Regional accounting firms are quickly establishing themselves as agile and strategic operators not out of choice but out of an existential threat to their livelihood as staffing issues are significantly worse compared to their metro counterparts

In our discussions with accounting firms, they tell us there are 3 main issues they are now facing. Here they are and some suggested solutions.

1. Clients want more communication, more services and are prepared to pay for the services

While a minority of clients have issues with their accounting fees, the vast majority of clients want more service from their accountants; and are most are prepared to pay for it. In particular,  we see an increasing take up of monthly direct debit facility through access to regular (monthly or quarterly) advisory services in addition to your regular tax compliance services.

The barrier that accountants seem to face in providing additional services is the software hurdle of providing cashflow forecasting and cost benefit analysis to your clients.

At Felcorp, we are evaluating these tools internally to evaluate ease of use they are to use and suitability for your practice. We are currently evaluating the below tools and discussing these with our firms.

bvoPro Appraisal Software

This software enables you to prepare a business appraisal of your client in 10-15 minutes and then prepare an actionable business plan that you can track with the client to see how your advice has improved their business valuation over 12 months after implementing your recommendations.

Learn more about bvoPro here.

Spotlight Reporting - Cashflow Forecasting and Budgeting 

This forecasting, budgeting and reporting software can provide valuable cashflow forecasting reports faster and better than excel sheets alone. While it has a learning curve, once you have set up your templates and connect to your client Xero or excel data, it only takes 1 hour to create a good forecast report. We have tried this internally and believe this is a solid tool to consider.

Learn more about Spotlight Reporting here.

2. Emerging issue of junior and migrant staff

Unfortunately, we are seeing graduates, Skilled Visa Migrants, and new entrant candidates begin employed only to last for 6 to 12 months before being poached by a competitor firm.

The cost issue is that Accounting firms spend a lot of time and resources training up these new entrants (especially skilled Visa migrants) before the firm actually sees any return on investment on that staff member.

The new staff member leaves for more money or joins a Big 4 firm, relocates back to metro areas after completing their 12 months experience. Essentially, you have trained up a resource to no or little benefit to your firm but have provided another firm with a 12-month experienced junior accountant. If it's a local competitor who nabbed your staff, it's particularly frustrating.

We are warning firms to seriously re-consider Skilled Visa Migrants compared with developing an offshore outsourcing strategy. Too many firms consistently lose their migrant staff putting incredible pressure on principals and partners.

Since October 2023, 4 firms in our network have lost Skilled Visa Migrant staff either going interstate, getting employed as Data Analysts at the Big 4 or going elsewhere for more money. These firms made the switch to engage our offshore outsourcing staff as it was too costly and stressful to keep hiring skilled visa staff. 

3. Outsourcing is more common than we expected

We estimate that 50% of firms over $500k revenue are now offshore outsourcing. It is also very clear that those that have offshore staff for more than 12 months have much more profitable businesses and face significantly less issues. They are now coming to us for advice on practice acquisition opportunity. (Yes, we do have them by the way).

As a stark contrast, only 20% of firms under $500k revenue are offshore outsourcing. Unfortunately, we are seeing the other 80% lose 5% of their revenue each year and have no way to increase it. What's worse is that each decrease in fees each year results in accelerated depreciation in the value of their practice.

The opportunity now exists to acquire these firms through a combination of vendor finance and some small upfront cash deposit and bolt it onto your existing firm. Ensure that you use the offshore outsourcing as the key profitability piece to sustain the client book and look for new revenue opportunities.

Our suggestion is that if you know of firms that are struggling, reach out to them and offer them a succession pathway that can promote their self-worth and adequacy as a business owner. We have firms in our network that are successfully acquiring firms through succession planning and supporting the purchase with offshore outsourcing without offering painfully low valuations.

If you would like to discuss any of these topics above, please give me a call on my mobile or send me an email.

Mark Livingston

Partner

Felcorp Support

0421 984 010

marklivingston@felcorp.com.au

A wise person once told “make sure the people around you, including your staff and clients are successful; then YOU will be successful”. Over my 30 odd years in business, I have always endeavoured to help my clients achieve business success. It’s the small things, done the right way, that make all the difference. We always strive for that.