Congress Fee Speech Ian Morris President ICAEW
Congress Fee Sept 2006 Speech Ian Morris President ICAEW
Ian Morris speech at FEE conference in Versailles – 7-8 September 2006
Ian Morris , President of ICAEW and partner in two practices which operate regionally in 8 offices and together have 15 partners,120 staff and a combined turnover of E7m.
This puts us at the bottom end of the top 100 practices, of firms registered with the Institute. (8,500 firms have just one partner).
We’re a general practice. We provide a range of services to family businesses, in particular audit, tax, investment business, advice for start-ups and growing businesses.
I believe passionately in Small and Medium Practices.
Why? People trust us and therefore come to us because we can help them sleep at night.
We help them not just with their business – also with their marriages, divorces, remarriages, their children’s education, weddings, etc, their retirement planning, even financial planning for their families when they die.
We’re the catalyst that helps their business to be profitable – and so supports their family.
We will always be necessary because we offer a long term trusted personal service.
What are the challenges UK SMPs face?
And top of the list for me is – we need to become more clever. Sounds odd I know. Let me explain.
Technology is changing what people want from their accountants. All the grinding work – churning out standard accounts, compliance – will ever increasingly be done by clients themselves using technology.
Or it can be outsourced. I’ve seen some examples of how accounting firms themselves use that to service more clients.
Some in the UK are finding it difficult to get good quality people to do that work.
So outsourcing isn’t a threat so much as an opportunity for us to concentrate on adding value.
The need in firms is for people who can interpret information – and address the underlying issues. Make professional judgements.
Clients may be looking for processing – that’s standard. But what is going to keep them is the professional guidance that makes a difference to their businesses.
Being clever means knowing about new issues – IFRS. What is going to happen next over IFRS for SMEs is obviously a major concern.
It’s hugely important that we – as SMPs – engage with our respective institutes to join the debate about IFRS. We should have our voice heard – and not let the standard-setters – or governments – make decisions without consultation on something that’s going to have such a huge effect. We should get engaged in the policy debates – as well as the technical debates.
There are many challenges to increasing revenue streams – and the reduction of the number of audits is one of these challenges.
In the UK , we’ve found a significant number of practices are dropping out of audit. Instead, management accounts are becoming their bread and butter income.
High audit exemption limits, increased regulation of all auditors – it’s killing off the audit in the SME market in the UK . Ironic – given the regulatory emphasis on the value of audit at the large company level.
In response to the trend to allow more companies to opt out of audit, the ICAEW has launched a consultation to consider the needs of audit exempt companies. As part of this consultation, we launched a new service for audit exempt companies. The service is called the ICAEW Assurance Service, and may become very useful where directors want to add credibility to their accounts.
Another trend evident in the UK is the increasingly aggressive attitude on the part of the tax authorities, particularly the Inland Revenue, on tax planning and compliance in general, as well as a significant increase in the complexity of UK tax legislation. The ICAEW understands the need for the revenue authorities to gather tax on behalf of the government, but there is a general feeling that this is in danger of going too far. The ICAEW is speaking on behalf of its members and the business community continues to make representations to the tax authorities. The UK tax system relies, in no small part, on the goodwill of accountants to function and increasing demands on accountants including ever shortening timescales have been successfully resisted so far.
The future of SMPs may well be in specialisation – in particular in market segments – dentists, farmers, doctors, lawyers, landed gentry – or the special needs of private clients in niche sectors. Generalist services will still be needed. But focusing on a market sector or niche makes it easier to build and maintain a reputation. It certainly focuses resources – as well as the mind.
To have a successful small or medium size practice you need the same things as you need in all businesses. The overriding need is for a good team. You need to cut out bad wood early and quickly – it is kinder. There has to be a gentle but iron-fisted and acknowledged leadership and communication in all directions.