IFAC’s Small and Medium Practices Advisory Group (SMPAG) recently discussed challenges for small and medium-sized practices (SMPs) related to the current economic environment and the new opportunities arising in a rapidly changing world.
Current SMP Challenges
High economic uncertainty is affecting almost every business, including SMPs and their small- and medium-sized enterprise (SME) clients. Members of the SMPAG noted some of the current challenges SMPs face around the globe:
- Succession planning
- The labor crisis and high staff rotation
- Work overload and managing staff burnout
- Labor pipeline issues with fewer graduates entering the profession
- Struggles with returning to the office environment after two years or more of being fully virtual
- Keeping up with firm digitalization and managing cyber risks
- Military actions in eastern Europe impacting businesses
- The environmental crisis
- Inflation and rising costs, including increased tax rates
- Supply chain issues
- Money laundering and corruption
- Political instability
- The shift to more advisory services and ensuring the right skillsets to serve their clients
- Higher fee pressures and lower profits in assurance services
- Smaller firms taking on larger jobs that they may not be qualified to perform
- High costs of software putting smaller firms at a technological disadvantage
The SMPAG responded to a quick poll during the meeting and noted that finding and retaining qualified staff, keeping up with standards and regulation, and keeping up with changes to technology and managing associated costs are the top issues facing SMPs.
Turning Challenges into Opportunities
In smaller breakout group sessions, the SMPAG discussed how to turn some of these key challenges into opportunities.
One key issue noted was attracting and retaining talent, which IFAC recently highlighted in an article on staffing trends during the great resignation. Members discussed that asking staff to speak at local schools and/or attend university career fairs can help with recruitment. Some firms are employing summer internship programs to help identify talent at an early stage and line up new staff well in advance. With the resumption of some in-office activity at this stage of the pandemic, some firms are finding that maintaining flexible work arrangements, especially with younger staff, is a good way to retain talent. Formalized mentoring programs have also become more common at firms and can help with staff retention. In some countries, higher workloads amid labor shortages have driven greater offshoring and outsourcing. Firms are also getting more creative with their marketing strategies, employing different marketing technologies, and using social media for recruiting.
With some countries offering significant economic relief programs, government reporting is becoming a more common service for SMPs, offering additional opportunities to provide both compliance and advisory services to both governmental entities and those entities receiving governmental funding.
There continues to be significant growth in advisory services. This offers huge opportunities for SMPs as they have remained trusted business advisors through extraordinarily challenging times (as highlighted in a previous article). One member suggested that firms could send a survey to their existing clients after services are complete to see what their additional needs might be – which could result in opportunities to discuss additional advisory services. A recent article covered specialization and trends in this area.
Some firms are also networking with other firms and specialists, including non-accountants, to be able to provide additional advisory services. These additional service offerings include:
- Estate planning
- Enterprise Resource Planning (ERP) services
- Property valuation and forensics in divorce cases
- Partnering with other firms to assist clients in reviewing eligibility and applying for government grant and loan programs
- Virtual CFO services
- Accounting and tax training as a service
- Business process outsourcing and re-engineering
- Compliance with any new Covid-related rules and regulations
- M&A and restructuring
- Digital forensics
Sustainability offers opportunities for SMPs to engage with clients around service offerings in that area; some firms are starting to hire and train in this area to be able to offer these services, in some cases hiring non-accountants as subject-matter experts. The effects of climate change, including more frequent and destructive weather events, pose increasing physical risks around the world – but may also spur the development of sustainability services. In 2021 IFAC published ‘Sustainability Information for Small Businesses: The Opportunities for Practitioners’ to highlight the range of sustainability services that could be provided by SMPs. This could include advice on how to optimize sustainable and responsible business practices, on strong governance within family businesses or identifying supply-chain risks and opportunities.
Inflation and rising costs may be an opportunity to talk to clients about fees. Some firms are seeing lower margins on compliance work – and this may be causing them to rethink their business respective models. There could be opportunities to streamline audits by using automated tools and techniques to decrease audit costs. Some firms are also considering value pricing models, as discussed in a recent IFAC article.
The trend toward consolidation among SMPs in some jurisdictions has important implications. While some may view this development as less than ideal, these mergers could result in decreased overall operating costs and the ability to expand firm service offerings. A recent article in Going Concern predicts that accounting firms will keep aggressively merging in the next year or two and explores some drivers of this trend.
While the current regulatory and economic environment remains challenging, some SMPs are welcoming change and trying to turn some of these challenges into opportunities. Firms that can embrace this change mindset are finding that they are still able to grow and even thrive.
IFAC has a dedicated practice transformation webpage featuring articles, resources, and thought leadership on key areas and initiatives for SMPs as trusted advisors to SMEs. A new podcast series features innovative practitioners sharing their stories on embracing digitization and investing in technology.
In addition, previous material on transforming challenges into opportunities has been published: