We’re living in a time punctuated with Kafkaesque chaos – as the offices open up but jobs become scarce, rioters and protesters take to the streets, and thousands of businesses shutter forever while the stock market unexpectedly spiked before the month ended – leaving us veering from one extreme to the other.
The truth is that the ‘New Normal’ looks like a vast expanse of undiscovered territory with new trends and new ways of doing accounting, business and finance.
So when I recently sat down for a virtual discussion with industry expert Lucy Cohen, the Co-Founder and Managing Director of Mazuma Accountants – we took our time in unravelling the advent of some emerging trends in business and accounting. While the ‘New Normal’ remains to be largely foggy, we were able to spot some trends that were thought provoking, inspiring and signposted different ways with which accountants can thrive in the post-lockdown economy.
Here’s a little glimpse into the highlights of our discussion:
Accountants in the 90% Economy: an opportunity or drawback?
“This is a seminal moment in accountancy, especially in the small business community.”
PC Courtesy: SimplyBusiness
Lucy and I kicked off our discussion by checking on the pulse of the accounting industry and its performance in the 90% economy – especially with the many small business clients being under the pressure of re-opening while still recovering from the financial backlash of the pandemic. We tried to make a case for more accounting firms coming forward to help more small business clients and establish their position as more than just their seasonal accountants.
What is 90% Economy?
A “90% Economy”, basically means that when businesses begin to operate with social distancing, the economy can be expected to shrink by about 10% - due to all the precautions and tiny changes in the day-to-day operations.
“We are an industry that has been able to pivot really quickly and provide their services from home,” said Cohen about the resilience in the accounting industry in the face of the crisis.
“Now that the initial rush has ended – we’ve all gotten a bit more used to it, it’s not so jarring any more, it’s not such a big shock. I think the way accountants need to deal with this is to build on that added relationship they’ve created with their clients. I see this as an opportunity to double down on the client’s services, on advisory, on really proving that they bring a lot of value to their business.”
With advisory, added services and consulting taking a front seat in many leading accounting firms –Cohen also points out to how this a crucial time to reverse some stereotypes about the profession being just limited to crunching numbers.
“Accountants have always struggled with making their clients understand what they really get paid for. Lawyer’s fees don’t get argued with, but accountant’s fees do,” said Cohen.
"This is a seminal moment in accountancy, especially in the small business community.” “A good accountant? They really know the value of that now.”
The Rise of Advisory or Remote Working?
“We’re going to start seeing micro-economies across the UK”
PC Courtesy: SantaFe New Mexican
The coronavirus was disastrous, devastating, and shocking but also a game-changing moment for the accounting industry. As accounting expert Steve Pipe suggests in an interview, for years, the industry has been trying to rebrand itself where accountants were striving to step up as advisors by digitising the bits that required number-crunching and paper filing. But COVID-19 brought a spike in the demand for advisory services where more businesses and individuals turned to their accountants for guidance to navigate through the financial crunch – from filing loan applications to drawing out contingent business plans.
Was the pandemic a catalyst to mainstreaming advisory services and a gateway to new service lines for accountants?
“This is a real opportunity to figure out what your firm does,” says Cohen on why she thinks compliance will continue to have more value amongst clients. “If you are a more traditional-style firm and you enjoy working in that way – that’s absolutely fine, there will be a way of working during these times.”
Cohen points out to another emerging trend that could bring back the culture of ‘supporting local.’
“We’re gonna start seeing micro-economies across the UK,” said Cohen. “I think we’re going to be seeing more people living not where they work anymore, more people are going to be working from home. I think the boutique firms and the traditional firms are going to have a real opportunity in that space.”
She points out to how two kinds of firm-models will emerge from this crisis – remote and local.
“I think we’re going to see firms that will completely disregard geography or the ones that are very laser-focused on geography and almost become boutique,” said Cohen “I think we’re going to see a segmentation of people wanting to support local businesses, stay in the local area, and potentially want to have a local firm as well – especially for the services that are more advisory, more consultative in their approach”
Brace for New Service Lines
“Partnerships are going to become more prevalent – with accountants and other types of businesses – to leverage that trusted advisor status.”
PC Courtesy: Techspark
From virtual graduation ceremonies to virtual dating – our civilisation is constantly coming up with new ways to carve through the ‘New Normal.’ A recent piece by the New York Times, reports on the way the city of Hong-Kong has adapted to continue a way of going on – by putting foam-boards in between restaurant tables, pharmacies handing out fistful of stickers with a reminder to wash hands and pressing elevator buttons with keys rather than fingertips.
The accounting industry has also adapted by moving quickly to the remote working model and Cohen points out to the possibilities of some new service lines and trends that could surfacing for remote accounting firms.
I think add-on services will have a lot of value,” said Cohen. “We’ll see firms joining hands with other types of industries to provide joint rounded services or double services – to help support clients for their own needs.” “Partnerships are going to become more prevalent – with accountants and other types of businesses – to leverage that trusted advisor status.”
A recent example of the strategic partnerships trend occurred when leading accounting software ReceiptBank acquired Xavier Analytics, another popular reporting tool – a move that has helped Xavier to springboard into launching in Australia later this year.
Great news from @ReceiptBank and @xavieranalytics.— Xero User Magazine (@xumagazine) June 15, 2020
Receipt Bank acquires Xavier to power accountants with “better advice from better data”
Read the full article on the XU Hub ??https://t.co/ghJPoYJODu pic.twitter.com/8v7n7pLBwn
Cohen also points out to how there’s another key strategic move that is even more impactful in increasing the reach and revenue of your accounting firm – Niching.
“Niching – it doesn’t have to be skill or geography or either or – but knowing your niche is absolutely paramount.”
“It doesn’t have to be – I don’t deal with plumbers, hairdressers, or IR35. Your niche could be your geography, how you deliver your service – and to not doing anything outside of that. I think that’s where firms really earn that trust and become experts.”
Importance of Small Business Clients in Economic Recovery
“Why hasn’t your accountant spoken to you yet? That’s where the problem is – This was all about being proactive, not reactive."
PC Courtesy: Elite Business Magazine
Back in April, UK’s Chancellor Rishi Sunak pledged to protect small businesses from cashflow issues saying they were important to build up the economy again. Following which, Sunak announced various financial support schemes to “bridge through a difficult period” for these firms.
Small business are integral part of every small-mid size accounting firm and Cohen points out to the various ways that accountants can support micro and small business clients to bounce back so that aid in the economic recovery using their influence, broad reach and deeper community impact.
“The thing that we think is most essential is communication,” said Cohen. “Talking to your clients, picking up the phone, proactively getting ahead of them – that’s how you show you care for them.”
Cohen also points out to an example of how her own accounting firm supported their small business clientele during the crisis.
“So, when all the government support was announced we were live tweeting it, we had an updated blog page going out, we had comms going out, talking to clients ad nauseam,” said Cohen. “From our point of view we ticked out own boxes – we knew we had given out this information to them, to help them.”
Cohen also points out to the imminent problem of lack of communication between clients and accountants in the industry.
“I have had people contact us through the business page – hundreds of them – who weren’t clients – and a lot of those conversations started with: ‘I haven’t spoken to my accountant yet but….’ And I just thought why hasn’t your accountant spoken to you yet? And I thought that’s where the problem is –this was all about being proactive, not reactive."
Cohen goes on to say how critical it is for accountants to be able to ‘signpost’ their clients to the right direction – even if that means signposting them to their own advisory services or the bank website, and all these gestures end up becoming the extra 5% that makes an accountant more than just a bystander service provider.
Are Brick-and-Mortar Accounting Firms Headed for an Extinction?
“We bought a building two years ago and now there’s no one in it”
PC Courtesy: The Telegraph
“We bought a building two years ago and now there’s no one in it,” said Cohen.
Cohen points out to how the rising trend of remote firms could be attributed to the millennials and Gen-Z population that’s entering the workforce.
“We’re going to move to extremes,” said Cohen. “I think the millennial and Gen-Z people who run their own businesses value their time and money very much and so they’re not interested in meeting face-to- face. However, larger businesses that maybe have boards might do otherwise.”
She also negates the idea of complete eradication of brick-and-mortar firms – mostly because they hold a strong value of “physical-ness” amongst people who are still very attached to the idea of building relationships fact-to-face.
“My sister is an artist and she lives in a very physical world,” says Cohen. “Some people like doing that I think we are now going to see more of a separation of the two. However, at the moment we’ve got a lot of firms that are somewhere in the middle – they offer a lot of online services and they’re also going on client meetings.”
Netflix, Spotify, and Now Accounting: Is it time for Subscription Business Model for Accounting Services?
“You don’t buy a house on credit card – it all comes down to what is the right billing model for your business”
PC Courtesy: US News
There are three different pricing models in accounting: the billing model, the fixed fee model, and the subscription model. The first two models have been quite prevalent for years in the industry. However, the success of content streaming platforms like Netflix and Spotify and push toward remote accounting firms due to the pandemic has again opened the debate on the adoption of subscription business models to firms.
Being a forerunner in adopting subscription pricing model to her accounting firm, Cohen recounts her lessons in running an entirely online, subscription-based accounting firm.
“Subscription is an incredibly difficult model to get it right,” said Cohen. “When my staff does the work doesn’t matter, but when someone takes longer to do the work- that’s our problem, not the client’s problem – so we had to be razor-sharp in our funnelling which kinds of clients do we want.”
Cohen points out to the following challenges in adopting a subscription based business:
1. Focusing more on marketing to attract the right clients
2. A long, arduous process to select the right clients before they even get a quote
3. Longer hours to do the work don’t result in extra fees.
“You don’t buy a house on a credit card – it all comes down to what’s the right billing model for your business,” said Cohen.Over the years, subscription payments have gained popularity but the implementation of the model comes with years of hit and trial. The recent spike in digital payments brought back the trend but according to Cohen – subscription pricing is a craft that one masters over time.
Lucy Cohen’s Subscription-Model Starter Pack:
1. Become obsessed with metrics and measuring productivity and results frequently – using dashboards, number of transactions, how long it takes on average for things to be done.
2. Establishing discipline in your accounting firm – in terms of output, fee, productivity, etc.
3. Choosing the right kind of clients that will help work easier – preferably not the ones who are technologically challenged, sometimes larger businesses etc.
Summing it Up
The Pandemic has left a deep dent on our way of living but it has also paved the way for accountants to navigate through the new normal.
The push toward being flexible, remotely operating accounting firm has given the community the tools to ride the wave of the upcoming trends of micro-economies, instantaneous client communication and fledgling in the 90% economy. But mostly importantly, accountants have again reclaimed something they’ve lost in the daily hustle and bustle of life.
“I’ve got the gift of time now,” said Cohen. “It’d be nice when things eventually open up and we’ll be able to go back into the world a bit more but now I’ve got an extra two hours a day – which I didn’t have before.”
And as far as the uncertainties and upcoming trends in the new normal are in question – Cohen had a fitting answer.
The biggest thing you can do, not just in accounting, but in any business, is to not be afraid to do something that hasn’t been done before – that’s what makes the difference.”
This article is compiled from a podcast conversation on ‘How Accountants Can Thrive in the Post-Lockdown Economy.’ Learn more by listening to the full podcast episode.
About our guest:
Lucy Cohen is the Co-founder of Mazuma Accountants, a leading Online Accounting firm for small and micro businesses. Lucy is a celebrated columnist at AccountingWEB and the proud author of her critically-acclaimed debut book, The Millennial Renaissance. With a career spanning over 17 years in in the accounting industry, Lucy appears widely on webinars, industry events and trade publications to offer her insights on the accounting industry.
Stay tuned for more updates and wisdom talks with experts and follow us on LinkedIn and Twitter with our social media handle @QXASLtd or reach out to our experts for consultations on cashflow, management accounting, business contingency planning and navigating the right grant schemes for your business. Our experts will be happy to help!
Note from the Editor: This blog is a part of a special series that explores "COVID-19 Support for Accountants". Stay tuned for more updates on this or contact our experts for discussing support strategies during COVID-19.
My name is Rishmita and I’m an aspiring journalist and blogger. I love telling stories – of people and brands. When I’m not too busy typing out incessantly on the computer, you’ll find me reading some old American classics or petting some furry stray cats.