You are not going to make a huge fortune preparing year-end accounts for your clients. In fact, it's actually quite hard for accountants to make even a decent living from year-end compliance services. But it's still the most important work that you do.
In the August issue of their Economia Magazine, the ICAEW published the Accountancy Rich List 2015 the second annual run down of the 100 wealthiest UK accountants. Only 2 of the accountants in the list said they made their fortunes from accountancy services: Simon Dolan of SJD Accountancy (worth £140m) and Matthew Brown of Giant Group (£35m).
SJD and Giant are not accountancy practices in the way most accountants would recognise one - they are ultra large-scale compliance factories and umbrella companies, working pretty much exclusively with the contractor market. So, how do typical accountants running typical accountancy firms fare?
According to the Accountancy Firms Benchmarking Report 2015 produced by NatWest, the median profit per partner in small accountancy firms is £77,000. For those performing below average, the lower quartile profit per partner is £52,000. Considering that this survey's definition of a small accountancy firm was one with less than £1.5 million in fee income, it's likely that the profitability numbers quoted above are higher than seen in truly small firms.
It's not news to accountants that compliance work is becoming a commodity - with prices being squeezed continuously by both technological and market forces. For this reason, accountants are increasingly starting to focus on advisory and added-value services which are generally less price sensitive and are recognised by clients as being worth more to them.
Last Thursday I presented to around 100 accountants during a break-out session at the AVN Accountants Conference. When asked to show their hands, everyone in the room confirmed that they do provide advisory and added-value services to their clients. However, 95% then put their hands down when I asked if they provided such services to clients for whom they do not already provide an annual accounts compliance service.
So there we have the conundrum: it's hard to make a living from year-end accounts work but it's impossible to sell the extra, good stuff to clients unless you do the accounts work for them first.
Year-end accounts work is therefore more important to small accountancy firms than ever. What accountants need is software that helps them to maximise the efficiency of this work so they can profitably retain their compliance base to build advisory and added-value services on top of.
They need Checkmybooks.