Adopting digitalisation: the practical implications for accountancy practices
Jeremy Clarke, ICAS Assistant Director, Practice, talks to CA magazine about traditional ways of working, embracing new technology – and why you can still have the best of both worlds.
For the past three years, Jeremy Clarke has had the special responsibility for guiding members through the practical implications of the government’s Making Tax Digital programme, which currently obliges VAT-registered businesses to embrace digital processes for taxation, whether they want to or not.
And, it seems, many don’t. “It’s been a bit of a slow burn,” admits Clarke. “Many businesses aren’t really committed to making the technological changes HMRC wants them to make. Essentially, people fall into three camps. That said, there are those who are genuinely embracing it, lock, stock and barrel. They see the benefits of it, and are prepared to endure the short-term upheaval and inconvenience in anticipation of medium- and long-term efficiencies.
“At the other end, you’ve got the ‘this just isn’t for me’ group – those who are burying their heads in the sand and pretending it’s not happening. They think they can keep on doing what they are doing, hoping the government will change its mind and MTD will fall off the agenda. Many businesses have been gently coaxed into implementing MTD by their accountants, who have, yet again, borne a great deal of the burden in helping their clients get across the line.”
If you embrace the cloud and do app consultancy it will take you to areas that traditionally you might not have got involved in, but which could be quite profitable.
But what about the next stage, when HMRC rolls out MTD to all businesses rather than just those which are VAT registered?
“That is a much bigger task,” comments Clarke, “and it presents significant challenges for firms and their clients alike.” He recommends accountancy firms have a clear plan for how they will go about this, rather than trying to be all things to all men. “Unless you have that, you will get pulled in every direction by some clients wanting Sage, some wanting Xero, some wanting QuickBooks or whatever software they see advertised on TV or social media,” he says. “If you try to be too accommodating in that respect, you will spend more time training staff on how to use a multitude of applications, rather than picking one or two platforms and saying that you will be experts in those.”
Firms should not make the mistake, however, of assuming that inflexibility is the way forward either. Those that are prepared to reengineer their workflows will reap the greatest rewards. This can be done by training staff in automation processes – taking care, of course, to reassure them that they are not putting themselves out of a job.
But there are other ways, too. “Some firms have found innovative solutions by playing to the individual strengths of their people,” says Clarke. “One such approach is to keep a ‘traditional’ firm, which will carry on working as it does now, while recognising that there are people within the business who would be great at doing it in a new, technologically leveraged way.
“A ‘brownfield’ firm is set up sharing the same premises or operating in one close by. It has its own employees and separate modern branding to accompany the technology. It is predominantly online and very compliance-based. The key thing is that you get all the benefits from the automation of the compliance services. The higher-value advisory work – like raising cash or looking at tax efficiencies – is passed on to the traditional firm. It just shows that you can have the best of both worlds.
“Interestingly, one national firm has set up a dedicated team to evangelise to the rest of the business about the benefits of digitalisation and to service clients’ requirements. That works well, too – as long as you recognise that it’s not necessarily going to be a quick or easy process. But if you do it right, there can be tangible internal cost savings in delivering accounts preparation work by implementing an appropriate ‘apps stack’.”
Clarke believes cloud accounting will open new business areas for adaptive firms. “If you embrace it and do app consultancy it will take you to areas that traditionally you might not have got involved in, but which could be quite profitable – for example, with debt collection, credit control and HR compliance work,” he says.
“The beauty is that every industry has specific apps and software that will tie into the core accounting model and which are built for that industry. If you get to know an industry well, then you could develop a profitable niche. It moves accountants from being just bookkeepers to becoming trusted advisers and protects them from automation.”
This has an in-built advantage. It means accountants can tell clients they can make processes less burdensome for them. They could help with everything from automating ordering to streamlining customer relationship management systems, for example. And, if they deliver, they will reap the rewards in trust and reputation, though he also cautions about the obvious downside of any failure.
The future will lie in diversification. “Successful firms will develop ‘app consultancy’ capability and hire people who know what they’re talking about in that area to deliver additional value to clients over and above bookkeeping compliance services. And they won’t all necessarily be accountants.
“Accountants, though, are really well placed to see the opportunities for improvement. If you know how to deliver that, and if you get the right people into your business, people who understand what they are doing, then you have a win-win situation.”
This article first appeared in the February 2020 issue of The CA magazine.