Public practice: Firm of the future

Keeping pace with the evolution of the traditional office, offering a multitude of services outside the usual, retaining staff and staying abreast of technological change are some of the key challenges facing CPA Australia public practitioners in the next 10 to 15 years.

And while the future looks bright, it will be a case of either adapting to the ever-changing world that society is throwing at us or remaining static and watching the future pass you by. The choice to be made is quite simple.

This is according to the Firm of the Future report commissioned by CPA Australia's board of public practice committee (BPPC) task force, which was asked to look into the crystal ball and see what the future of public practice may look like in 2020.

Importantly, the report also sought to develop a strategy to prepare members for the challenges ahead. 'I am fairly happy with the outcomes but I did think it would be more controversial,' says John Mann, ex-chairman of the CPA Australia BPPC and the task force chairman of the Firm of the Future report.

'It is important for the profession to look ahead into the future,' he said. 'It is also important for members to see where they are heading in regard to Generation X and Y, training, human resource issues and succession planning, to name a few [issues]. They then need to ask themselves, "Am I heading in the right direction?"'

The report highlights several areas CPAs need to address to keep their practice alive and prospering in the future. It also points out where members need to address shortcomings in either technical knowledge or so-called 'softer issues' such as people management and succession planning.

The biggest challenges facing the profession are in the areas of specialisation. The report urges practitioners to 'play to their strengths' by clearly outlining in what areas their firm will specialise, and have the appropriate staff in place to carry out those duties.

Some firms will specialise in the traditional areas such as tax and compliance while others will look to value-added services such as financial planning, coaching, business planning and mentoring 'at the expense of traditional accounting work'.

Peter Knight, general manager of PKF Australia, states that specilisation is imperative because at the moment firms doing both 'aren't doing either very well'.

Small firms will have to keep up with technology changes if they are to stay in practice. The report warns, 'Many firms are yet to fully grasp and exploit technology tools.'

The value of having an in-house IT specialist cannot be underestimated. It offers the benefit of having mobile staff if all of a company's and its clients' IT needs are being met.

Having the ability for staff to work remotely either at home or at a client's premises while still having access to data from the office is a great asset. There is no reason why public practices cannot use new mobile technology solutions to achieve this.

Yet according to Michelle Knight, a principal at Rob Knights & Co, this facility is not as yet readily available. 'It's a lot of lip movement for some, and not a lot of doing,' Knight says. It is crucial for firms to invest in this technology.

Succession planning has long been an important topic for the profession; in the future it will become even more so. As the report states: 'As Generation X and Y seek more personal and professional flexibility, they will be less willing to buy into a firm.'

This means that sole practitioners have either the option of trying to sell their practice to a bigger firm or closing the practice when they retire. A calculated risk may be to employ CPAs aged in their late-20s or early 30s, and have a two-year plan for them to take over the business. That way, they have some personal affinity with the company.

The report states consolidation of firms will continue in the future but this will not be achieved as easily as it is now. The reason? Public practice firms will need to have identified and built a niche of specialised services or have a good cross- section of clients boasting continued and growing profits.

'It [the report] is a stocktake on how we regulate our members to make sure that we are not hin-dering our members,' says Peter Docherty, CPA Australia's director of public practice. 'There is a great future in public practice and a substantial amount of money to be made if members embrace opportunities.'

One of the most important areas outlined by the report will be in the field of people; both employees and clients. As we live in a 'now' society, staff demand to know right away either why they haven't been promoted or been allowed to work from home.

Clients will want to know why you can't provide the answers in the timeframe they want.

As staff will constantly look for better opportunities, financial solutions such as better salary packages that include bonuses – and even a percentage of billings – will become part of salary negotiations.

'If you can't replace them, you can't lose them,' says Suzanne Baldry, a director of the Baldry Financial Group. 'So managing conflicts, managing people, sharing the success financially with your team – is important. '

Managing a range of employees from Baby Boomers to Generation X and Y won't be easy. Training will need to be readily available in a range of areas, especially in order to keep up-to-date with marketing and financial planning trends.

Ultimately, it's clients who will have the final say on the future of the profession. If their needs are being met, then they will want to continue to have a trusted CPA advising them when it comes to making important business decisions.

At the same time, their needs are expanding and they want more value-for-money services, according to the report. 'Business owners want advisers who can cover accounting, tax, finance and business issues,' the report states.

'The client of the future will have a sharper understanding of finances and be more demanding of quality service at value-for-money rates.'This will ensure public practices offering a broad range of services have the relevant experts in each area of speciality. This could, the report suggests, stop clients from looking elsewhere.

The increasing number of female business owners will change the traditional nature of public practices, many of which are used to dealing with a majority of male management. As many run home businesses, it will require CPAs to understand the complexities of micro-businesses and how to support them, the report says.

Naturally, expenses will be more accountable. Every dollar spent will be analysed with a view to reducing any unnecessary costs.

The report warns that 'the outlook for productivity is troubling' because of three elementary factors: 'relatively low hourly charge rates; principals expecting a high level of personal fee generation; and most firms not looking to expand their service range'.

However, on the upside of that is the federal government continuing to reduce personal income tax. This will encourage workers to stay in the workforce longer, with the distinct possibility of the federal government extending the retirement age towards 70.

Cashflow and investment of capital will be crucial towards the future of public practices. The report suggests this may be achieved using alternative forms of fee setting such as fixed agreed sums rather than hourly charges. Capital investment will also change. It's expected more spending on IT equipment – both hardware and software – will be required, especially if staff are going to be working away from the office more. Companies may also be faced with the prospect of helping employees establish offices at home. Outsourcing will continue to grow, but it is envisaged that 'different models will emerge to the current ‘sent it to India' mentality' that now exists.

'This report challenges the traditional firm structure, and provides encouragement and support for the sole practitioner,' says Mann, the task force chairman. 'There is a need for the sole practitioner – especially those who specialise. It is a report that all accountants worldwide could use and will benefit from.'

CPA Australia's Docherty believes many tests lie ahead. 'Areas such as compliance and regulation will increase, and this is a worry because of the risks involved with not having succession planning,' Docherty says. 'Less than 30 per cent of businesses in Australia have succession planning, and that is an area that public practices need to look at.'

Though reports looking into the future are expected to provide talking points and debate, there is no doubt that CPAs have more than a few challenges coming over the horizon.

Recruiting, maintaining and training key staff, ensuring a firm is at least abreast if not ahead of IT development, and pursuing stronger profits, more liquidity and lower overheads are just some of the issues facing CPA practitioners.

Someone once said that those who reject change are the architects of decay. The CPAs who will be best equipped to face the future are those who embrace change as a constant, considering the issues it presents as challenges to be met rather than as obstacles to be overcome. As the report itself suggests, it is designed to be used as working tool – not one that sits on a shelf and gathers dust.

Download the report

Firm of the future: Opportunities and challenges for public practitioners is available from the CPA Australia website.

CPA firm of the future – the key challenges 

1. Strong growth opportunities for CPA firms

• CPA firms must ensure they are structured to embrace the demands associated with growth
• the long-term growth forecast provides stability for employees and a great career path for new graduates

2. Practitioners must embrace succession planning

• succession planning is an essential component of your risk management strategy
• it provides you with the opportunity to respond quickly to unexpected opportunities
• it ensures you can develop a plan to maximise the value of a practice

3. Practice structures will change

• mergers, consolidations and acquisitions will continue and result in a decrease in the number of practices in the next decade
• be up-to-date on alternative operating structures
• different models for partner or employee equity will emerge

4. Sole practitioners must have a comprehensive referral network and outsource support services

• ensure they have appropriate and independent referral services
• maximise the benefits of outsourcing and minimising associated costs
• provide a broad range of services for a broad range of clients

5. Service and product mixes will continue to evolve

• practices will be not be able to rely on high percentages of recurring work
• new areas of personal services need to be embraced to support the ageing population
• ensure you and your staff have the appropriate levels of knowledge, training and appropriate risk management strategies
• accounting firms that continue to meet the demand for these new services areas will attract the best staff and graduates

6. Compliance and regulation will increase

• keep up-to-date on legislative and regulatory changes
• understand and be prepared for the demands of a more financially literate public
• maintain independence and transparency

7. Recruiting and retaining staff will become more challenging

• understand what motivates graduates and ensure you properly structure their work environments, working hours, operating structures and incentive arrangements
• develop alternative staffing models such as the greater use of para-professionals
• understand what will make you an employer of choice
• embrace the needs of an ageing workforce

8. Increase your focus on soft skills development

• understand the ongoing importance of soft skills development
• introduce staff mentoring programs
• support staff in communication and presentation skills training

9. Technology will play a vital role

• understand the value-added features of software programs and how they can maximise profitability and delight customers
• embrace the benefits that flexible operating systems can provide to clients and staff (virtual office and portal systems)
• commit appropriate levels of expenditure to maintenance of systems
• introduce a 'less paper office' with the aim of moving to a paperless office

10. Professional integrity and independence will continue to be under the spotlight

• be seen to and be perceived to act with integrity and independence
• act within the 'spirit' of the Code of Ethics for Professionals when there may be conflicting requirements

Source: CPA Australia report Firm of the Future

Reference: July 2007, volume 77:06, p. 44-47

This page is available online at:
http://www.cpaaustralia.com.au/cps/rde/xchg/cpa/hs.xsl/724_23181_ENA_HTML.htm