A Scarey Wake up Call on the Accounting Industry Crisis
Almost every small business owner is reliant on a professional accounting firm for the production of financial reports and advice, so it is important for those small business owners to be aware of the situation in the accounting industry.
In Australia the ATO, the accounting associations and others have indentified a clear and present need to reduce the volume of compliance work being carried out by accountants in public practice. If not there will be serious consequences due to the questionable sustainability of the profession. Compliance work is unattractive and younger folk are not committing to the public accounting profession. The profession is facing a serious skills shortage. And this problem is about to be exacerbated when within the next four or so years the baby boomer accountants start to retire in large numbers.
Already the number of skilled accounting personnel is diminishing while at the same time the number of small businesses is growing. Some accounting firms are telling their less profitable clients to go away, and are closing their doors to new clients. As these discarded businesses join the new businesses clamouring for accounting services, the smaller accounting firms will react by increasing their fees to reflect the demand for their services.
It is blatantly obvious that accounting related activities cannot continue to rely on increasingly expensive labour. Some forward thinking firms forsee the looming scarcity of skilled labour have chosen to outsource to overeas accounting firms (notably in Malaysia, India and the Philippines).
Overseas outsourcing happens in a number of ways. Promoters engage overseas specialists and on-sell the labour services to firms in Australia. The fees charged to the Australian firm is not usually at a cost below the cost to provide the service in-house, but it is of value to the firm with a growing number of vacant desks, or the firm that wants to contract in physical size but retain or grow the services it provides.
In other situations firms engage direct with counterparts overseas and take advantage of the low cost to add to the bottom line. Value to the firm is a newfound pool of labour and increased profits. Cost to the firm is a possible increased exposure to professional negligence if overseas service providers fail to maintain Australian credentials and a possible loss of status for failure to ‘buy Australian’.
The focus still is on skilled labour quantities. At eclat we see the urgent need to change from a reliance on skilled labour for processing to an unskilled labour force (the business owner) aided by smart technology. Reducing the effort the professional accounting industry applies to compliance activities will make way for the high level skills the industry can apply to business clients in the form of financial advice. This in turn will enhance the remuneration of the industry professionals and attract graduates to work that appeals.
Peter Murray BBus
Professional Accountant, Small Business Advisor and designer of eclat.bos Accounting Software.