Growth drivers for accounting firms in the post-pandemic era
During the 2009 recession, when global GDP contracted -1.8 percent, revenue from the Big Four accounting firms dropped by 7.4 percent after having registered a record growth of 13.7 percent in 2008. Over the last decade, accounting firms have been on a continuous growth trajectory aligned to GDP growth, spurred on further by the expansion of the consulting business in the past few years. COVID-19 has contracted global GDP, implying a significant drop in the revenue for accounting firms.
COVID-19 has brought a pressing need to enable remote work at scale across all industries. As a result, accounting firms (known for in-person client experiences) are facing unique challenges. In accounting, top line revenues are still driven by chargeable hours, thus making it extremely important to maintain and enhance employee productivity while working remotely.
Accounting firms are also realizing that the post-pandemic world will focus on delivering more value to customers at lower cost, redefining the workspace, creating new technology-driven services and responding with agility to regulatory changes. The pandemic is essentially acting as a digital accelerator for accounting firms, driving a paradigm shift from brick-and-mortar to digital ways of work, in turn enabling growth, optimizing costs and improving the experience for employees and customers.
However, responding to pandemic-induced challenges will require accounting firms to rethink business and operations models through a technology lens. Four key aspects where technology will play a role in defining the future of accounting are future-proofing, recalibration, productivity, and trust.
Future-proofing: Reimagine business models
Accounting firms are being driven to reimagine the delivery of business processes with technology at the forefront, leveraging data-driven insights to generate more business, delight customers and be better equipped to create new futuristic services. What firms need to do today is to make holistic changes to core business with technology capabilities, such as using machine learning to bridge the gap between pre-defined rules. This will increase speed and drive down the cost of service delivery.
Accounting firms have a treasure trove of proprietary knowledge and experience which could be monetized and converted to products. The successful firms of the future will be those that establish the right balance of “in-person” and “service as a product” business.
Recalibration: Redefine business focus and operating models
Accounting firms now have an opportunity to recalibrate and consolidate many business processes without compromising on agility. A centralized IT function can steer the business to the right technology foundation and building blocks. This would bring extensive reusability across business groups without duplication in spending and effort.
While in the recent past accounting firms have started to build capabilities to become full-services players, in the aftermath of COVID-19, they need to reevaluate their approach and look at focus areas instead of a full-service play. In a short to medium time-frame, firms should focus on their core strength, which is their understanding of the business and the ability to use technology to influence the outcome. Technology enablement to drive virtual on-boarding/off-boarding and seamless work in remote mode will assist the new recruitment approach.
Productivity: Enable processes and tools with ‘employee-first’ thinking
In the post-COVID-19 world, employee productivity will be impacted by three key aspects: well-being, remote readiness and reskilling.
According to the Institute of Chartered Accountants in England and Wales (ICAEW), nearly a third of accountants (30.4 percent) suffer from mental health issues. More than two in five (43.5 percent) of accountants believe their job was a key contributor to their poor mental health. With COVID-19 making safety and the health of all employees a key priority, accounting firms will need to place more emphasis on mental well-being.
Besides employee well-being, accounting firms will also have to shift their focus from in-person collaboration to remote work readiness in order to drive higher productivity. Organizations will also have to accelerate their digital learning journeys by investing in learning platforms and embracing technologies like AR, VR and mixed reality.
The post COVID-19 market will become more competitive and the pressure will be felt by all employees. It’s important to draw the right balance between performance and well-being to avoid any long-term impact on productivity.
Trust: Institutionalized practices to demonstrate in market place
The pandemic will drive more intense focus on audit quality and accuracy due to the alarming growth of fraud, which has considerably stressed the finances of organizations across all landscapes. While the audit and tax industry are no stranger to controversies, the auditing process needs further safeguards. AI-powered software can be of significant value here. However, the auditing of AI practices to comply with eliminating or reducing biased standards is going to be crucial, and explainable AI will play a significant role, which requires robust governance and standards.
Embracing digital: The post-COVID-19 future of accounting
Accounting organizations need to gear up for a long period of uncertainty and post-pandemic change by building resilience in systems and people to withstand current and future shocks. They must be adaptable to build business models which could be easily tweaked, launch new services, and target new segments with agility — all while ensuring superior customer experience. Accounting firms that have already made significant investment in digital technologies were able to pivot well during the COVID-19 crisis; those that are still heavily reliant upon archaic infrastructure were not as fortunate.
In the near future, technology will be a great leveler to open up the market to all deserving players. Accounting firms that make the right investments in technology and in driving effective change management with a “people-centered, machine-first approach” to build a resilient, adaptable and purpose-driven core will be better positioned to rise against the COVID-19 tide.