How is the impact of MTD and digitalisation upon practices presented? It seems popular to outline a scenario which for most practices is totally different to the current method of operation and indeed might well be termed in other parts of the press as ‘doomsday scenarios’.
Partners looking back over the last 20 or 30 years have dealt with the intense pressure of addressing the Millennium Bug, various FRS requirements and standardisation of returns for HMRC.
The laid-back response is that digitalisation is just another frightener, postulating an unlikely scenario where based on experience, with implementation dates either delayed, aborted, or the constituent reporting requirements watered down.
The reality of MTD for VAT submissions is, however, a move which can only be expanded to other returns within the short term. The IT and software sector see a significant marketing and sales opportunity to sell more licences and to embed clients with their systems and integrated suite of programs.
The pace of introducing new specific applications, customisation of reporting requirements on an industry sector basis, plus the drive towards paperless, has made digitalisation a nearby reality. What is needed, therefore, is a new approach to how your firm operates, and how your people operate within it.
‘Digitalising’ your workforce
Very few of the articles on this topic address the question of how digitalisation is going to change the constituent’s skills, those recruited and developed within a practice, and how a traditional practice might move from its existing structure to train staff and reposition their roles for a digitalised world.
There’s also little third-party consulting support where practitioners and/or partners can seek independent advice without going to a software provider interested in driving the sale and the perceived benefits of their own system. This does not necessarily cater for the overall strategy of the practice and practice portfolio of clients, which of course varies from practice to practice.
Current thinking and sentiment towards AI’s impact on jobs and skills throw up the professional service sector as an area where perhaps employment opportunities will be lost, but significant productivity gains can be achieved.
A key element in this change process that will need to be addressed is resourcing. The traditional employment path, where trainees are encouraged to stay with a business and pursue their careers with one employer or at least progress through a period of training and then taking on senior managerial and then partner level responsibilities, could be challenged as an inappropriate model for a digitalised future.
There are many firms who are struggling with the costs of training, seeing a reduction in audit clients and then failing to recruit appropriate people at the appropriate level to meet the service demands on their business. The audit skills and resourcing audit work has long been a catalyst for learning the trade and broadening experience.
The pyramid, or ladder, system that most accountants in practice have followed has been well entrenched historically. It has provided a discernible pathway to partner level.
Digitalisation, however, will bring about more fundamental changes and it will be root and branch change to the workflows and skill sets to be recruited, maintained and trained for future practices.
How one firm has modernised
The prime example that I recently came across was a management accounting business. They specialise in providing monthly accounts with some form of ‘FC’ or ‘FD’ commentary. The business was focused on one industry sector. Five years ago, this business was dominated by data entry work – so bookkeeping and accounts preparation were key pinch points in their workflow.
But over the last 5 years 70% of the data input, whether sourced from banks or from client’s suppliers or automated payroll feeds, has been digitalised. Data entry bookkeeping has been reduced to 30% and is declining year-on-year. In turn, standard IT client software has been upgraded and a standardised reports created, albeit with some customisation where required.
Taking these changes into account, the firm faces:
A much-reduced requirement for bookkeeping and data entry;
An enhanced requirement for an administrative role, chasing clients and suppliers to ensure data is delivered to a pre-set timetable;
An IT resource, whether it be outsourced or internal, to on-board new clients digitally and to work on converting clients who have not yet migrated onto the portal input system; and
A resource to analyse workflows and automate every step as new software is developed.
The emphasis and investment made in new client on-boarding brings quality data feeds and the preliminary review stage for the accounts preparation has been eliminated. Therefore, client account managers have more time to review the reports, then either hand onto partner level or interpret and advise clients on potential actions to be taken.
The recruitment and training within this organisation has evolved and changed. Some of the skillsets that were needed at the account’s preparation level, where the preliminary reviews are undertaken on clients’ accounts, has been eliminated. This client now employs administrators to chase information, contact the clients and ensure the data is delivered within the pre-set timetable.
The role of the analyst and IT specialist is key to this change. The skills to on-board clients, which is partly of a technical IT nature, include building the datalinks and integration - which are not client-facing roles. External recruitment of these skills will be necessary, challenging the old pyramid structure.
The client-facing side of the business is now clearly with the administration, manager and partner level. The need to continually evaluate new processes will be ongoing; new ways of bringing data onboard new ways of delivering FC/FD advice or highlighting critical situations on interpretation of the data.
Steps towards modernisation
We are therefore looking at wholesale change and little advice on how a traditional practice can move progressively in a planned manner into the digitalised world. The ongoing developments are all dynamic and require investment. Current recruitment however needs to take into account the new model.
In talking to a large firm who fill 200+ training positions every year, they are now understanding and planning for the retention of only 25% of those trainees whereas previous plans had targeted a retention rate of 50%. They are looking at the recruitment of more varied external skillsets to fulfil management and technical positions for their three-year horizon, rather than relying on internally trained individuals.
An HR talent plan is therefore required, but to do this you do have to firstly agree and understand the level of digitalisation to be achieved for a business and at what speed and second the talent already in sourced. In the example above, the client was an early adopter but it has taken some five years to bring about a fairly smooth change in the workflow - and a definitive step change in recruitment and training.
It is more difficult to significantly change a traditional practice with existing loyal staff and a fairly rigid work flow - but not impossible. It should similarly be tackled with an open-mind and solutions keenly sought.
Keith Underwood is managing director of Foulger Underwood.
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