Our 2021 Accounting and Bookkeeping Industry Performance Report takes a close look at the performance of the industry between April and May 2021. Over 500 practitioners from accounting and bookkeeping firms of all sizes took part and the data gathered gives us clear insight into the industry as it stands today.
The report covers the key aspects of running a successful accounting and bookkeeping practice, from recruitment and growth to supporting clients through the pandemic. Overall, the data shows that the industry has been remarkably resilient, with just over half (51 percent) of respondents telling us that their business is growing at a similar rate or even faster than it was pre-pandemic.
We recently held a live panel with industry experts to discuss how key insights from the report can be used to future-proof your accounting and bookkeeping practices. Hosted by Kat Bond, Head of Partner Consulting & Verticals at Xero, our panel included Jonathan Bareham, Founder of accounting firm Raedan, and Paul Barnes, Co-Founder of GoProposal and Founder and MD of accounting firm MAP.
Read on for the key highlights.
Supporting clients with general business growth
Data from our report shows that practices growing faster than pre-pandemic are most likely to have 100 percent of their clients using online accounting software. The report also shows that harnessing technology (37 percent) and supporting clients with Making Tax Digital (43 percent) are seen as the key opportunities for growth for UK firms.
Both the pandemic and Making Tax Digital have brought business owners’ attention to their finances and how technology can improve the efficiency of not only their bookkeeping but also their overall business operations. Our panellists note that as awareness and understanding of technology increases, so will your clients’ questions and requirements.
The real challenge for accounting firms is to keep the momentum going and continue to have meaningful conversations with clients. Our panellists recommend taking the time to understand clients’ specific industry challenges, get close to what’s going on in their businesses, ask the right questions, and have conversations about what you’re seeing in their numbers.
Paul Barnes adds that it’s also important to consider where your clients’ blindspots may be. Whilst some may readily approach you for advice and support, others might be more reluctant to reach out and keep on top of their tax obligations and upcoming regulatory changes. Keep an eye out for those clients who may not proactively ask for help to ensure they’re aware of the support you can provide. Make it clear that you’re there to provide education as well as advice.
Boosting profitability for your firm and your clients
Another noteworthy finding from our report shows that firms with 75 percent or more business clients using online accounting software enjoy the greatest average revenue per client. The adoption of online accounting software is a key driver for boosting profitability for your firm. Our panellists note that firms often can’t give their clients the same level of support using desktop applications, so the value of cloud services has never been more prominent. Having a two-way channel of communication, where you can both look at the same data from anywhere in the world just with an internet connection, is vital to staying on the ball and spotting areas for optimisation, therefore boosting profitability for your clients.
Early adopters of cloud accounting software are now paying dividends as others in the industry prepare for Making Tax Digital. For those who have already leveraged cloud accounting, the next step is ensuring clients are maintaining high-quality data. From there you can begin having conversations about further improvements to their accounting processes such as streamlining payments, automating payment collections, and better managing their payroll. It’s also worth looking at bespoke applications that are relevant to your clients’ industries that could further optimise their processes and boost profitability.
Recruitment and retention for your firm
Data from the report shows that 30 percent of firms will be hiring more full-time staff in the year ahead. With a shift to remote working as a result of the pandemic, firms are no longer focused on hiring the best local talent, but can now consider hiring the best global talent. As mentioned above, early adopters of cloud technology will benefit the most, as they’ll already have the infrastructure in place to support a digital workforce.
Equally, the recruitment boom also offers the opportunity to consider your retention strategy. Our panellists point out that you may not be the only firm that’s looking at a recruitment drive, so it’s important to evaluate your employer brand and retention initiatives. Specifically, consider the wellbeing support your firm offers to avoid burnout, the steps you take to foster a healthy work-life balance, and how to create a meaningful workplace so that current and future employees have more reason to continue choosing your firm as their employer.
Consider evaluating new channels of recruitment instead of simply relying on agencies. Revisit your culture, brand, and values and be sure that you’re clearly communicating them throughout the recruitment process. Finally, Jonathan Bareham suggests it’s worth considering how your recruitment process itself could be adapted to mirror your brand and culture, such as by including video applications if you want to attract a tech-focused workforce for your digital-first firm.
Building financial stability for your firm
If you’re getting into providing advisory services, it’s important to first establish your firm as profitable and credible. Financial stability and pricing are at the very heart of this; make sure that the hard work you’re delivering to your clients is coming back to you in terms of value that you can then invest back into your teams and business. Take time to step back and build a uniform pricing system that all of your team are on board with.
Our panellists also discuss how scope creep has been a particular challenge over the last eighteen months, both with remote working and the number of clients that have been turning to their accounting firms for support. This is another aspect to evaluate when building your firm’s financial stability. Take stock of how much advice and support you may have given away for free to clients, such as furlough support, and communicate with clients if you have to tweak your fees going ahead. Jonathan Bareham notes that charging a small amount per client for furlough advice would overall pay large dividends to the firm whilst also making your employees feel as though their time is valued.
Evaluating and tracking how time is spent on clients will also help you make better decisions about how to package your services going ahead. This is especially important as you build your team, business and offering. For all the key data, download the 2021 Accounting and Bookkeeping Industry Performance Report or take a look through the key insights from the report for a quick summary. You can also access the practice health check tool to see how your practice compares to similar size firms.
The post Xero’s 2021 UK Industry Insights: How to plan for the future of your accounting practice appeared first on Xero Blog.