The study into factors affecting the long-term demand for, and supply of, professional accounting services in rural and regional Australia was a research project undertaken by The University of Melbourne, Deakin University and RMIT University, in partnership with CPA Australia.
Regional Australian public accountants face major socio-economic obstacles and too little is known about the range of services provided by and demanded from accounting firms.
The aim of this project was to overcome these deficiencies by modelling the factors affecting the supply and demand of professional accounting and allied services as a basis for enhancing economic development in regional Australia.
The research project will enable the accounting profession to establish effective strategies and policies for the education, training, and recruitment of professional staff in regional communities as well as ensuring that services can meet future regional demands.
The study’s research method was based on in-depth interviews with, and large-scale surveys of, rural and regional accounting firm practitioners and SMEs located in rural and regional areas.
The study was researched by Professor Colin Ferguson, The University of Melbourne; Professor Barry Cooper, Deakin University; Associate Professor Graeme Wines, Deakin University; Professor Beverley Jackling, RMIT University; Dr Rodney Carr, Deakin University; and Dr Phil Hellier, Deakin University.
Part 2 of the summary results will be available shortly.
2009 preliminary observations
A. Forms and areas of practice:
(i) A variety of forms of accounting practice structure are evident in rural and regional areas, from sole practitioner firms to medium and very large partnerships with multiple offices. Consolidator firms also operate in some regional areas. Larger firms generally service clients across the whole spectrum of economic activity, while smaller firms have tended to develop their own niches (eg primary production clients, SMEs). At least one Australian regional accounting firm audits a stock exchange listed company.
(ii) While it has often been suggested that sole practitioner firms will become a thing of the past, the study has found that sole practitioner firms are generally dynamic with extremely healthy client bases. Also contrary to generally held beliefs, the majority of the clients of sole practitioner firms are SMEs, including large primary producers, and not merely salary and wage earners.
(iii) While there are viable accounting practices in smaller towns, there is a trend towards a greater concentration of firms in the larger regional centres. The major problems for practices in smaller towns are those of staffing and business succession.
B: Positives:
(i) Clients are generally satisfied with accounting services and view the accounting firm as central to their business activities and decisions. (For example, one accounting firm client observed that ‘all you need is a good doctor, lawyer and accountant’).
(ii) Firms are increasingly using sophisticated technology to overcome the disadvantages posed by distance. Clients are also increasingly computerising their accounting systems, resulting in the accounting firms spending less time with basic data entry operations. Online communications technologies are being used to link firms and their clients. This is an area where improved broadband (and mobile phone) services in regional and rural areas are essential.
(iii) Accountants effectively comply with their continuing professional development requirements, but it is more difficult and costly for them in comparison to those in capital city based firms.
C. Challenges:
(i) The major challenge is the shortage of professional staff, especially with increasing ‘red tape’ resulting in accounting staff spending time on compliance requirements with a reduction in time available for the provision of proactive and value-adding services. (also see point D below)
(ii) Due to legislative changes and registration requirements, the provision of financial planning and superannuation services and advice can be problematic. Firms have adopted a number of models to address the problems. Some have obtained registration or become associated with registered firms to provide financial planning services themselves. Others have entered into joint venture arrangements with financial planning firms, while some are forced to refer clients on to specialist financial planning firms. In these situations, clients often find it frustrating when the accounting firm is often in the best position to provide financial planning advice but, due to the legislation, is unable to do so.
(iii) Auditing: The CLERP 9 legislative changes of 2004 are having a major affect on auditing services. Requirements, such as that for the rotation of audit partners, have resulted in some auditors withdrawing from this area of service completely. Some audits, such as for certain charities, etc, are now requiring a registered company auditor, further reinforcing the difficulty for rural and regional firms. A shortage of audit staff means that firms cannot bid for some audit work they would have in the past (eg public sector audits outsourced by Auditors-General).
(iv) Maintaining personal relationships between accounting firm partners and their clients as the practice grows presents a difficulty as the practice expands.
D: Staffing issues:
(i) Most firms would employ additional staff if they were available.
(ii) A majority of the staff tend to have originally grown up within the region. They have often moved away for reasons of study and/or experience, but then return to the region.
(iii) Many staff have completed their tertiary studies at universities or university campuses within the region, or in off-campus mode. This highlights the importance of regional universities and off-campus studies for the health of the accounting profession in rural and regional areas.
(iv) To assist in addressing staff shortages, many accounting firms are offering internships, cadetships and scholarships to students studying at universities within the region.
(v) Some firms also use para-professionals (eg TAFE graduates), for many bookkeeping and accounting functions. Also, some firms hire mature age and semi-retired people for data entry functions to alleviate the skills shortage.
(vi) In developing policy options, the accounting profession should consider policies developed by the medical profession to address the medical shortage in rural and regional areas. The medical profession has established rural and regional education facilities in association with regional universities. The accounting profession could examine this option and work more closely with regional universities.
(vii) Policies should aim to increase the participation rate of rural and regional students in university education. A number of secondary colleges no longer offer the teaching of accounting through to year 12, which has been counter-productive for rural and regional firms. Policies should also aim to improve the perception of the accounting profession as held by secondary and tertiary students. The stereotype of the accountant only working behind the desk all day completing compliance type activities needs to be addressed. Students need to realise that a successful accounting practice in a rural and regional area requires the accountant to be dynamic and proactive as a key adviser to business clients. This requires the utilisation of a wide range of skills.
