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Tomorrow's Practice - the journey

Advancing thinking and debate

"Tomorrow's
Tomorrow’s Practice is ICAEW Practice research project designed to understand the forces that are shaping accountancy practices now and in the near future.


What's it all about
Tomorrow’s Practice is designed to provide a view of the future of practices, interpreting and collating the insight of clients and practitioners who are sharing their views on the most powerful forces that they believe are shaping demand for their services.

What will Accountancy practices look like in the future? What services will clients require them to provide?

The key immediate questions are as important as the longer term strategic challenges - how will payroll, tax and audit work be performed in the future? What skills do accountants have that will continue to make them essential service providers to their clients? What will be the effect of the consolidation of large national practices on smaller independent practices?

The project also explores how technology changes the way businesses require information – how it alters the way they meet regulatory obligations – and also how being on the move and having instant access to real time information becomes a critical factor in how practices serve their clients.

This initiative is undertaken in association with Intuit, who are a key supplier of software solutions to businesses and practitioners.

What we're thinking about

Tomorrow's Practice is exploring nine key themes.

Technological advances

Technology is changing the way all of us work. Who would have envisaged the ‘always on’ and ‘always available’ world we now inhabit? It has a profound effect on how accountancy practices serve clients and organise their own businesses.

Being connected to the internet is now regarded as a utility, we have moved into the age of ubiquitous communications and computing.

Reporting of real-time financial information has meant that many off-the-shelf financial tools can easily and smoothly replace data inputting. Not only does this take a great deal of grind out of the job for accountants, it also means services to clients have to be delivered very differently, if at all.

Big data has enabled many businesses to achieve a detailed analysis of all aspects of their business. Data mining and predictive analytics giving any business the ability to take the guess work out of resource planning and cost allocation. It has immediate benefits for companies in how they budget and business plan, but it also has important implications for the operational and interpretive elements of the service accountants provide.

The greater the use of technology, the more the risk of a cyber attack on a business. More and more sensitive data in the cloud means a heightened vigilance about cyber security. But it’s not just malicious attacks that make a firm vulnerable, power and service interruption are major threats to businesses.

Globalisation

To many globalisation conjures up thoughts of greater mobility between time-zones, movement of people and trading with countries either as customers or as suppliers.

For accountants in practices of any size all of this has important and immediate challenges to address. The adoption of global accounting standards has been much debated and much discussed. Greater harmonisation of regulation has meant that governance for the profession now transcends borders.

It also creates opportunities for practices as global accounting standards are harmonised.

Economic change

A new world order has emerged over the last two decades. Economist Jim O’Neill, once of Goldman Sachs, first coined the phrase BRICS to describe Brazil, Russia, India, China and South Africa. These were globally focused emerging markets that not only provided massive competition to the West, taking manufacturing capacity out of western economies, but also market places for products and services.

Even the BRICS have been supplanted by the rise of the MINT economies – where Malaysia (or is it Mexico), Indonesia, Nigeria and Turkey are the challenger nations.

The truth is, clients in domestic markets are embracing these opportunities. It requires a set of skills and sensitivities which accountants must adopt in order to advise their clients.

Changes in the economic order also mean changes to the power of currencies. The US dollar is no longer the global reserve currency while China’s Yuan is facing pressure as it changes how it is pegged to other floating currencies.

There are other massive economic changes that need to be understood – how are new currencies such as Bitcoin being adopted?

Regulation

There are two constant threats for any business under the heading of regulation. Too much of it, and not enough of it.

The UK government has pledged to cut red tape and do away with over 3000 regulations. No-one ever got elected saying they wanted to increase the burden of regulation on business. But accountancy practices actually play an important role in helping businesses comply with requirements from regulators and from government.

It’s a double-edged sword. On the one hand, businesses resent the onset of needless rules, but they like standards that give them a quality assurance and a mark of respect. These are often worn as a badge of honour by businesses, separating themselves from businesses that don’t strive for standards of excellence.

The commitment to cutting red tape and government bureaucracy comes in many forms, one example could be the raising of the audit threshold. Does this represent a risk to practices? Does this cut off a revenue stream?

Demography

At a recent debate I organised in Manchester, the motion on the table was that the old are stealing the young’s future. It proved to be a lively and emotive topic. Much of it pivoted around the rising age of the population. Have the baby boomer generation had the best of a free education, rising house price equity and a comfortable pension regime?

One of the reasons that we are living longer is that we don’t work in jobs that kill us. You might get a bad back from hunching over a laptop, but you probably won’t get black lung, which you may have done if you’d worked down a coal mine.

Between 1960 and 2010 a man’s average life expectancy increased by ten years, a woman’s by eight.

All these generational changes also represent market opportunities. The Grey Pound represents a significant economic force, not only in financial products but in consumer goods and travel services.

The counter argument is that the young have a different set of challenges.

Entrepreneur Julie Meyer in her book 'Welcome to Entrepreneur Country' says that no-one she knows under the age of 30 wants to work for anyone else.
Demographic change also manifests in different ways and represents generational challenges for managers. The aspirations and attitudes of different generations within a workplace make it a constant juggling act.

Energy and the environment

Companies must now report much more about the socio-environmental impact of their business, alongside financial information.

To facilitate this, there is a continued emergence of integrated reporting models, covering these new mandatory aspects.

As energy and water become ever more scarce, there is increased use of carbon taxes and other environmental market mechanisms to manage these issues.
But there is also a cost issue around managing energy use for many businesses – 96 per cent are still on a standard tariff and few have properly understood the potential advantages of installing solar panels and the potential uplift from managing credits.

The rise of ‘cleantech’ energies (e.g. wind/solar energy) spearhead a big focus on carbon efficient and secure forms of energy

Mandatory carbon reporting was introduced for FTSE companies by the UK government from 2013.

Skills

Although educational access is growing worldwide and there are growing trends towards online courses and accelerated learning, not enough students are reaching the workplace with the skills desired by employers.

Research of business chief executives carried out by PwC revealed that UK business leaders are more concerned about the availability of key skills than any of their Western European counterparts.

The inability to find the right people to do the right kind of job is the biggest issue that keeps leaders awake at night. The problem is the most acute amongst technology and engineering firms who report a chronic shortage of skilled employees.

Yet the young don’t lack enterprising skills. According to the Seven Hills Growth Britannia report, young people are becoming more enterprising. Business creation among the under-30s rose to 9.5pc in 2012 from 4.75pc in 2010.

The government is alert to the problem and initiatives like the UKCES Futures – with the promotion of apprenticeships and funding for training, but is it enough to tackle the scale of the issue?.

There are many other background issues concerning the distribution of skills. Will professional qualifications and further education be as attractive in the future as they are now? Will it lead to more people qualifying as solicitors, accountants, doctors, thus creating ever fiercer competition for such careers.

Business evolution

Growth companies… Only six per cent of all UK businesses are defined as high growth, but they create 54% of all new jobs. (source NESTA).

Self-employment, freelancing and flexible working, coupled with improvements in remote working technology mean that more workers than ever are no longer office-based. Companies have embraced this, with higher commercial property rents causing boards to consider just how many employees they need.

At every turn there are business models being turned upside down.

Just as online retailers such as Amazon continue to steal share from high street retailers, so there are apps to help you book a taxi, rent out your apartment to visitors to your city. Look at how music and media have been disrupted.

Closer to the heart of the chartered accountant, we see a shift in finance that may become as brutally transformational. Research from NESTA showed that the alternative finance market in the UK has grown 91% since 2012, and is estimated to be worth £1.6bn this year.

This includes peer-to-peer lending, which has grown by 211% over the last year, and crowdfunding which is gaining popularity as a funding route for creative projects.

Funding Circle leads the peer-to-peer lenders, giving out £16m a month to small businesses, with an ambition of cornering a minimum 10pc of the SME lending market reckoned to be at least £84bn each year.

New lines of business

If different service lines are declining - audit fee income is a reducing share of firms income (FRC report 2013) – then what other services will you be providing in the future?

There are changes in the corporate finance market too and we ask ourselves whether this is likely to be a service offered by practices to clients. Will they be squeezed by investment banks at the top end and niche boutique specialist practices at the other end of the market? Will on-line business brokerage kill off much of the corporate business sales market? In Japan, for instance, boutique firms are far more prevalent.

These are challenges for practices, but they are also opportunities. The ICAEW is now a legal services regulator allowing for the provision of probate services. Also new areas such as work-place pensions auto-enrolment could be vital part of the practice offering.

Ask yourself…
  • What are accountants good at?
  • Who provides that trusted service?
  • Where are the new business opportunities?
What we're doing

This initiative is undertaken in association with Intuit, who are a key supplier of software solutions to businesses and practitioners.

Activities have included:

  • Round tables held in Birmingham, London, Bristol and Manchester - enabling local discussion and debate.
  • Conference panel sessions - continuing the conversation at our practice conferences this year.
  • Webinars - widening the conversation regardless of geography.
  • Face-to-face interviews with practice and business owners - exploring the key themes from the point of view of practitioners and clients.
  • Linkedin discussions - a forum for member views, an essential part of this project.

Take a look at the insight received so far and find out more about each of the activities below.

What's it all about 

 

Activities

Local discussion and debates

Roundtables held in:

Bristol on 29 September 2014
Manchester on roundtable 18 September 2014

London roundtable on 8 July 2014
Birmingham roundtable on 11 June 2014
Conference panel debates

Continuing the conversation at our practice conferences this year

Sole Practitioners conference: 28 November 2014

Key issues covered at the Sole Practitioners conference:

Keep up to date with relevant and practical advice on a wide range of topics
Hear technical updates in tax and accounting
Get the highlights of emerging trends to help you with the management of your practice. 


Annual Practice conference, 3 September 2014

Key issues covered at the Annual Practice conference:

The changing face of tomorrow’s practice - what it means to you
Taking advantage of new revenue streams
The impact of technology on the way you work
Tomorrow's Practice: The future is coming, are we ready for it?

Facilitator: 
  • Michael Taylor, Founder, thinkmore
Panellists:
  • Arthur Bailey, President, ICAEW 
  • Simon Chaplin, Managing Director, Greenstones 
  • Rich Preece, UK VP & Managing Director, Intuit
  • Fiona Hotston Moore, Tax, Business Advisory and Forensic Accounting Partner, Ensors
  • John Howarth, Chair, ICAEW Student Council

Webinars

Widening the conversation regardless of geography. Webinars held: 

The future is coming - do we understand it?

Key themes covered in this webinar:
What are the external forces shaping the business world generally? How will these play out and affect how accountancy practices perform their services?;
What will accountancy practices look like in the future? What services will clients require them to provide?;
What will be the effect of the consolidation of large national practices on smaller practices?;
What new service lines are there for chartered accountants to consider?

What entrepreneurs want - what practices can offer

Key themes covered in this webinar:
What new businesses want;
Why cashflow matters and how accountants can help;
Negotiating the tax minefield - what new businesses expect;
The business journey - creating loyalty and a valued relationship;
How to offer leadership and management advice to new businesses;
Recognise what you have to offer and what value it has to a new business;
Debate how technology, disruptive business models, new approaches to finance and lean innovation is revolutionising business.
Interviews

Face-to-face interviews

Held across the UK with practice and business owners - exploring the key themes from the point of view of practitioners and clients.

You can view their thoughts, as well as that of Nick Williams, Head of Business Development at Intuit UK, on some key questions below.

  • How will the expectation of staff impact on chartered accountancy practice in the future? #tomorrowspractice

 

  • What other services could chartered accountants provide in the future? #tomorrowspractice

 

  • What will you not be doing due to technology or regulatory change? #tomorrowspractice

 

 

Fortnightly blog

This project is facilitated by Michael Taylor who charts the activities and progress of this project on his blog.

Blog posts

LinkedIn

LinkedIn discussions

Member views are an essential part of this project, sign up and share your views.

Visit our LinkedIn page.

View the Tomorrow's Practice findings