Compliance based accounting practices that want to grow their practice revenue and be financially rewarded should:
- Firstly, recognise that the world has changed and that compliance based services will not have the demand and profit margins that they have historically had.
- As the compliance fees revenue is stagnating or falling the costs of providing the compliance services needs to be intensively managed. All the costs, especially the labour costs, need to be reduced. This can be achieved by working more efficiently by using technology (like cloud based accounting), outsourcing overseas to lower labour cost countries, or reducing fixed overheads (for example, reducing office rental space and costs by having some staff work from home).
- Start offering value adding services to their existing compliance base clients. For example, all compliance business clients should be offered the Tax Planning Review service. This should be a high fee, high value added service.
- Draw a line in the sand and commit to having ten percent of the practices annual revenues coming from value added services within twelve months. This is the base to move to twenty percent in year two and rise through to fifty percent in year five. This makes the principal think about how they would achieve that, what services they would offer, what changes they will need to make, and what prices would they charge?
- For every business client look at answering these four key questions. Question one – Is my current business structure the optimum for operating my business? Question two – How can you help me to legally reduce the amount of tax I pay? Question three – How can you help me to increase the profitability of my business? Question four – What advice can you give me to make the operation and management of my business easier?
The changing dynamics of the compliance accounting practice will continue on and cannot be stopped. Practice principals therefore need to change to fit into their new world environment and realise the great opportunities.