"Become a virtual FD or retire"

"Become a virtual FD or retire"

Barbara Kroll explains how, as the role of bookkeeping begins to change fundamentally, accountancy practices can exploit real-time information to provide a true virtual financial director service.

The situation is being made worse by SMEs reducing internal staff numbers. With clients increasingly struggling with their accounting function and often-unwieldy bookkeeping software, accountants are spending more and more time correcting mistakes and repairing bookkeeping errors. As a result, many accounting practices are resorting to deskilling – employing less qualified individuals to handle this mundane yet essential error correction task.

But there are other options. Rather than trying to make money from disruptive bookkeeping services, accounting practices need to embrace market demand and exploit valuable, highly qualified expertise. SME organisations need financial advice today more than ever before. They need an up-to-date position on cash flow; they need to reduce debtor days; and understand the best way to approach the bank for better finance. They don’t need – and in today’s cloud-based technology era, should not even consider – just basic bookkeeping.

Instead of spending time correcting historical information, accounting practices should be looking to exploit cloud-based bookkeeping solutions to take a far more proactive role in each client’s financial affairs. Unlike traditional bookkeeping software solutions, these systems combine a degree of self-learning with integrated workflows between the accountant and SME, fundamentally transforming the way SMEs and accountants can interact on a day-to-day basis. In addition to being a cost-effective option for businesses, with a pay as you go model, a growing range of customised solutions delivers vertical market specific bookkeeping to add further value.

For the accounting practice, the cloud model delivers real time access to this client information, enabling continuous review and immediate remediation of problems. This real time accountancy process delivers a number of benefits: at the most basic level, a VAT return can be completed in a second because the information is already in place and verified. There is no need to spend extra time checking that figures are accurate, in the right period and that accruals are correct – that process has already been completed. Similarly, the end of year accounts process is virtually seamless, providing significant cost savings for the accounting firm.

Critically, this approach can transform the value of the service offered to clients. Rather than low profit bookkeeping, firms can offer a range of services that essentially fulfil the role of a virtual finance director. From reducing debtor days by undertaking credit control, to delivering Key Performance Indicator (KPI) tracking or even attending a board meeting to provide an up-to-date financial position or a meeting with the bank to discuss financing, it is these services that both exploit the expertise and experience of the accountant and meet the needs of the SME business community.

For those organisations large enough to retain a dedicated FD role, the real time accounts process provides unprecedented insight into financial performance. From KPI monitoring to working capital optimisation, the practice can work in conjunction with the FD to drive business value, creating a relationship that is a far cry from traditional debates surrounding the accuracy of postings.

However, while the technology components are in place, and the SME market demand is clear, accountancy firms will need to make significant changes to existing business practices if they are to realise this vision. The first step must be a move away from deskilling towards actively employing individuals with business experience who can add value to the accounting skills. The move is likely to be supported strongly by younger partners within the firm who are keen and confident to embark upon new business practices and exploit technology innovation; individuals who recognise that the next 30 years of their working lives will not be sustained by traditional accounting models.

It is also essential to change the way the business interacts with clients. Using online services to offer a dedicated client portal provides not only up-to-date accounts information, but also KPIs and information about the end-to-end services on offer. Firms must also be far more transparent about costs, with end-to-end service provision options based on transaction volumes to provide clients and prospects with an immediate estimate of potential cost of these added value services.

The demand for change is certainly strong. Accounting and financial advice is without doubt one of the most important professional services, especially for the SME that cannot justify a dedicated, board level finance expert. There is now a real opportunity for accounting practices to take control, evolve beyond bookkeeping and exploit existing expertise to create and deliver an end-to-end service portfolio.

Barbara Kroll is managing director of Twinfield UK, the online accounting business of global information provider Wolters Kluwer.