbnb and Xero have been around for over a decade, and yet at the same time we still have rampant use of desktop bookkeeping and accounting software here in Australia.
A little over a year ago an article indicated collaborative consumption is changing the way we live, and that means professional services such as consultancies, financial advisers, legal services, and HR consultants. And of course professional services such as personal loans, mortgages, and international money transfers. And yet whilst the fuse has been lit on these changes, it’s still a long burn for change to take effect in the Australian accounting industry.
Speaking of HR consultants, there’s been a recent move for Australian companies to utilise the services of Philippines based service providers who operate on the “seat fee” model. These models have become interesting for Australian accountants for several reasons including cost, convenience and variety. The main reason, and the one that’s going to be the hardest thing to change behavior around: Accountants still think they need to hire (own) resources because it provides convenience, and choice, and ownership.
In the firm of the future (we keep being told), resources should be engaged as required, and employees may be better engaged as contractors. In cases where this happens, contractors are engaged to provide a result, and not time/billing relationships. That being the case for the future of accounting, then the Philippines HR consultants/firms are on borrowed time with low barriers to entry, and need to quickly move up the food chain to provide trained resources offering solutions. We’ve already seen pressure on the per seat fee of these providers with last year showing the per seat fee down to sub $200 for one Philippines provider.
At the same time the pressure is on for change as the younger accountants aren’t willing to buy into these older models of ownership. CPA Australia’s data which shows the average age of members going out on their own dropping from mid-40s back in 2000 to early to mid-30s in 2017. The knowledge acquired to operate a firm is now learnt/developed in a shorter time period than before. And it would seem to be in with the new and out with the old: old systems, old business models (partnership/equity), old concepts of ownership of clients which can be sold and not really serviced, and old concepts of resource engagement. If these business models don’t suit accountants heading out on their own, then newer business models and newer systems will step into the gap to fill the void.
In a presentation on Innovation and digital disruption in professional services, it was noted that 66% of SME’s would replace their accountant by using cloud services for the same work, (please don’t tell us compliance is alive and well!!), and 50% of SME’s would change accountants if their accountant didn’t embrace a cloud offering. Included in the tasks that can be automated and replaced by software are: manual data entry, bookkeeping, year end financial reporting, BAS lodgements, Payroll and financial analysis.
Certainly the technology is there to quickly create a new accounting company. just need a laptop and internet connection to start a professional services practice. At the same time, with labour force disruption a lot of the grunt work and back of office can be outsourced overseas so accountants can be more customer facing while producing work.
Deloitte Private has an 18,000 strong Indian workforce doing tax and financial compliance, along with administration, business development and marketing. And of this 3,000 are dedicated to the Australian offices of Deloitte. This workforce will eventually move to higher value added services.
And there is certainly no shortage of service providers keen to provide software and systems to fill the (perceived or imagined) gap in how to sell, how to market and how to create these businesses. Some of these companies even offer systems to manage compliance, hence creating friction in the industry as it’s difficult to sell a system for something that is being commoditised, automated and offshored. These compliance systems salesman are out and about, and very loud. For these salesman the sun is setting on their industry and it is definitely PM if not approaching sunset.
And more entrepreneurialism being shown in this internet age means newer technology is being released in never ending waves at a much quicker rate. But they do have competitive advantages in that they adapt quickly, and keep coming back in better releases.
It now seems to be a case of build it and they will come, and this is something being embraced by younger accountants as they push out into their own firms.