Accountants: Tech your way out of the Recession!

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1 Accountants: Tech your way out of the Recession! Will Parker, UK Country Manager accountsiq Executive Summary We all know the old adage cash is king and in a recession, never a truer word can be said. Our small business community is at risk and for the accountant this means clients will go out of business and revenue lines will be eroded. But there are simple measures that can be put in place. Accountants can grab the opportunity that the recession creates and offer value added services to the small business community to minimise the risk of them going bust. And small businesses would welcome this support, according to our new research. Have you met your customers face to face in the last 12 months to discuss how else you can support their needs? With bookkeeping, accounts production and payroll administration two a penny, the real money is in revenue generating services, such as cash flow advice, data analysis and other virtual finance director services. More powerful and easily accessible IT can change an accountants ability to deliver these services whilst making a positive dent in operating expenditure. 10% have already taken a chance on new software tools and 19% offer first class value-added services. My guess is that there is a strong correlation between the two. One thing is for sure, the old ways don t wash with Internet savvy customers and running for cover instead of embracing the internet age is a dangerous strategy for any business. Background Small businesses are vital to the UK economy. There are almost 3.8 million in the UK, accounting for over 99% of all businesses. They employ 12.6 million people, represent 56% of the private sector workforce and contribute over a trillion pounds a year to UK Gross Domestic Product. Evidence suggests that UK SMEs are feeling the effects of the economic downturn. It is no surprise that SMEs are vulnerable and it has been predicted that the number of small business failures will increase by 18% by the end of One of the challenges of running a small business today is dealing with the feast-or-famine nature of business. Never has good cash flow management been so important. As traditional lenders start to tighten their funding lines it is important for SMEs to acknowledge that they are less likely to be able to borrow if times get tough so stabilising cash flow is a business imperative. External

2 pressures can seem overwhelming and can distract from the necessity to make timely and effective financial decisions. Accountants remain the most trusted advisers for UK SMEs and are in a good position to offer services, such as advice around effective cash flow management, in a period of economic uncertainty. Small businesses trust their accountants even more than their bank managers when it comes to seeking financial advice, according to a recent study by credit agency Graydon UK and the Forum of Private Business (FPB). The survey found that 70% of small business managers consult their accountants for financial advice, compared with only 47% who look to their bank managers. In the same survey however, 36% of respondents had not met their accountant in the last year, with 24% putting this down to either lack of faith in their adviser s knowledge of their businesses or the fact that they have received bad advice in the past. Not a shining reference for the profession. If anything this indicates that accountancy firms are becoming disengaged from the business community that they serve. According to the Federation of Small Business survey Lifting the Barriers to Growth, there has been a dramatic crash in the number of small businesses turning to accountants for business advice dropping from 74% to 51%. So why is this? Well you hardly need a degree in accountancy any more to manage the day to day books of a business so maybe accountancy firms are failing to capitalise on the opportunity to offer more valuable services and are therefore gradually losing day to day contact with their clients without even knowing it. Today s accountants can t simply be figures people. The good ones provide an overall package of business advice and consultancy on how to free up cash, make savings and raise capital. They ll know tax laws and legislation inside out and will be able to suggest ways to operate more efficiently and save money. We decided to commission a survey to find out exactly what SMEs want from their accountant in a time of economic turmoil. What SMEs Want We commissioned Vanson Bourne to survey 100 Small Business owner/managers in December 2008 to ascertain what services would be of most value from their accountants during the current economic environment and compare these to what they actually receive. When asking respondents whether they would welcome better support and advice from their accountant to help weather the recession a staggering 82% said that they would. But what support and advice do they require? 80% would like their accountant to offer improved analysis and interpretation of their financial data into suggested business actions with a huge 50% crying out for assistance by saying that they would welcome it greatly. In addition to this, 69% said that they would like their accountant to provide better measures to help them manage and improve their cash flow, with a significant 41% saying that they would welcome this greatly. 63% said they would like their accountant to provide greater visibility of changes to their financial position and the same number would like access to their financial information at any time and from anywhere to improve decision making.

3 So why aren t respondents receiving these services? Accountants may give the following reasons; You only get what you pay for... Respondents are not aware that their accountant offers these sort of services... Clients don t overtly ask for assistance in these areas... Indeed, we asked respondents whether their accountant currently provides a first class service in each of these areas and what was particularly alarming was that on average only 19% do. Even if firms are providing these services, only 1 in 5 are providing them to really high standards.

4 Powerful and accessible IT has changed the role that an accountant can have. New technology has improved our ability to collect, distribute and interpret financial information. Accountancy firms that use modern financial systems promote the new technology to their clients along with the service benefits that the technology unlocks. Online accounting Online accounting applications have evolved, and over the past year in particular they have increased in availability and popularity. The number of companies using SaaS (software-as-a-service) systems has trebled in the past year and now represents approximately 10% of the total market. Savvy accountancy practices are starting to see that exploiting the online accounting approach can enhance revenue generating opportunities and client services. These services are particularly valuable in a recessionary environment where cash and costs must be constantly monitored. They are based around being able to provide immediate and accurate financial information to clients, such as cash flow forecasts, which can be further enhanced by automatic linking between a client s online accounting package and their online banking solution. According to a recent ICAEW report the potential is enormous, In an era where the electronic filing of statutory returns is increasingly the norm, online accounting now seems less like a big risk and more like an idea whose time has come bringing some significant business benefits along with it.

5 On a practical level, using the internet to access and maintain business accounting records can make tasks such as bookkeeping, accounts production and payroll administration, much easier for everyone involved. Practitioners can take a more proactive approach to offering advice and services and because the accountant can log onto the clients accounts at any time, it is easier to spot when they are going wrong or getting behind, and offer advice on key transactions, thus facilitating better bookkeeping support. It can also create a basis for all sorts of revenue generating opportunities, such as providing real time transaction and tax planning advice, producing timely management accounts from clients raw accounting data and offering a range of virtual FD-type services. The SaaS model Software as a Service (SaaS) is a compelling model for acquiring, using and paying for business software functionality. It is fast to implement and offers low upfront costs for acquisition and deployment. With SaaS, no large initial outlay of capital is required to license the software and the solution is typically purchased on a per user, per-month basis. This significantly eases the burden of licensing software and makes the price paid for software directly proportional to its use. SaaS is considerably more than just software. It is a business service, providing the software and its management and the opportunity to layer consulting services on top of the software platform. Included in the solution is the infrastructure necessary to deploy it: storage, database, application server, web server, disaster recovery and backup, all of which has to be paid for and maintained separately with traditional licence based software You don t have to install the software, it is already set up and ready for you to use. You don t have to manage the hardware, the application itself, or the upgrades as the SaaS provider ensures a continuous stream of ongoing upgrades to the solution, all behind the scenes. Conclusion Dennis Howlett wrote on his blog recently that, In tough economic times, SaaS represents one of the few technical solutions through which accountancy professionals can provide a differentiated service whilst reducing their operating costs. So when is the right time to make the change? Are there signposts that can signal when the time is right? When is there potential for greater return on investment? What are the business conditions that should compel such a change? The best time to determine when to make a change is when business conditions dictate, specifically when accurate, immediate business information is needed and when costs must be tightly controlled; which is arguably now.

6 About accountsiq accountsiq delivers a powerful, scalable and easy to use on line accounting solution for SMEs and their accountants to use in collaborative, connected world. accountsiq offers a smart way of exploiting the potential value-added and revenue-generating benefits of online accounting providing a potential upgrade path for a wide range of business types and sizes, so accountants can easily develop and sustain their relationships with growing clients without the need to be familiar with (or support) multiple accounting applications. For more information contact: William Parker wparker@accountsiq.com Web: Tel: /