Many SMEs only see their accountants on a once-a-year visit or for a brief conversation about their business performance at the end of the financial year. Only a small number of SMEs use the expertise of their accountants for business planning and ask for their advice ahead of important strategic decisions and investments.As the accountancy market gears itself for a major structural and cultural transformation of their business, it is likely to drive a positive change in the ability of accountancy practices to respond to the needs of their clients. During 2015 it is expected that the audit exemption threshold will be increased once again, freeing a large number of SMEs from the bureaucracy of a compulsory audit. On the other side of the coin, this new development raises important questions for accountancy firms which derive a significant proportion of their revenue from auditing: How are their newly exempted clients likely to react? Will they continue with a voluntary audit, and if so, why? How can they continue to serve those clients no longer requiring a compulsory audit? The accountancy firms interviewed for the CaseWare report ?The changing shape of the audit market in the UK?, indicated that in order to maintain their position in the marketplace, post-audit reform, they will have to diversify their range of services, review how they manage their client relationships and look to selling the value of a ?voluntary audit? package to their clients. Many SME companies will benefit from the diversification of their accountants? offering. This is likely to be reflected in greater specialisation in existing service areas, such as audit or tax. It could also involve focussing on specific industry sectors resulting in greater experience and detailed knowledge of their clients? markets and specific business needs. Accountancy firms surveyed by CaseWare also indicated that they plan to take on additional services, such as personal and commercial legal advice, property valuation, or financial advice for private clients on investment and pensions. Spofforths, a Sussex-based firm with five offices, has already diversified, recruiting a team to provide tax advice and private client services on wills, trusts and estate management. The accounts and audit team has also adapted. Partners and their staff have become less ?general? and more specialised. From 2009 onwards, partners also became organised around sector specialisms to ensure clients receive expert advice. There is also evidence of firms adapting their organisational structure and services around sector specialisation. David Landau, principal in audit and advisory at North London firm, Berg Kaprow Lewis, explained: ?We?ve restructured ourselves internally and separated out our assurance teams from our support teams. We are looking to keep the audit skill-set in a smaller number of better trained people so we can give better advice and more focused work. We think clients will get access to better quality work and at more reasonable prices than from a generalist, or the bigger firms who are sitting on more expensive overheads.? Richard Spofforth, of Spofforths, believes clients that give up on audit may be converted to an alternative ?assurance? product. The removal of the requirement of a statutory audit for some organisations means audit firms will need to actively communicate the benefits of conducting an audit or assurance report for other purposes. This means offering audits or assurance reports to those SME businesses that need audit reports as part of their procurement process, to help them obtain credit facilities from banks, or for those with stakeholders who demand audits to ensure that financial discipline is being exercised. Moreover, the value an audit is particularly pertinent for owner-managers intending to sell their businesses where a set of clean audit reports can support the transaction. For those smaller companies who have previously baulked at consulting with their accountants on additional business matters due to the sector?s tradition of charging hourly for their time, some firms are now realising that this approach is ultimately counter-productive for both the firm and the client. Instead, forward-thinking firms are leading the way by leaving behind a ?chargeable hours? culture and moving to one focussed on building good, value-based relationships with their clients. Chief executive of Midland-based firm Dains, Spencer Wright, stresses that this is going to be the number one issue for the industry in the future. Audit clients are ?not a once-a-year visit?, but should instead be subject to year-round contact, which sees the firm act as an ever-present sounding board for commercial and financial decisions. The relationship will cease to be just about compliance and more about a true business partnership. Also Paul Dearsley, partner at Price Bailey, stresses the importance of staff, particularly those in senior roles, spending as much time as possible with clients. ?Clients appreciate spending time with a professional adviser. This is us investing our time.?
This culture change, more than anything else will contribute to strengthening of the business relationship between accountancy firms and their SME clients and will significantly benefit both parties. Simon Warren is managing director of CaseWare. Image source
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