Where is the Accounting industry heading and is your job safe and is your accounting practice safe.
We are heading into head winds and we need to be prepared.
The threat will be coming from 2 areas:
- Technology (Artificial Intelligence and Blockchain) will reduce the demand for “grinding” and therefore the number of staff doing “grinding work.”
In 1978 when I was at my first job we needed 15 accountants to manage $1m (equivalent) in fees and a typist per every 2 accountants (7 typist per 15 accountants)
Than with the discovery of desktop software such as MYOB it went to 9 Accountants per $1m in fees and around 3 typist/secretary
Today it’s 5 accountants per $1million in fees with no typist/secretary.
Cloud Accounting is here and Artificial Intelligence and Blockchain is coming and will threaten accounting jobs into the future.
- Competition (fees to clients are coming down due to competitors who are embracing technology and outsourcing )
Our clients have received various pamphlets/offers over the last 18 month period from competitors to prepare their SMSF for $800.
Over the next few years this will start to apply across all other services such as company tax returns etc as competitors who embrace technology and outsourcing are able to offer fees to our clients at a 50% discount to what we are charging.
Naturally it’s not fees charged that’s important but maintaining our margins that’s important.
I have often said that it’s better to charge our clients $3,000 and make a margin of $1,000 (and win market share) than it is to charge them $5,000 with a margin of $1,000 (and lose market share)
It’s not the fee charged but the margin made.
If your fee is low enough (with a good margin) then you will not only keep the client but you will get growth. The lower the price the bigger the market share.
If you haven’t grown over the last few years you are too expensive.
We need to be ahead of the game to ensure we not only survive but we thrive for the sake of all concerned: Staff, clients, management and shareholders.
To achieve the above we need to ensure that we manage our Practices efficiently and be ahead of the game and take our opportunities.
Poor management does tremendous damage to all concerned.
- Clients get over charged which results in zero growth or stagnation of the practice due to being too expensive.
- Stagnation of Staff wages because there is not enough money to go around. Artificial Intelligence will make grinding obsolete.
- Tremendous pressure on Management as they are squeezed in the middle between client’s fees coming down and overheads (such as wages) going up.
- Shareholders gets a poor return on investment due to poor management. Many accounting firms make very poor profit albeit they may have good turnover.
Efficient management Action:
- Run Efficient teams with the right people are doing the right work, at the right price.
No longer can badly managed accounting firms get away with using a “high cost person” (due to laziness) to prepare a “low cost product” (Bookkeeping/BAS/Individual tax return/admin) and pass our poor, inefficient and lazy management onto our clients in the form of higher prices.
As compliance fees become more commoditised our Outsourced teams become a significant part of moving into the new world of lower fees and the “Ideal Team Structure”
Without Outsourcing you won’t be able to compete with lower fees to your clients and provide wage increases to your Australian staff.
Without technology (Cloud software like Xero and Receipt Bank) you won’t be able to use Outsourcing.
Use the “Ideal Team Flowchart”
The industries that have reduced their prices over time succeed and prosper and the industries who have increased their fees over time have gone under.
(a) Cars, mobile phones, TV and electronics etc etc have all come down in price over time and are doing very well.
(b) Kodak, Nokia, Blockbuster, Borders, Polaroid, Minolta, Wang, Compaq etc are examples of Companies who kept increasing their prices over time, became complacent and did not embrace technology and are all no longer here today.
- Technology. Embrace technology like Receipt Bank, Xero and Practice Ignition etc to compete competitively. Those who don’t will disappear.
If they don’t disappear, at the very least, they won’t make any money, as overheads (such as wages) keeps going up and the clients and competitors puts pressure on “client fees” to come down.
Feel free to pass this to your team as you see fit.
P.S. Whenever you’re ready… here are 4 ways we can help you grow your Accounting or Bookkeeping business:
1. Grab a free copy of our book – Accountants 20-Hour Workweek
It’s the blueprint to structure, staff and scale your firm whilst dramatically reducing your work hours. — Click Here
2. Join the Wize WaterCooler and connect with other Accountants who are scaling too
It’s our new Facebook community where business-minded Accountants and Bookkeepers learn to build a firm that runs without them. — Click Here
3. Join our new WizePulse Implementation Program
We’re putting together a new mentoring case study group this month. If you’d like to get the plan, tools and advice from the Wize Mentors to scale your firm… just send us a message with the word “Pulse” – Click Here
4. Work with the Wize Guys privately
If you’d like to work directly with the Wize Mentor team to take you from stuck to scale…just send us a message with the word “Growth”… tell us a little about your firm and what you’d like help with, and we’ll get you all the details! – Click Here