Simply put, things are changing in a manner that we haven’t experienced since technological breakthroughs like the desktop PC, or the deregulation of the financial markets.

While there are many reasons for this cultural shift, the report found that it is occurring mainly in response to changes that will come to light over the next decade, as the 21^st century gets into full swing.

Have you wondered if your practice will be the same in 2030 as it is now, given the technological and societal changes that are happening? How will you prepare?

The evolving profession

A staggering 90% of accountants agree that there is a cultural shift happening in the industry. Why is this happening? Data suggests that it’s being driven by clients and the marketplace, who together demand more than the traditional number-crunching and compliance work that has, until now, been driving accounting.

This is what the data says:

What are the implications for your practice?

Giving the market what it wants

Market demands are just about anything a client could ask of a practice. This could be simply doing the year-end taxes, but it is increasingly becoming more focused on consultative and partner-oriented advisory services. Note that increasing client demands have become prevalent enough to have their own response and segment in the graph.

Practices are typically founded to cater for market demands. They wouldn’t be very successful if they didn’t.

But how are they to cater for contemporary market demands?

The easiest way to find out is to compare your practice to any new accounting firm in your region. This could be as simple as looking at what services it offers on its marketing material. What is its focus? Is it a specialist? If so, why do you think so?

You will also need to look at the culture. Do they operate mostly via social networking channels? Do they have physical premises or do the staff work remotely? This might seem crazy to some, but it is perfectly normal for others. It allows the practice to save money, which helps it pass on cost-savings to its clients. Many clients appreciate this forward-thinking approach because they could be in the same position themselves.

You could also ask yourself what a practice would look like if it was a start-up today. It is logical that technology would be at the centre of it. In the age of tax and payroll digitisation, you’d be unlikely to set up paper-based processes with clients who still want to bring you boxes of receipts. Would you be anticipating a 100% digital client list?

This is remarkably radical and trying to retrofit it to an existing practice is neither sensible nor desirable. But what bits of wisdom can you glean from this and turn into practical changes in your firm? You might not be able to do much at first, but you could start discussions with your staff about the direction of travel in future.

Regulatory burdens: How to respond

Accountants know the chain of events: Governments implement new legislation, which places strain on businesses. They, in turn, ask their accountants to make sense of it, and often to take care of it.

Has the regulatory situation gotten worse? Recent times have seen numerous financial scandals, forcing worldwide legislature to respond. Ironically, many legislatures in the Western economies have been trying to simultaneously reduce “red tape”. The result has been more of a reshaping of the regulatory landscape, rather than an increase or reduction.

Increasing, or simply differing, regulations remain a core business driver for accountants. It is also a driver of innovation, as different regulations challenge accountants to stay on top of their game. The Practice of Now Report shows that accountants globally agree that this is part of the cultural change.

Your practice has specialisations in regulatory necessities, but is it keeping up with the changes your clients need? Is there training available for you to learn what you need to know? These are questions that the Practice of Now’s findings suggest should not only be asked on a regular basis but should be investigated with the intention that changes are implemented immediately.

Leveraging ongoing digitisation

Accountancy and technology have been bound together for over half a century – the electronic calculator brought the industry into the modern era, and AIand bots are pulling it further into the future by fundamentally changing the way accountants work.

Accountants surveyed in The Practice of Now report do not think that technological adoption is happening fast enough. In fact, 85% believe that the profession in their country needs to increase the rate of adoption in order to remain internationally competitive. Respondents, when asked why firms are lagging, stated lack of time (13%), money (38%), and expertise (25%) were holding them back from digital transformation.

Accountants can be confident that technology is a game changer. Changes throughout generations have shown this time and again. Not adopting new technology would be like taking a step back.

The solution is to simply keep digitisation top of mind. Because technology is evolving at such a rapid rate, adoption cannot happen only once. New and useful products are coming to market on a regular basis.

For example, how good is your knowledge of blockchain and the switch to decentralised ledgers? How is machine learning fundamentally changing the low-level admin jobs within accountancy? If all this sounds like Greek to you, you could have a major problem – and one that will only get worse with time.

Research some technologies and think about how they would affect your current processes and tools. Look at how these technologies are being implemented within businesses. You could even make small investments in training and technologies but be sure to take your clients on the journey with you because, in the end, it’s them who will benefit most.

Adapting to generational changes

Much has been said about Millennials. The US Census Bureau reports that those born between 1983 and 2000 comprise the largest living generation by age. And 2018 marked the first year that people born in the 21^st century came of age.

Millennials were born into a world of technology and will incorporate it into all activities without a second thought. According to the Walking the Walk report by Sage, Millennials have a unique set of values that sets them apart from other generations. Over 60% of Millennial entrepreneurs say they have given up profits to stay true to their personal values, and 66% said they prioritise life over work. More than half believe that they will start more than one business in their lifetime.

The reason there is a cultural shift happening is because Millennials are out there creating businesses and impacting the profession. They might need accounting services, but they also know how to take care of the day-to-day processes. What they require most are service-oriented business partners who can guide them through the peaks and troughs of business life. Does your practice provide that? If not, how can you make changes to ensure you stay relevant?

The Millennial generation is not only affecting the client base; they are also entering the profession. There is much to gain by having Millennials on your staff. What better way to draw in Millennial-run businesses to your client base than to have your own staff who they can relate to, and who have the same value set? Be sure to look after your Millennial workforce – research shows that they have little tolerance for low-level work, and high expectations for career advancement.

Evolve and adapt

There are many challenges facing the profession at present. In fact, it might be an unprecedented time of change.

The pressure is on for practices to evolve and adapt. For some, this could mean radical changes. It will most definitely require at least root-and-branch evaluation of you processes – research shows that there is simply no other option if you want to ready your practice for the next decade.

This is yet another sign of the remarkable cultural shift within accountancy that the report has identified. It also highlights that many accountants know there is a deficit in an important business area.

When firms were questioned about why they believe the profession is trailing when it comes to technology adoption, they said that lack of time (13%) and money (38%) to invest in digital transformation were big reasons, while 25% believe a lack of expertise is holding them back.

Starting your digital transformation plan

If your practice is in dire need of modernisation and digitisation, here are some steps that might help kickstart your processes:

1. Know what you’re aiming for

What is the desired outcome of your digital transformation plan? Cost savings? Greater efficiencies? Better client service? Improving your public image with clients who require a technological approach from their accountancy firm? Maybe it’s a combination of these.

While these reasons might seem obvious, it’s necessary to map them out, in order to clearly understand what you want to achieve. Start by noting five to 10 benefits you believe the implementation plan should bring about. Once you’ve made your list, add details to each, and be as specific as you can. If you’ve listed cost saving, for example, try to add the amounts. If you’re hoping to grow your client sign-up rate, can that growth be expressed as a percentage?

2. Allocate the implementation plan 

According to the basics of project management, a hierarchical structure is best, with one person at the top of the organisational tree owning the project. This person will have in-depth knowledge of the plan, even if they did not create it (e.g. the plan might be created by one person and assigned to another member of staff).

This person will perform tasks and make decisions regarding budgeting and staffing for implementing the plan. They might create teams to handle specific parts of the implementation, some of which are highlighted below.

The buck stops with them. They will be the point of contact for all queries and will ensure the smoothest possible rollout. The ideal person to perform this function would be someone senior within the practice, who has experience managing transformation.

3. Keep track of the implementation

Documentation is another important component in project management, to ensure that everyone can see – both at a glance and in detail – when things are due to happen.

It is often necessary to split implementation into several phases, and to create specific plans for certain parts of the rollout.

If your practice is already using project management software, you can use this to successfully deploy the plan. Creating a few Gantt charts will also help you list milestones. Microsoft Excel also has several built-in templates you can use.

4. Agree on touchpoints and sign-offs

When doing a major upgrade project, people are often eager to start and don’t do enough preparation. Planning ahead can help avoid unnecessary time and money costs later on.

Touchpoints and sign-off processes should be agreed on from the outset. How will you know when you’re halfway through the project? Or even when you’re finished?

Look at the volumes you are working with, and what tools you have to support this. What kind of timeframe are you looking at for completion? Weeks? Months? If you have decided on a gradual rollout that will only affect new clients, it is possible that implementation could take years.

What to focus on

These are the main areas that firms focus on when embarking on digital transformation projects.

Client list

The majority of the work within a digital transformation will be determined by your client list. You will need to ensure that they will be compatible with your new way of working. While some clients will be entirely amenable to fitting in with this new way of working, others might not.

Usually a client list can be split into two categories. The first consists of the businesses whose attitudes, experiences, and interests make them perfectly suited to the first phase of your implementation plan. They might already be using cloud-based accounting software, or they might just enjoy exploring the benefits of new technologies.

The second category consists of those who are less amenable to change. These could be the clients who simply hate accounting, or who still use paper-based ledgers and a shoebox of receipts.

It might be helpful to create a series of scripts that can be used when talking to these categories of clients. The script should emphasise the benefits of the digital transformation and provide concrete details regarding its implementation.

Staff training

Skimping on staff training when making transformation plans is a common mistake within businesses. This is because training can consume large amounts of time and money, and people assume that all accounting software is fundamentally the same, especially to those training in accounting.

While there will be staff members who take to the new software with ease, there will also be those who don’t find it quite as simple. Without training, these people may come to dislike the new software. This won’t help the transformation you are hoping to achieve, and in some cases, these staff members might even revert to the old software, which could be catastrophic.

Ensuring all staff are trained is essential. Even staff who might not really need it are likely to discover tricks and tips they would otherwise have missed, and that can make everyone’s lives easier.

Software vendors offer training, as do consultancies. If costs are a concern, you could select one person to be trained in the new software, who can then train everybody else. While this is not ideal, with free resources such as webinars and PDF manuals to supplement the training, it might suffice.

New technology

A digital transformation plan will see new technologies being introduced into the workplace. This could include both software and hardware. A key aspect of  accounting is that mobile devices can be used, opening up the possibility of working wherever there is an internet connection. Staff will need to be made aware of this.

With this new focus on mobile, many firms are able to save on IT costs by having a Bring Your Own Device (BYOD) policy that allows staff to use their own phones and tablets to perform work tasks. This offers staff a greater sense of control and limits the number of devices they need to carry around.

Your BYOD policy should be stipulated in your IT policy, to ensure staff understand the basics of IT security. This includes not sharing passwords and installing anti-virus software on their devices. With the GDPR and POPIA in place, any data breach potentially carries serious penalties. This needs to be communicated to staff individually, and perhaps even written into their employment contracts.

Cultural change

While the above advice is useful, we cannot assume that digital transformation is as simple as implementing new technology. You need to remember why you’ve chosen to make the transformation.

The Practice of Now 2019 report found the 49% of accountants had formally examined their business practices over the last year, and 26% have done this over the last five years. This points to a profession that is building for the future.

A fundamental cultural change in the way your practice operates is what drives any digital transformation and is what will be delivered once the upgrades are completed. While you will still be doing your usual work, such as compliance or auditing, you’ll be adding significant extra potential and capacity to also do other types of work.

This significant cultural change needs to be communicated to your staff, and even to your clients, and basic training will need to be offered. Everyone should know that you now have the potential for new business advisory services, and an even more dynamic and responsive service for clients.

Once a digital transformation is implemented, your practice will be fully prepared for the future.

It might seem like simple advice, but many small businesses make the same mistakes early on, and it comes back to haunt them a few years later. Of all the roles that new business owners need to take on, managing the finances and keeping accurate records is the most difficult. It’s not only big financial disasters that cause businesses to fail. The build-up of small, poor decisions can also cripple a business.

Here are some money mistakes small business owners should avoid at all costs.

1. Not budgeting

When it comes to business finances, “playing it by ear” is not the best strategy. Budgeting is essential. Not only does it help you take care of your expenses, but it also ensures that you have enough cash put away for recurring but overlooked expenses, like tax and insurance. It also helps you reduce wasteful expenditure and offers insight into where you can cut costs.

Let’s use the example of a mobile ice-cream parlour. There will be fixed expenses like van repayments, salaries, and base ingredients. These will not vary much. So, keep an eye on the expenses that are variable. You might notice that your cone supplier has increased his prices by 20% over the last three months, which would indicate that it’s time to find an alternative supplier.

Drawing up a budget means that you will also be able to plan and save for your quieter months in winter, and you’ll be able to identify expenses you could eliminate – like flavours few people order.

You’re certain to run into cash flow problems at some point if you haven’t put a budget in place.

2. Freestyling your cash flow

Your cash flow goes hand-in-hand with your budget. Many small businesses confuse cash flow and sales. While you might have loads of orders for ice-cream cakes, until you get paid for those orders, you will need to cover all the expenses – taxes, petrol, wages – from your own pocket.

To encourage prompt payments, invoice as soon as an order is placed using accounting software and adjust payment terms with your suppliers. With the correct software, you’ll also be able to automate payroll, invoicing, and tax reporting, and it will keep you compliant with all financial regulations, meaning you can keep your eyes on more important things in your business.

If cash doesn’t come in quickly enough, you could find yourself needing to take out a loan to keep your business afloat, and the worst time to ask for money is when you need it most.

You’ll want to keep an ear out for government communications like the Budget Speech to find out more about the new tax regulations for the year. To be best prepared for tax-filing season, use your accounting tools and take advice from your trusted accountant.

3. Securing funding too late

If you’re already skipping payments because you’re short on cash flow, convincing your bank to lend you money is going to be near impossible.

The best time to borrow money is when you don’t actually need it and you can present a strong financial position showing lenders that you are well able to repay your debts.

If you’re really in a pinch and have absolutely no other alternative, you could use your credit card to fund the shortfall, but take heed: do not use your cards unless you can repay the balance in full each month. If you don’t, you’ll quickly get caught in a debt cycle that’s tough to get out of.

A good rule of thumb is: don’t spend money you don’t have.

If you need money quickly, one option is to contact alternative lenders. Ideally, you should avoid borrowing money altogether by building a financial safety net.

4. Not having an ‘ICE’ fund

You’re in the ice-cream business, and not many people buy ice-cream on cold and rainy days. Because you run a seasonal business, you will need to have savings to see you through the quiet months, or to help you recover if there is an emergency or unavoidable incident – like your van breaking down, or a faulty freezer spoiling your product.

In an ideal world, your ‘in case of emergency’ (ICE) fund should consist of savings of at least three months’ worth of expenses. This money should be kept in an easy-access investment account so that you earn higher interest but can also withdraw the money at short notice.

Do not use your credit card to cover big unexpected expenses. It’ll result in extra expenses you likely haven’t budgeted for, which will put you back into a difficult cash flow position.

Emergencies happen in every business. Make sure you’re prepared by having contingencies in place.

5. Not being money-smart

When you’re just starting out, see if you survive with the bare minimum. You really don’t need the best and latest gadgets and office space. See if you can work from home or share an office. Drive your ice-cream van until you absolutely need a new one, and try to use freelance resources before hiring full-time ones.

A good way to measure if it’s worth the expense is to ask if it adds to your bottom-line or if it will generate revenue. If the answer is “no”, then simply don’t buy it.

You need to be really good about record keeping. If the idea of admin makes your heart stop, hire an accountant to do it for you. They could even help you find tax breaks you didn’t know you were entitled to.

Receipts and invoices need to be processed immediately; they can’t wait “until you have time”. You can scan them on your mobile as you get them, and, if you have a cloud accounting solution, they will be uploaded and categorised automatically. Your software can also be linked to your accountant’s, and they can handle all the admin for you.

Nurturing a healthy bottom-line and staying cash flow-positive is essential to run a successful business. Check in on your finances often to make sure you’re on track to meet your goals. If you’re not, you can make the necessary changes now.

Your future self will thank you.

Article credit: Sage 

In Part 1 in this series, I discussed how the limitations of traditional performance metrics might stop your business from reaching its full potential. In Part 2, I looked at the different types of performance metrics you can use to complement traditional KPIs. In the final part in this series, I look at how you can run a smarter, faster, more connected business.

If, until now, you’ve been using mostly traditional metrics to measure business success and to identify growth opportunities, you might be wondering how you can start doing things differently, and how you can start using analytics to gather and benefit from the insights buried in your data.

Here are a few suggestions:

1. Choose the right solution

Your business intelligence solution should provide specialised, accurate reporting that will help you to identify trends and opportunities that can boost your competitiveness.

With a holistic view of your business, you’ll be able to track, analyse and manage customer and supplier interactions, and make faster, more effective decisions.

2. Break down silos

Traditional business metrics, like overall profit, usually highlights the negative. When the sales department sees a fall in revenue, they might question their performance. But the real cause of the revenue drop could lie elsewhere. It’s important that you help your people understand cause and effect.

For example, view your traditional metrics – like revenue goals – as the ‘effect’ and help your people understand the ‘cause’ by layering more indicative, proactive performance metrics on top. This will help them to understand how their efforts contribute to the bottom line.

Here’s another example. The sales team is often measured against traditional metrics like handling a certain number of client queries within a certain time period. But if you share metrics about profitable clients with them, they can focus their attention on better serving these clients, rather than ticking boxes and dealing with queries that don’t necessarily drive business performance.

Similarly, if you share metrics about stock levels with the sales team, they can proactively push these product lines, rather than pushing blindly to meet their own sales KPIs.

It’s up to you to decide how much data you share with your teams, how often, and in what formats. But if your people are all working towards the same goals, they’ll be a lot more effective.

3. Be responsive and proactive

Traditional metrics measure performance based on old data. By switching to real-time metrics, you’ll be able to see the information as its generated and act on it immediately. You can identify trends before they become problems in your business, or you can leverage positive trends to drive business growth.

Choose a business management solution with sophisticated reporting and dashboard functionality. One that connects your business with smart, cost-effective, scalable and secure functionality. An integrated solution should help you to manage your financials, customers and people while streamlining manufacturing, distribution and key supply chain processes.

When you start using data proactively and pervasively, you can:

• Gain more visibility into financial and client data.
• Reduce complexity when expanding your business.
• Eliminate operational silos that prevent collaboration.
• Reduce uncertainty about things like cash flow shortages and unpaid invoices.

Last word

Businesses are operating in a hypercompetitive world. Relying solely on traditional performance metrics will put you in a vulnerable position. You need to embrace and exploit the full range of data available to you, so that you can extract the business insights you need to get ahead.

Be sure to share these insights with the people who could benefit from them, so that all departments are united behind a common goal to increase profitability and drive business growth.