2016/2017 saw a continuation of the consolidation within our industry and a record number of partnership appointments which highlight two things: 1) the accounting industry is thriving, and 2) the war on talent is unrelenting. We’re seeing full employment in our industry and firms are locking-in talented staff and executives to retain competitive advantage and shore up client relationships.
We also saw the continuing trend of accounting firms diversifying their businesses away from total reliance on compliance services and into consulting channels, particularly the Big 4 with a number of business acquisitions. Thus, it is now harder than ever to define what an accounting firm is. Most of this change is of course being forced by the disruptive impact of technology and was triggered with the introduction of the GST in 2000. The subsequent improvement in accounting software such as QuickBooks, MYOB and Xero has allowed for greater transparency and efficiency in the compliance process so that this felt like the year when our industry finally came to terms with the need to move beyond compliance into advisory services.
Regulatory changes in 2016 were enormously disruptive. Licensing registration requirements for accountants in relation to advice on superannuation funds has driven huge change in the industry. Recent changes in the super rules as well as the additional work required to comply with issuing statements of advice, are placing huge strain on advisors. ASIC seems finally to have recognised the implications of this policy change with an extension to the deadline for distributing Statements of Advice. However, the challenge for accounting firms has been established – how to deploy effective administrative processes to support responsive and high-value advice.
In terms of challenges, I’ve already mentioned the competition for talented staff and senior executives but this also extends to the graduate pool. Young grads want more commercial roles or more interesting consulting assignments. The cost and availability of office space in Sydney and Melbourne is also an issue.
In terms of opportunities, the range of advisory services will allow us to help our clients far more than ever before. High level tax advisory and value added advisory services with innovative remuneration models for staff and executives are the focus for every progressive minded practice.
I also believe those firms who belong to international networks will thrive from the opportunities brought by overseas investment and an increasingly expansive global market. Many Australian businesses also have one eye on Britain and the impact Brexit could have on trade beyond Europe, particularly into Asia.
Technological innovation continues to have the greatest impact on short, medium and long term planning. Where this technological change next plays out is difficult to predict. There are revolutionary models in play right now that have the potential to disrupt the entire financial services sector, but the incumbent infrastructure will be resistant to change although progressive firms will be scrambling to find leverage behind closed doors. Block chain is one such innovation. For example, it could threaten traditional Audit services, based on its inherent ability to verify and authenticate.
Despite the high level of disruption from technology, the short term outlook is very positive for accounting firms who embrace the need to offer higher value advisory services.
This transformation imperative could result in different types of executives entering accounting firms to manage cultural change as well as different business objectives and service offerings. Accounting firms will need technology literate staff and leadership to help plot the pathways and deliver their diversified proposition so a strategic approach to training and recruitment will be required.
Accounting could become totally automated with the introduction of the New Payments Platform www.nppa.com.au developed collaboratively by authorised deposit-taking institutions. The new platform will not only be fast but it will also be versatile. With longer payment descriptions and the ability to accept attachments, accounting software will both accelerate the automation of the compliance aspect of accounting and improve its accuracy.
In the next few months/years, we believe Australia’s current obsession with property will definitely slow, particularly in the unit space. When the inevitable correction occurs, we don’t believe it will be to the same level as previous property corrections because banks have been tightening their lending requirements, partly in response to the Government’s tightening of bank capital requirements, and interest rates are at very low levels. Most of our clients are uncertain how long the current positive trading conditions will last. They still remember the GFC as I’m sure generations before us were ‘clouded’ by the great depression. Clients continue to be unsettled by geo-political concerns (Trump, Middle East, Korea, terrorism).
CIMIC Group, the world’s largest contract miner has charted the Australian construction industry’s prospects and has projected the following infrastructure expenditures in the coming years: peaking at $17B in 2020 (up from a peak of $10.5B in 2013). The 2018 – 2023 projection in total is $80B spend. That has to signal a promising future not just for the directly related industries but for the tertiary services sector also, providing of course there is no political disruption.
To read more about the current trends and future expectations within the local accountancy industry click here.