Enhanced Practice Management & New Services
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Presentation by Giancarlo Attolini, Chair, IFAC SMP Committee at the IFAC-SAFA SMP Forum, in New Delhi, India, October 10, 2014
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Enhanced Practice Management & New Services
- 1. Enhanced Practice Management & New Services Giancarlo Attolini Chair, IFAC SMP Committee IFAC-SAFA SMP Forum New Delhi, India October 10, 2014 Page 1 | Confidential and Proprietary Information
- 2. Agenda—Expanding the range of SMPs Services Page 2 | Confidential and Proprietary Information • Practice Management • Technology Developments • Trusted Business Advisor • New Service Offerings • References
- 3. Page 3 | 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 www.ifac.org/Gateway
- 4. Implications for SMPs—Practice Management I Page 4 | Confidential and Proprietary Information • 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
- 5. Implications for SMPs—Practice Management II Page 5 | Confidential and Proprietary Information • 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)
- 6. Implications for SMPs—Practice Management III • Accounting, compilation & other non-assurance / related services (33%) is fastest growing source of revenue for practices (IFAC SMP Quick Poll 2013) Page 6 | Confidential and Proprietary Information • Opportunities – Technological advances enable practices to profitably provide outsourced accounting services – Rapid change and increasing complexity are driving up demand for outsourced accounting services
- 7. Page 7 | Confidential and Proprietary Information Technology Developments I Three Mega-Trends • Digitization (cloud computing) – Paper to paperless to boost productivity • Virtualization (systems of engagement) – Physically present to virtually present to improve market reach • Transformation (business intelligence) – Compliance provider to trusted advisor to enhance value – On-demand reporting, business analytics, dashboard graphics, target market segment benchmarking and advisory services (discussing how best to respond to revealed issues)
- 8. Page 8 | Confidential and Proprietary Information Technology Developments II Opportunity, Threat and Challenge • Technology is part of step change in accounting • Technology = opportunity – the future of practice • Technology = threat – commoditization, DIY • Challenge is how to implement technological change
- 9. 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 Page 9 | Confidential and Proprietary Information Technology Developments III
- 10. Page 10 | Confidential and Proprietary Information Technology Developments IV Digital Enablers • Help improve practice efficiency and move client interactions online • Smartphone apps – Wi-Fi Finder, Evernote, Feedly, Dropbox, Keeper, TripIt, XE Currency, Uber, PrintCentral, The World Clock, HP12C & AirServer • Video and instant messaging services – Skype, FaceTime and Google Hangout • Search engine optimization (SEO)
- 11. Page 11 | Confidential and Proprietary Information Trusted Business Advisor—What it Means • Understanding and listening to clients’ needs • Using our broad experience/expertise to help clients accomplish their goals • Creating an ongoing relationship with clients • Providing more than core accounting services
- 12. New Service Offerings—Country Examples I Page 12 | Confidential and Proprietary Information • Ireland (IFAC Board member) – “If we do not provide bookkeeping services, we encourage the client to purchase an accounts software package, then install it and get it set up and then train the client on how to use it and to take back-ups. Each year we review how they are getting on and attend their premises to tidy up, before doing a year end procedure. The “cloud” is the obvious next move for this service though it is a little cost prohibitive for now. These are all value added services which the client pays a bit more for and gets them more engaged with the financial side of their business. Equally, we are not burdened with quality control issues over low value bookkeeping services.”
- 13. New Service Offerings—Country Examples II Page 13 | Confidential and Proprietary Information • Australia (SMP Committee Member) – “We aim to become the virtual CFO. We target companies which are large enough to need planning, SWOT analyses, but not so large to have their own CFO. Our role is to facilitate, engage in your clients’ business and make an impact on their life – help them pay off their house loans, pay kids school fees, plan for retirement” • Brazil (SMP Committee Member) – “SMPs have been supplying all kinds of services related to tax and accounting issues—including complete outsourced accounting, payroll & tax. Additional services related to evaluation, financial due diligence, and outsourcing of administrative and financial routines, are also an increasing market”
- 14. New Service Offerings III—Sustainability Services • Sustainability Services Insights from IFAC SMP Quick Poll Page 14 | Confidential and Proprietary Information – Mid year 2013 • 46% of practices offer sustainability services • 27% respondents current do not offer any sustainability services but plan to in the future • May be a growth area for practices
- 15. New Service Offerings IV—Review Engagements Page 15 | Confidential and Proprietary Information • International Standard on Review Engagements (ISRE) 2400 (Revised) • The Guide to Review Engagements available on www.ifac.org/SMP
- 16. Page 16 | Confidential and Proprietary Information New Service Offerings V—AUP • Agreed-Upon Procedures (AUP) Engagements • Based on the IAASB’s ISRS 4400, Engagements to Perform Agreed-Upon Procedures Regarding Financial Information • Attractive and fast-growing service • The practitioner provides a report based on the factual findings regarding financial information—no assurance is expressed • The report is not distributed publicly—it is restricted to those parties that agreed to the procedures
- 17. Page 17 | Confidential and Proprietary Information References—Business Advisory • Gateway—embedded various topics: www.ifac.org/Gateway • The Role of SMPs in Providing Business Support to SMEs research paper: www.ifac.org/publications-resources/role-small-and-medium-practices-providing-business- support-small-and-medium-s • SMP Committee Business Advisory Interviews (Videos) IFAC YouTube Channel: www.youtube.com/user/IFACMultimedia • 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 • Sustainability: Challenges and Opportunities for SMPs and SMEs article: www.ifac.org/news-events/2013-04/sustainability-challenges-and-opportunities-smps- and-smes
- 18. Page 18 | Confidential and Proprietary Information References—Practice Management • 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 • 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
- 19. See you in Rome in November 2014 www.wcoa2014rome.com www.ifac.org
Editor's Notes
- 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 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.
- 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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- A white paper written by technology guru Dr. Geoffrey Moore, Accounting Services: Harness the Power of the Cloud, for AICPA’s subsidiary CPA2Biz lays out a road map for accounting firms to launch and grow a cloud-based outsourced accounting practice. Moore credits three mega-trends for fertilizing the field for client accounting services, a field that has proved lucrative for a number of US accounting firms. There is much more material via data-files, material that is scanned etc, and there is less paper involved. Many accounting software has built-in data authorisations etc in their ledgers etc so the need of the physical paper is diminishing. Furthermore, there are more and more SMPs who work with facebook, LinkedIn, they are almost always reachable on mobile phones/IPADs and so on and so forth.
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- Today there are countless apps available to help improve productivity and access to information - these apps help us arrange business travel, network with clients and colleagues, store and share information and more. There are over a million iOS apps in Apple’s App Store and possibly even more Android apps in Google Play. IFAC staff and fellow SMP Committee members helped compile this list of apps. It’s worth noting that their usefulness may depend upon where you are located. Wi-Fi Finder – to help you find the nearest and cheapest Wi-Fi network; Evernote – to help you take memo notes without pen, paper or post-it note; Feedly – to help you browse and share your favorite news sites and feeds; Dropbox – to help you store and share files; Keeper – to help securely manage passwords; TripIt – to help organize your travel plans; XE Currency – to help convert from one currency to another; Uber – to help get a pick-up from airport, client or hotel PrintCentral - to print from smartphone or tablet to printer The World Clock - to determine times across different time zones HP12C - to make financial calculations; and AirServer - to stream content or mirror your display from your iOS devices.
- Ireland Encourage client to purchase an accounts software package – train and help install and get it set-up. Review each year to tidy up.
- Of those providing Sustainability Services: 76% offer advisory services – accross all regions and practice size 52% offer reporting 42% offer assurance – 33% sole practitioners offer this compared to 59% of practices with 21 or more professional staff The IR result may be explained by a much more pronounced need for clients in the region for professionals’ help in this field, likely due to less means in house or to less expertise than clients in the other countries. Therefore, this kind of service may be a growing business line in the development of practices in the region.
- ISRE 2400 (Revised) was issued in September 2012 and comes into effect for periods ending on or after December 31, 2013. The standard addresses the practitioner’s responsibilities when engaged to perform a review of historical financial statements (when the practitioner is not the auditor of the entity) and the form and content of the practitioner’s report on the financial statements. The Guide to Review Engagements was published in December 2013 and provides non-authoritative guidance on applying ISRE 2400 (Revised). In India at present they have Audits mandatory for all companies & have Tax Audit also mandatory for turnovers exceeding certain amounts which are not high by any standard. Looking to the cost of Audit, which is very low, it is considered that it will not be any time soon reviews will catch up in India. They do undertake reviews for Listed Entities every quarter for quarterly financial information.
- Clients may not need an audit, but may greatly benefit from an AUP engagement that certain financial reporting processes and controls are operating effectively. According to ISRS 4400, the objective of an AUP engagement is to carry out procedures of an audit nature to which the practitioner, the entity, and any appropriate third parties have agreed and to report on factual findings. These engagements may entail the practitioner performing certain procedures concerning individual items of financial data (for example, accounts payable, accounts receivable, purchases from related parties, and sales and profits of a segment of an entity), a financial statement (for example, a balance sheet) or even a complete set of financial statements. Examples of AUP engagements, both on financial and non-financial information, include: Due diligence when buying a business or selling a business Verifying cash balances Checking security balances Income tax provisions Accounts receivable/payable processes Special reviews of loan portfolios Reviews of internal control and environmental management systems As the practitioner simply provides a report of the factual findings of AUP, no assurance is expressed. Instead, users of the report assess for themselves the procedures and findings reported by the practitioner and draw their own conclusions from their work
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