Are compliance services dead?

I’ve been doing a lot of travelling around Australia over the last few weeks for a client and have managed to catch up with some new & interesting people. During my travels I had lunch with a nice young chap who was working in a small accounting practice. It was himself working with two other more senior accountants.

Whilst we were munching on our salad I asked my friend how many clients his firm had. With great pride and gusto he said 7,500. That’s right you read it correctly – 7,500! He then went on with great pride to tell me that the systems & processes within their firm were top notch and that they give H&R Block a run for their money in processing tax returns.  The last comment was shared in the spirit of it being a thing of great beauty & virtue.

I was too polite (or gutless) to point out to my friend that his firm was on the wrong track and they would be working themselves into the ground providing a commodity (i.e. compliance services) that clients see very little value in and resent paying for. Does that sound too harsh? I’m sorry if it does but that is the cold hard truth.

Now I know you have heard for many years that compliance is dying and that it will go away and guess what it is till around. However, in the last couple of years in particular two big things have happened:

  1. The acceptance of the “cloud” by many businesses including government departments and the big end of town.
  2. The surge in the use of outsourced services as indicated by the popularity of sites such as odesk, elance & freelancer. These sites have a created a global market for anyone to buy services ranging from bookkeeping up to network administration.

Please tune into the next two posts where I’ll be unpacking the above two big things!

See you next time.

James E

 

Does the size of an accounting firm matter? – the YES case

I conducted an interview with another CFO recently and asked him the question about the importance of an accounting firm’s brand. This chap has given a qualified YES – the brand is important. For the time being I will withhold his name but suffice to say his organisation is big, complex and has high expectations of its external accounting firm(s).

In professional services it’s always the individual it comes down to in terms of expertise and the quality of the work that you get, but you rely on the professionalism of the brand of the overall organisation as to the resources that they send to you.  So at the end of the day it’s very important, but it comes back the integrity of the organisation and the professionalism of those organisations.  If we were looking to appoint a new auditor, for argument’s sake, and I was aware of a local audit firm that’s just gone through some problems with some audit clients, I would probably tend to steer away from them because I would feel that their processes had broken down somewhere that meant that I was taking on trouble by adopting them and therefore I’d go elsewhere.  So, their quality through their professionalism is very important at the end of the day, because you’re paying for that expertise, you’re paying for those services, and in most cases you want something that you can rely on to take to other parties – not just internally – therefore that name has to stand up in front of those other parties that you’re using that work for as well.

They (the external accounting firm) ultimately have to present our accounts to their investors, which are institutional investors, and they wouldn’t be happy if someone was being used that they weren’t familiar with in most cases I would imagine. For purposes of quality assurance with other parties that we would use that information for the brand is absolutely important.

Size does matter for some clients. That being said the individual must be up to the task of delivering a consistent & sound service that provides an effective outcome for the client.

See you next post,

James E

Does the size of an accounting firm matter? – the NO case

Hi everyone.

Shame, shame, shame. Not on you … but me. I have not posted a blog for over 3 weeks. Lots of reasons and excuses. I think the best reason/excuse is that I just finished another book – What do Financial Planning Clients Really Want? I’ll tell you more about that in a couple of weeks.

But back to business. Here is a re-blog of a popular post I wrote a few months ago. Hope you get something out of it.

I asked a CFO friend of mine who used to head up Finance at an engineering firm (Revenue $80m employing 100+ staff) how important an accounting firm’s brand is to him when he is looking to engage external help/advice. This is what he had to say.

I wonder whether brand is quite the right word. Perhaps reputation or their perceived level of expertise is better. But for the sake of the question, let’s stick with brand. The brand itself in the first instance, I wouldn’t say is that important. I would be more interested in speaking to the people who were going to be doing most of the work and looking at what their experience is, their qualifications, or how “good” that particular individual is. Brand doesn’t really come into it. Look at the case of Arthur Andersen which at the time was a major global accounting brand. They were the auditors for WorldCom, Enron, HIH, Ansett and One Tel – not a very good track record!

You can talk about the brand of a major multinational firm, but they’re only as good as the person that you’re going to be dealing with week to week. There is always going to be variation in the quality of the people within a large organisation. So, I wouldn’t say that brand itself is that important. I probably look at the professional firms generically and say, “Big Four, second tier, smaller…” In my mind, I don’t see any difference between any of the Big Four firms. I wouldn’t really know whether one was better than the other. Furthermore, I wouldn’t know if one individual within the big firms are better than the other.

Some interesting thoughts from Paul. The insight that captured my imagination was his statement regarding the “person” – You can talk about the brand of a major multinational firm, but they’re only as good as the person that you’re going to be dealing with week to week. There is always going to be variation in the quality of the people within a large organisation.”

Leaving aside the important areas of  support infrastructure, methodolgy, staff training and development it is the individual which makes the biggest difference to the client relationship. The other areas should be seen as hygiene factors (their impact is felt when they are not present)

In the next post we will talk about the “YES” case for a firm’s brand being important.

Bye for now,

James