Death of the practice accountant?

Enterprise_Warrior

Has anybody else noticed that one man band businesses are starting to do their own accounting more and more or are using firms that offer cloud based software where clients do their own bookkeeping in return for a small monthly fee?

I am starting to think that the true value in accounting these days is tax planning as most business owners are not able to do this work themselves or have to take tax courses to do it themselves.

I am interested to know what other people think on this.

Bertie

Hi,

Tax will always be a winner.

Cloud based software is very popular, that's for sure. I think it suits smaller businesses with a reasonable invoice volume better than a larger business with masses of.

I see the benefit to the cloud, it takes away some of the mundane keying and coding - only if the client has a clue, if they don't, expect a mess.

What are your small businesses like in general? How small are they? What do you do for them? Bookkeeping, accounts and tax, accounts and tax, just tax? What are your fees like?

Your idea of small fee could be different to mine.

Enterprise_Warrior

Most of my clients are contractors and I do bookkeeping and accounts for them plus tax returns. Usually get about £1,200 a year from them each, which is good money but I keep seeing more and more cloud films charging £60 a month and its only a matter of time before the bubble bursts.

Bertie

Yes that is a reasonable fee to be charging.

I too have seen prices floating around similar to what you have.

Charging fees like that (£60 pm) is a race to the bottom.

The software itself, when using the fully loaded version, capable of invoicing and equipped for accruals accounting is not cheap! It certainly does not allow for much margin when charging £60 pm.

I'd hazard a guess that when you say you do the bookkeeping you actually do do it. Today many clients will do their own, with an accountant looking over things and performing year end adjustments and such.

The benefit is you can take two clients using the cloud in the place of one using the traditional methods.

I do think that client side the cloud is a bit of a fad, being able to check how the business is doing in real time on their mobiles and tablets - time will tell I suppose.

The larger the business the more you will do, and the more fees you can charge as the client won't have the time to do it themselves.

I wouldn't worry too much, just don't lower your prices to fight for the cheap clients - it's a race to the bottom that way.

Enterprise_Warrior

I agree.

I suspect though that large volumes of clients can justify the lower fee as they will eventually recover the cost of the software.

reader

Enterprise_Warrior said:

Has anybody else noticed that one man band businesses are starting to do their own accounting more and more or are using firms that offer cloud based software where clients do their own bookkeeping in return for a small monthly fee?



I am starting to think that the true value in accounting these days is tax planning as most business owners are not able to do this work themselves or have to take tax courses to do it themselves.



I am interested to know what other people think on this.

Yes- I've noticed this too.

Moreover, I've noticed more and more clients setting themselves up as ltd companies, setting themselves up with business banking, and vat/paye registration by themselves as well.

I've also noticed more and more using bookkeeping packages like Free Agent to do their own bookkeeping, VAT, payroll and self assessment. And all they need is just a once a year corporation tax service only.

I think as time progresses and cloud software gets better, .gov.uk literature on DIY gets better, and as Making Tax Digital comes in these clients and Free Agent, etc will add accounts and corporation tax to the ever growing menu of DIY services. Micro accounts, and single submission to Companies House and HMRC, will also make it easier for the corporation tax work to disappear as well.

With automation and software taking over much of the routine compliance work, accountants really need to add some advance advisory work, e.g. tax planning and advice, in order to make it worthwhile for the client to hand over their money to us.

At the rate things are going there is not going to be much routine compliance work left in as soon as 5 to 10 years time.

I'm currently doing ATT now (papers 1 and 2 done, paper 3 in May) and plan to do CTA next year in order to up skill and stay ahead of the competition (i.e. the robots).

What are your plans? How do you see things playing out?

Enterprise_Warrior

To be honest, I am looking at getting out. I have already set up a bakery business with my partner and the business skills I have learned have come in handy. Fortunately, robots can't prepare fresh food...yet.

reader

Enterprise_Warrior said:

To be honest, I am looking at getting out. I have already set up a bakery business with my partner and the business skills I have learned have come in handy. Fortunately, robots can't prepare fresh food...yet.

Sounds like a good plan, always good to have a backup just in case.

Enterprise_Warrior

The AAT magazine landed on my doormat this morning and there is an article on this very topic. It more or less says that bookkeeping and accounts preparation is going to be redundant as a service and we should focus on value adding activities such as improving the performance of our clients businesses. Considering most of the businesses in the U.K are one man bands or very small, these clients will not be interested in this service as they will be plumbers, electricians and various other contractors who source their own work and know their costs.

I see the the demand for practice accountants becoming less and less yet the accounting bodies will be pushing to encourage member growth. We will end up with too many accountants and not enough work which will result in a drop in earnings due to the oversupply of accountants. Effectively...a race to the bottom.

I remember when I first started in the profession, people saying you will have a job for life. Who would have thought that accountants would be one of the first professions to be replaced by computers.

I wonder what the AAT are doing about future proofing the profession for their members.

Bmer82

there is one very important aspect to accounting which will trip up computers being substance over form. yes whilst a lot of the data entry requirement will fall away the review of that information etc will be of more importance. I also read that article today and to be fair a lot of it made sense in that it was flagging that now is the time to add value to the accountancy offering and those seeing the opportunity within the industry changes will take the chance to pivot early and ride the wave where those that dont will struggle.

Enterprise_Warrior

My concern is that people get drawn into the profession and study the qualification believing that what they learn is what they will do in the real world. To pass all the exams and not be employable because they haven't developed the skills to be management consultants, is not a good thing.

reader

Enterprise_Warrior said:

My concern is that people get drawn into the profession and study the qualification believing that what they learn is what they will do in the real world. To pass all the exams and not be employable because they haven't developed the skills to be management consultants, is not a good thing.

Completely agree, the AAT magazine often trots out the "value added" line regarding a post MTD/automation world. However does very little in terms of training its students/members to offer "value added" services.

I think you would have to be a very naive 18 or 21 year old to want to go into a career in accountancy. The BBC did a study that said bookkeepers, chartered accountants and tax experts have a 95%+ chance of losing their job to AI/automation in the next 20 years. To be honest, I don't think it will take as long as 20 years. I think AI/automation/DIY really taking over within the next 10 years. Imagine being a 18/21 year old going into a career with no longer terms prospects. How would you repay your 25/30 year mortgage?

AAT should be doing more for its current members. Instead they are spending all their time trying to push the qualification across the globe to get new members.

reader

Bmer82 said:

there is one very important aspect to accounting which will trip up computers being substance over form. yes whilst a lot of the data entry requirement will fall away the review of that information etc will be of more importance. I also read that article today and to be fair a lot of it made sense in that it was flagging that now is the time to add value to the accountancy offering and those seeing the opportunity within the industry changes will take the chance to pivot early and ride the wave where those that dont will struggle.

To be honest, depending on the size of the client, I don't think the client will really care about substance over form. They will enable a bank feed between their bank and the software, the software will automatically post the transactions, and the client will just click submit and then wait and see whether or not HMRC challenges their claim. If HMRC does challenge the claim then presumably the client would need to pay the tax/fine, or hire a tax expert to defend them (if they can't defend themselves). Consequently I see the lower level, regular compliance work disappearing and the higher level ad hoc tax consultancy becoming the norm over the next 5 - 10 years.

Enterprise_Warrior

Exactly. Most of the qualification is teaching tasks that computers will be doing very soon. I studied the qualification a long time ago when it was thought that accountancy was a career for life.

reader

Enterprise_Warrior said:

I see the the demand for practice accountants becoming less and less yet the accounting bodies will be pushing to encourage member growth. We will end up with too many accountants and not enough work which will result in a drop in earnings due to the oversupply of accountants. Effectively...a race to the bottom.

To be honest, I think member growth will slow as 18 - 21 year olds realize that AI/automation is taking over. You would have to be quite naive to join a profession with a 10 - 20 years shelf life but take out a student loan and mortgage that will last 25 - 30 years.

Enterprise_Warrior

You will find that there are a lot of naive 18 - 25 year olds and the marketing by accounting bodies is very good and convincing, especially the AAT with their TV and radio advertising.

Bmer82

I am sure the syllabus will be changed to reflect the climate, but has anyone thought that with more automation HMRC will require more audits etc for comfort that revenue is not being lost? could give rise to a poacher turned gamekeeper scenario?

reader

The Government is cutting the number of HMRC staff so i very much doubt the number of check/enquiries will increase.

The Government is trying to simplify tax as much as possible (office for tax simplification, current VAT review, new IR35 online questionnaire, MTD pre populated with employment and interest figures, etc) so that tax payers can manage their own tax affairs quickly and easily (without having to spend hours on the phone to HMRC asking for answers).

reader

I don't see how AAT will amend the specification in line with AI/automation. What will they write under double entry: "Don't worry about it, the software provider will do it for you!"

Bmer82

> @reader said:
> The Government is cutting the number of HMRC staff so i very much doubt the number of check/enquiries will increase.
>
> The Government is trying to simplify tax as much as possible (office for tax simplification, current VAT review, new IR35 online questionnaire, MTD pre populated with employment and interest figures, etc) so that tax payers can manage their own tax affairs quickly and easily (without having to spend hours on the phone to HMRC asking for answers).


currently yes but lets face it HMRC has always been reactive rather than forward thinking, you can guarantee if they think they are losing out on a large scale it will be an area targeted, and the reduced numbers of inspectors will either have to be dealt with or outsourced

Enterprise_Warrior

My biggest concern as I have said before, is that MTD is going to eliminate most of the work that the vast majority of accountants do in the UK. As most of the businesses in the UK are too small to want any of these 'value adding services' that the accounting bodies are pushing for us to learn (to avoid becoming irrelevant), it is going to result in practices making redundancies and sole practitioners having to take second jobs to pay the bills. This will create a shift in practice accountants entering industry with lower salary expectations and before you know it, salaries will start dropping as jobs will be limited but candidates will be something like 500 to every available job. Simple economics of supply and demand.

The average chartered accountant currently earns around £35k a year. I have one client that is taking £50k a year who drives a lorry for a living and barely has any GCSEs to his name. You promote that to a person looking to enter accounting and I guarantee they will start looking at gaining a HGV licence over an accounting qualification.

I sometimes visit contractor forums online and over the years there has been a rise in SME companies reducing employee numbers and replacing them with temporary workers through their own limited companies. These people who would rather be employees, are forced to operate through limited companies and are resentful at the fact that they have to pay out money (use accountants) to get paid by the company they essentially work for. I see a lot of hate for accountants for this very reason and constantly see abuse regarding the fees we charge as we don't work for minimum wage or for free (in some cases). When MTD comes in, these people are going to love the idea that the 'money grabbing fat cat accountants' are going to be out of work because the government is making it easier and easier for them to do their own accounting. What's next...people fighting their own legal battles in court as they no longer need lawyers?

Those who survive in accounting will be either tax experts being paid to reduce their clients tax down to near zero or senior management in industry.

I see dark days ahead for our profession.

Bertie

I do think you are reading too much into this.

Folk have always been able to fill and file their own returns, but they don't because they don't want to.

Automation will take away coding invoices, that isn't bad surely?

Having data in real time isn't bad, but it is only as 'real time' as someone entering a invoice - where ever that is in the chain.

Show me a program that can handle, decode and calculate questions you ask of it for over 20000 pages of tax legislation.

Not going to happen.

A program can't do that, a program can calculate your position but only after you've decided, after relating X to Y FRS, together with section 123 of the tax act.

Can you imagine how many variables and drop down menus a program would need to cope with that?

Then add in the fact it would be a totally untrained, uneducated (finance wise) individual clicking the buttons.

MTD will still require adjustments, you'll still need to know what you are doing - the tax laws aren't changing just the way it's reported is.

You can't run a nation, a company, or a business without fully trained finance professionals, you can't run those mentioned with the power of a computer unless you've a professional operating it.

I'm sure at one point when bookkeeping grew from the paper ledger to Sage (or other) people had the same fears - yet we are still here.

AAT does include value added services within the syllabus - management accounting.

Spotting what a client is doing, asking them their plans helps you provide better solutions. Through having knowledge of financial accounting, management accounting and tax compliance already enables you to do so.

You are a valuable commodity, you can steer businesses, and you can help to drive people towards success.


Sounds like a sales pitch but it is true.

I have no fears whatsoever.

reader

Bertie said:

Folk have always been able to fill and file their own returns, but they don't because they don't want to.

Automation will take away coding invoices, that isn't bad surely?

Show me a program that can handle, decode and calculate questions you ask of it for over 20000 pages of tax legislation.

You can't run a nation, a company, or a business without fully trained finance professionals, you can't run those mentioned with the power of a computer unless you've a professional operating it.

Although taxpayers have always been able to DIY, MTD and the associated software companies WILL make it easier for them to do it themselves. This will result in a decrease in the supply of clients as young millennials will be doing their taxes on an app rather than paying an accountant £100 - £1,000/year.

Most clients don't need an accountant that can deal with huge volumes of legislation. In most cases, the software prompts will be sufficient for a client to use. Besides, if this forum is anything to go by, most AAT accountants have no idea about all the different volumes of legislation out there and most AAT accountants will never be in charge of running the finances of a nation or large company/business.

I think you are seriously underestimating the power of AI/automation. All the large software companies (Google, Microsoft, Oracle, SAP, salesforce, Apple, etc) are pouring BILLIONS into AI/automation. The accountancy/tax world we live in now will be completely different to the one we have 5 - 10 years time.

I agree with most of the learned commentators out their, i.e. AI/automation will kill off most accounting/tax jobs within 20 years (max) and MTD is the biggest change to tax since the advent of self assessment.

Enterprise_Warrior

For small business, they will not require management accounts as the owner will have a pretty good idea on how he is performing, especially if they are contractors. There is no other value to create for these people other than saying 'I know a secret way to reduce your tax bill to near zero, but you need to pay me loads of money to do it'. Accountants may have to branch out into other areas such as marketing and corporate finance to try and become a one stop shop for these people as it saves them hiring multiple people.

reader

Enterprise_Warrior said:

What's next...people fighting their own legal battles in court as they no longer need lawyers?

I see dark days ahead for our profession.

Within the last 10 - 20 years I've seen:

Checkout people losing their jobs in supermarkets and MacDonalds because people are using screens to checkout and pay for their things.

High street firms, like HMV and Blockbusters, closing down because they are losing customers as people shop on online.

The old photo processing companies, like Colorama, closing down as people take pictures on their phones.

VHS, cassettes, floppy disks, CD's etc are all virtually non existent too due to downloading and the Cloud.

I hate to say it but accountants will DEFINITELY join the above extinction list, I would say anywhere between 5 - 10 years depending on the nature of your role. Accountancy and tax is easy to automate and get to a stage where all the client needs to do is click "Submit". The thing that all my examples have in common is the progress and ruthlessness of IT/technology.

Enterprise_Warrior

Perhaps a shift to inheritance tax planning. Everybody dies at some point.

Bertie

Well surely if that is your true belief, it is best to learn how to write and code computer programs within the ten year time scale you've stated.

When you're established give me a call, I'll do your accounts.

Enterprise_Warrior

Bertie said:

Well surely if that is your true belief, it is best to learn how to write and code computer programs within the ten year time scale you've stated.



When you're established give me a call, I'll do your accounts.

I wish I could share your optimism but personally I am at a point in my life where I have done all my studying and have recently started a family with the expectation to reap to rewards of my labour but it appear as though I will have to pull myself away from my family to now do further study to stay relevant. This was never the case for accountants decades ago. Yes, computerised accounting became a reality but it didn't take a 3 year + course to learn it.

Bertie

I'm 32, young daughter - seriously, I'm not worried at all.

Maybe that's just because I've interpreted it differently to others.

reader

Bertie said:

I'm 32, young daughter - seriously, I'm not worried at all.



Maybe that's just because I've interpreted it differently to others.

I'm slightly younger than you and to be honest, I'm not worried either for the time being. This is because I'm currently doing ATT and want to do CTA afterwards so hopefully somehow I manage to survive when all the AAT-only accountants go extinct. I also may go into teaching in the next 5 - 10 years when the accountancy Armageddon happens which should hopefully be a more stable career path.

burg

I agree that automation is happening. I don't think it will take over our roles. I am embracing automation. We are using the cloud based apps as fully as we can. We are one of those accountants who are supposedly doing work for nothing. Our contractors fees start at £720 if they do their own data entry on Xero. This leaves us with £588 to provide support and the year end accounts and tax work. On average support is 2 hours per year. Accounts prep only takes 2 hours max with around 30 mins tax work and 30 mins meeting. So thats say 5 hours. Thats an average hourly rate of £118. Using the 1/3 rule many accountants use (1/3 for overheads, 1/3 for staff and 1/3 for profit) you could be paying your staff a very healthy salary if you had a practice full of contractors at this rate. They take very little time to actually work on. The lifecycyle is short but you can still make good money.

There is no doubt the future of accountancy is going to look very different to now. There will be those who decide to give it a go and do more themselves however we still have over 300 clients who could do it themselves who don't. Whatever the reason may be, lack of skills, lack of time, lack of knowledge or actual aprpeciation of what an accountant can add, they still chose to use us. We are not reducing in client numbers. We are growing. The last 6 months with no advertising has seen us grow by a few clients. I fully beleive that there is the work out there and will continue to be. The difference is the profile of a typical client is changing. Accountants need to recognise this and identify the services that this new type of client is after. You then develop the skills and offer those services. They then buy them.

I'm nothing more than AAT. I don't consider that a problem and am very happy with my AAT qualification. Yes I have other further studies that mean my skills are probably that bit higher but I am only a member of AAT. I don't see a need for anything else. I've never viewed other firms of accountants as competitors as such. We all have our own place in the market and our own target clients. We each serve those clients in a slightly different way. I ocasionally turn clients away as they don't fit what works for our practice. A modern one with a digital approach using tech as much as possible to aid us and clients.

From practices I've worked at and looked at purchasing I can really see how some accountants will struggle. Accountancy is already very different today than it was 10 years ago. Many firms still do things in the same old way and offer the same old services. I know some of these will struggle unless they do a great deal of work to catch up now. It may just be too much that is needed.

Overall I may be wrong but I believe I am right. The reason why I think I will succeed is that the od traditional firms who have not modernised will fail. Clients in the main will want this new way of working and they will seek out those who can offer it. The traditional firms will eventually disappear leaving a new wave of modern tech based firms who can go on to shape a new future of accountancy.