Small and Medium Practice Transformation During a Crisis
“There have been many lessons from the pandemic, and small- and medium-sized practices (SMPs) have had to evolve their practices to fit the changing needs of their clients. In some cases, this has meant assisting them with debt covenant waivers, obtaining new sources of financing, navigating cash flow issues, advising them on technology needs, and so much more than they may have been asked to do in the past. It has also changed the way that the firms themselves do business, as many firms, like their clients, have had to shift to a fully virtual working environment. In many cases, it has even changed the way firms try to retain key staff and plan for their future. Read on…”
1 New Service Offerings and Digitalization
The pandemic has fostered innovation for many firms. Businesses and individuals that are struggling financially are seeking ways they can operate more efficiently. Because of this, accounting and advisory expertise is needed more than ever. From questions about government stimulus packages, to adjusting business models, to needing general insights on financial health and resilience, accountants are helping current and new clients navigate these challenges.
The global health and financial challenges have propelled many professionals and firms further into advisory services, and this need will continue – offering a great opportunity for the industry. The trend towards offering more advisory services is not new, but the pandemic seems to have accelerated the rate at which this work is being undertaken by firms.
“The global health and financial challenges have propelled many professionals and firms further into advisory services, and this need will continue – offering a great opportunity for the industry. The trend towards offering more advisory services is not new, but the pandemic seems to have accelerated the rate at which this work is being undertaken by firms.”
SMPs need to embrace technology to better serve clients and attract and retain top talent. A survey of 3,300+ Gen Z’ers across G20 countries examined this generation’s views on public policy and the workplace. It showed that Gen Z expects digitalization and emerging technology will be a double-edged sword, both bringing new ways of doing things (meaning new and more interesting jobs) but also driving the decline of traditional job roles and responsibilities.
According to industry data, SMPs that embark on diversification (before digitalization) tend to have lower productivity. One pointer, noted in the Association of Chartered Certified Accountants and Singapore Commission report and quick guide, is to digitalize first—before diversification.
2 The Virtual Office & Hybrid Models
One major challenge for many SMPs in 2020 was converting to a fully virtual work environment. Many firms were not prepared to work in a virtual office setting. With stay-at-home orders and many office locations around the globe being closed even well into 2021, firms have had to figure out how to continue to provide high quality services to their clients, while not being able to be on site.
Google’s CEO Sundar Pichai said recently that the future of work involves a “hybrid model.” A March article from IFAC on the virtual environment and the hybrid office notes that as with other trends in technology in the workplace, companies will thoroughly understand the benefits and challenges of a hybrid office model only after it has become a common practice.
Remote Onboarding Best Practices (January IFAC Guidance)
Onboarding remote staff also comes with challenges. A January IFAC article notes the following measures should be considered:
- Getting the technology and environment right.
- Communication between the employer and employee and setting work expectations.
- Staff interaction.
AICPA 2020 Succession Planning Survey: Remote Work Trends
A 2020 Succession Planning Survey conducted by the AICPA noted that the majority of firms surveyed expected that more of their staff would work from home after the pandemic ends than they did before it:
- Almost three-quarters of multi-owner firms (71%) and nearly half of sole owners (47%) said that more of their staff would work remotely once the pandemic is over.
- In some cases, respondents expected the shift to remote work to be considerable. 18% of respondents from multi-owner firms and 17% of sole owners estimated that their employees would work remotely 40% or more of the time than they did before COVID-19.
Effective selection, implementation, and management of technologies, as well as training employees to use software solutions, have become fundamental to the success of any firm. When introducing or reviewing a technology strategy, a firm needs to first define its goals, then find and embrace a system that will achieve most, if not all, of those goals. IFAC has developed a Practice Management Guide, which covers leveraging technology to assist SMPs in developing an effective technology strategy.
3 Staffing Trends & Talent Recruitment Shifts
More work and tighter tax and other reporting deadlines have caused widespread staff burnout. Firms will have to be strategic and creative in attracting and keeping talented people as we continue to navigate what seems to be a never-ending busy season.
“Firms will have to be strategic and creative in attracting and keeping talented people as we continue to navigate what seems to be a never-ending busy season.”
Firms also may need to think outside the box regarding the skills they are seeking to perform new services and how those services are staffed. Firms may also be able to leverage technology tools in order to reduce staff hours spent on projects, allowing them to focus more on the big picture and advising their clients.
AICPA 2019 Hiring Data: The Rise of Non-Accountant Recruitment
In a 2019 report by AICPA, the recruitment of non-accountants as a percentage of all new graduate hires surged dramatically from 11% to 31%, whereas there has been an approximate 30% decline in the hiring of accounting graduates since 2017. The marketplace continues to demand different competencies and, while accounting graduates are still being hired, firms are also seeking other skill sets to expand their services. There is further anecdotal evidence to suggest that some of the technology-specific hiring is occurring at the “experienced hire” level—not just the entry level.
IFAC has developed a Practice Transformation Action Plan that focuses on how SMPs can embrace change, leverage technology, manage talent, and have a renewed emphasis on providing relevant and value-added services.
4 Succession Planning
A December 2020 Journal of Accountancy article notes that many CPA firms are now grappling with succession planning issues, according to the results of the AICPA’s 2020 Succession Planning Survey. More than half of multi-owner firms (55%) said they are currently experiencing succession challenges, up from 26% in 2016, the last time the survey was conducted.
Pandemic Resilience in Retirement and M&A Timeframes
However, the survey results indicate the COVID-19 pandemic has not affected most firms’ plans for succession:
- More than three-quarters (76%) of single owners and sole practitioners said the pandemic has not changed their time frame for retirement.
- The vast majority of respondents from multi-owner firms (88%) said it has not changed their senior partners’ time frame for retirement.
- Most single-owner firms and sole practitioners (72%) also said the pandemic had not changed their plans for merging or selling their firms.
5 Conclusion
The pandemic has shown that the pace of change will be faster tomorrow than it is today. Firms will need to continue to adapt and adjust their business models to keep up with their clients’ needs.