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What makes a future-ready accountancy firm?

In the world of accounting, “future” hasn’t always been regularly used, but what makes a firm future-ready is something that for the past four years Intuit has recognised in its network of accounting practices.

This year’s Firm of the Future winner Cloud Bookkeeping Services does bear some similarities to the previous year’s winner AIS Solutions, not only in that they are both Canadian, but they are both dedicated to educating other bookkeepers to be more future-ready, and small businesses to be better.

“The educational component to what we do is the biggest deal to us,” said Cloud Bookkeeping founder Tanya Hilts, referring to the firm’s Bookkeepers Bootcamp and Business Bootcamp. “We are teaching other bookkeepers about value pricing, workflow, technology and advisory work. With Business Bootcamp it’s coaching, we dig in with them to show how to work better and to implement plans.”

Hilts’ firm has evolved over its 20-year history, the last nine of which have been focused on bookkeeping and advisory services. With only three full-time staff, this Barrie, Ontario firm currently serves nearly 40 clients, down from nearly 100 over a year ago. In that time, Hilts said revenue has actually increased from £115,000 to £150,000.

“Essentially, we scaled back our client base so we could do more for the right ones,” she said. “We can charge more because we do more.”

Hilts also believes her small firm’s new status as a Firm of the Future is not something they were striving for, but that it is more of a recognition of how they’ve evolved and the services they provide versus just embracing technology. Her firm has been using QBO since 2012 and Hilts admits there were some initial challenges simply because it was not the desktop product.

But networking and connecting with other bookkeepers and ProAdvisors, as well as the evolution of the product itself, made everything easier. It also was the impetus for creating the Bookkeeper Bootcamp, which she feels ultimately pushed her firm into the running to be a Firm of the Future.

“People need an example of what “change” looks like, that’s what Firm of the Future is about,” said Ariege Misherghi, Intuit’s new accountant segment leader. “Emerging as advisor and being more welcoming of technology is what we tend to look at.”

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7 facts that are interesting to know about the future of accounting

Accounting, much like any industry, has seen its fair share of changes. It has proven to be a very challenging one too, but if you have a knack and drive for it then it might just turn out to be a really lucrative one.

People who are already in accounting or are planning to jump into it as a career, often think about the future of the industry and what will happen to it with the rapid technological development and automation being rolled. To answer that question and more, here are 7 interesting facts about the future of accounting.

1. You will not lose your job to technology

Yes, while we all harbour a small fear that we might just have to give up our work desk to a shiny robot, it is highly unlikely that an accountant will be replaced by a robot. However, with the advancements being made in artificial intelligence and enterprise resource software, you will be at the helm while the technology helps you do a better job.

2. The industry will keep thriving

With every day that passes entrepreneurship becomes increasingly popular which makes way for more and more start-ups to surface and eventually grow into companies. These very companies then seek out services in administrative procedures as well as financial ones which means accounting will never go out of business. Now is a time as good as any to be an accountant.

3. The more you are qualified the more you will grow

If you manage to get a master’s degree in accounting then you can rest assured that you will experience a career with a lot of room for salary growth. The extra time and money that you will invest in getting yourself a master’s degree will pay off twofold for you and more. So, take pass your official CPA exam as soon as you can and venture beyond that.

4. Having a specialty is sought out

It is true that hybrid careers have become the most sought-after ones such as people who have a degree in engineering as well as law or candidates who have a degree in finance and law as well. For accounting, however, if you can find yourself a niche and become an expert in it then you will be able to stick around in the industry for the long run. Try to take as many relevant courses as you can to grow your expertise.

5. International opportunities are abundant

With companies branching out and exploring new waters overseas, they send their delegates to form fronts and setups abroad. The core teams that go along include accountants so that they can cater to the corporation or enterprise away from home and it keeps it running as efficiently as they can.

6. There will always be opportunities in teaching

As future accountants enrol themselves for education in this domain, they will seek out business and finance schools to enable and provide them with the knowledge and the tools that they need. This is will be a cycle that will continue to go forever so you can try your hand in the field and in the classroom as well. Both experiences will benefit from the other.

7. Implications for Research

Accounting firms are conducting researches on the side as well to see the feasibility of new and upcoming technologies and the new kinds of frauds that come with those. Therefore, accountants with knowledge of digital technologies will help front the research endeavours which the entire industry will benefit from.

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Why annual cash flow forecasting is advisory gold

An essential but underdone advisory service that CPA’s should be considering is cash flow forecasting.

Why? It’s high value to the customer and after all, we all know that without liquidity, businesses wither and die and should be high-value to the accountant too in terms of fees and potential follow-on work.

Every annual financial cycle is an opportunity to sit down and set goals and project numbers forward with your significant clients. Looking forward is not only important, but often essential to identify and avoid any looming business issues or, more positively, for identifying new opportunities too.

This work was a key part of my own advisory practice growth and could be for yours too. My basic proposition to the accounting industry is that every business client deserves a cash flow forecast.

Every business client deserves an understanding of cash and liquidity for better decision-making – and your care and attention as a trusted advisor to “make it happen.” So don’t wait to be asked for help by a client in cash flow trouble or reactively when the bank needs some projections – start thinking now about what cash flow-related services you could offer.

Annual Cash Flow Forecasting

This is the single most obvious and useful accounting output. It should also be the most profitable and valuable service, if done efficiently and sold with a ‘value-based’ mindset.

Forecasting doesn’t have to be a big annual exercise, although a new trading year is a natural starting point. Periodic or ‘rolling’ forecasting – bringing in actuals and extending out the future view based on latest data and expectations – keeps the information fresh and relevant for good decision-making.

Scenario Planning

Scenario planning can you to easily create multiple scenarios from your initial budget. The power of this is that you can test various theories or ‘what if?’ scenarios for your clients; this is gold!

As an advisor, you and your clients will face many opportunities or obstacles to consider, plan for and/or mitigate. With a budget and cash flow forecast locked in, running scenarios, pricing changes, new revenue lines and margin improvements are easy and illuminating.

Cash Flow Management

Short-term cash flow management is the really low-hanging fruit service. Having a 90-day view of inflows and outflows gives the client some ability to micro-manage for cash flow positivity.

Pricing & Debtor Process Reviews

An often overlooked opportunity is to advise clients on their pricing model and Terms. These two areas, which encompass what and how they charge, what margins are achievable, how they bundle and promote and what expectations they set with their customers are fruitful areas to explore, advise and take action on.

Debt & Capital Reviews

Most businesses carry debt, have capital requirements and/or have material Balance Sheet items that impact on cash flow now and into the future. These can be forgotten if there is too much focus purely on trading cash inflows and outflows. Key areas of advisor focus can be the ‘right-sizing’ of existing loans, management of shareholder drawings, and future capital or investment requirements.

Final Thoughts

My hope is that accounting firms will embrace cash flow forecasting and budgeting work as a standard service for clients of substance, capturing value for themselves and their clients. Competitive advantage will accrue for those that make the ‘cash advisory’ move.

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Carillion’s demise spurs call for action against Big Four

MPs have said the stranglehold of the big four accountancy firms on the audit market needs to be broken.

Business and Work and Pensions Committees. say the competition regulator should look at breaking them up to prevent another situation like Carillion which collapsed months after accountants KPMG signed off its books.

But what impact might such a massive shake up have?

What have MPs proposed?

The committees want the government to refer the accountancy market to the competition regulator to investigate two possibilities. The first is breaking up KPMG, Deloitte, EY and PwC into smaller companies.

The second possibility is that the big four “detach” the audit part of the business which checks companies’ books, from consultancy part that offers advice.

The committees say this is needed because there is an inherent conflict of interest in having the two under one roof.

An auditing firm has an incentive to not highlight problems at a firm it is extracting juicy consultancy fees from. Non-audit work now makes up £4 in every £5 of fees for the big four.

Why have MPs proposed this?

The committees put forward the first, more radical, proposition because they say there is not enough competition in the audit market. The four firms sign off the accounts of 97 per cent of the UK’s 350 largest listed companies.

Firms over a certain size have to be audited and the largest of those companies have little choice but to employ one of the big four accountants to carry it out. No other accountancy firms have the manpower and other resources to be able to do the job.

This often results in “cozy” relationships like the one between Carillion and KPMG, which had audited the collapsed construction firm’s accounts for 19 years and failed to highlight serious problems.

What would happen if they are split up into smaller firms?

One possibility is that two or more smaller accountancy firms jointly audit large companies. France has this system and it has helped maintain a more competitive market than in the UK. The accountants produce a joint audit report and cross-check each others work, potentially making it more reliable. Both firms are then liable for the contents of the report.

Andrew Oury, partner at law and accounting firm Oury Clark says there “is some truth that ‘size matters’ but the cosy relationship needs disrupting”.

“Part of the solution could be an independent appointment from a wider pool of auditors for public interest entities – however those are defined.”

What would happen if audit and consultancy departments were split?

Accountancy firms would need to think of a new business model. Lower-level staff at the big four firms currently carry out a large volume of audit work. The job is inherently boring but the bargain is that new recruits slog their way through and eventually work their way up to more interesting and lucrative work. They also get their fees paid for professional exams.

If audit had to be hived off into a separate company the job would arguably be less attractive to talented graduates. However, it would at least mean that the employees carrying out audits are doing so because they want to rather than as a stepping stone to something else.

The most obvious positive is that auditors would clearly be working for shareholders of companies they audit, not the managers of those companies. This is, of course, the role that auditors are supposed to have been playing all along.

Is this a good idea?

It certainly has a lot of support. The Carillion disaster is merely a particularly high-profile example among many cases of auditors apparently failing in their duties. Apart from the two committees of MPs, the head of the accountancy watchdog, the Financial Reporting Council, also said recently it was time to break up the big four.

Sacha Romanovitch, the chief executive of the fifth-largest accountancy, Grant Thornton, has called for the CMA needs to investigate the sector. His firm stopped bidding to audit FTSE 350 companies recently, saying it was too expensive to do so.

Global megatrends are global opportunities for accounting profession

There’s been a lot of talk about “megatrends”, some of which are addressed in a recent OECD report.

It is clear that trends such as big data and artificial intelligence play into the future way in which we live and work. Depending on your perspective, these trends can be threats or opportunities.

With the right lens, they can be disruptors and enablers.  Embracing these trends is key to the future of our profession.

Technology and innovation allows for different and better ways of working, from simply collaborating, to being part of the bigger, broader contribution to global changes.

Big data and artificial intelligence for example, have enormous significance on changing the social and economic infrastructure of our global construct.

They also have a compounding effect on our profession broadly and individually, as we consider our roles as leaders in business and accounting.

The OECD report provides us with the most comprehensive insights yet.

These megatrends are catalysts in dramatically changing professions and the nature of work.

The Science, Technology and Innovation Outlook 2016 predicts that by 2030 “emerging economies are expected to contribute two-thirds of global growth and will be the main destinations of world trade”.

Innovation and technology are driving steep changes to workplaces across the world.

Be prepared

Accounting is no exception – it’s a profession that’s being influenced and shaped by a number of megatrends.

As a professional member organisation it’s our responsibility to prepare for these challenges and embrace these opportunities.

Globalisation is well in play across the membership sector. And the accounting and professional services is consolidating its approach and evolving to remain relevant to its diverse, increasingly tech-savvy member base.

The past 10 years in accounting has seen a number of mergers or partnerships between organisations, providing members with mutually recognised qualifications.

There are other more recent megatrends too.

Rapid advances in technology have led to the proliferation of huge industries in data, artificial intelligence and analytics.

The application of these technologies presents significant opportunities for our profession to leverage, as accountants continue to strengthen and leverage their vital roles to support the ever-changing needs of businesses and the communities in which they work.

Accountants will continue to provide the financial and technical rigor to enable the freedom of innovation and ideas, so integral to global growth.

Data analysis tools are already helping chartered accountants provide richer insights for their clients, while delivering greater efficiencies.

Accountants – from sole practitioners to those in big six firms – are all benefiting from the technology, freeing up these professionals in practice to spend more time providing strategic advice to their clients.

New opportunities

Artificial intelligence for those who choose to embrace it, will enable the provision of economic and strategic insights to businesses, which in turn allows for a greater role in global business growth.

New markets and new and emerging economies will likely see the profession become more diverse.

What will this mean for the future of the profession? What will a “future” accountant look like in this world? Will this mean more or less regional sole practitioners? Do skills diversify further – with the old “bean counter” image giving rise to commercially astute, practitioners with immediate business relevance from day one and graduation?

And what skills and experiences will be required to reflect the changing business profile, as we embrace more start-ups and move to borderless commercial entities?

It will most certainly change the way we currently work. The role of the accountant is society will certainly need to adapt to reflect the impact of these “enabler trends”.

Embracing these trends enables a richer contribution from the accounting profession, at both an economic and social level.

It’s a pivotal time for the profession. Megatrends bring mega opportunities.

Canada’s audit regulator releases report on Big Four accounting firms

Significant inspection findings lower in 2017; CPAB views longer term consistency through a quality systems lens.

In its public report on the 2017 inspections of Canada’s four largest accounting firms (Big Four ― Deloitte LLP, EY LLP, KPMG LLP, PwC LLP) released today, the Canadian Public Accountability Board (CPAB) reported a reduction in inspection findings across the four firms in 2017 compared to last year. It inspected 86 (2016:87) audit engagement files – six of those files had significant findings compared to 11 files in 2016 and 24 files out of 93 in 2015.

“While each Big Four firm demonstrated an acceptable level of inspection findings overall, CPAB continued to find exceptions where they are still not executing consistently across the organization,” said Brian Hunt, CEO, CPAB. “The need to fully embed audit approach improvements into every practice and every engagement still requires more attention.”

For the four firms, the majority of inspection findings related to significant accounting estimates, executing audit fundamentals, and professional judgment and skepticism. A significant inspection finding is defined as a deficiency in the application of generally accepted auditing standards that could result in a restatement. There are two restatements to date.

To better identify and understand impediments to improving firm quality systems and consistency in how audits are performed, CPAB will evolve its inspection approach in 2018 to incorporate additional operational reviews of the effectiveness of firm structure, accountabilities, quality processes, and culture.  The new approach will launch in the 2018 inspection cycle beginning in March 2018 at the Big Four firms. CPAB expects to apply the new model to the 10 other annually inspected firms in 2019 or beyond.

The Big Four firms share significant inspection findings and CPAB’s public reports with their clients’ audit committees.  CPAB strongly encourages audit committees to discuss the public report and any file-specific findings, if applicable, with their auditor.

CPAB’s 2017 Big Four Report is available at www.cpab-ccrc.ca.

About CPAB

The Canadian Public Accountability Board (CPAB) is Canada’s audit regulator responsible for the regulation of public accounting firms that audit Canadian reporting issuers. CPAB operates independently from the provincial regulatory authorities who oversee the accounting profession.  A world-class audit regulator, CPAB contributes to public confidence in the integrity of financial reporting, which supports Canada’s capital markets.  CPAB operates from offices in Montréal, Toronto and Vancouver.