The need for accounting practices to continually evolve is not just about driving efficiencies. It's an important part of the process of retaining the business's most important asset, its staff.
Now more than ever, it's essential for more traditional accounting practices to engage with younger staff and clients to avoid a situation in which the younger generation set up in competition with their former employers.
"It's critical for partners to develop a mindset whereby they are genuinely engaging with younger staff," says David Clatworthy, Accounting Segment Head at Macquarie Group.
"Some firms have recognised the need for this engagement and, for example, have made a younger member of the practice accountable for technology. This is a great idea from which other firms could learn," he says.
According to Clatworthy, other firms are inviting younger members of the practice to contribute to the decision-making process in management meetings, to help challenge old ways of thinking.
Taking steps such as these can help to address the succession planning issues many businesses are facing. "Engaging the younger generation and getting them excited about the future directly correlates to how likely they will be to buy into the business," Clatworthy argues.
More forward-looking practices are also taking an intergenerational approach to their business, matching advisers to clients based on demographics. They are engaging their clients' children when they start work and putting them in touch with people in the practice of their own age.
"Smart firms are linking the right clients with the right accountants based on skill set, demographics and style. This will pay dividends long-term," he says.
Clatworthy acknowledges it can be challenging for older firms to embrace new business models if they feel doing so will result in a reduction in profits. To address this, he suggests setting up a small incubator that sits alongside the main firm, where younger staff have permission to test new ways of doing business.
"Doing this gives the younger generation an outlet to try new things, but also allows the business to control the cost base and maintain profitability," he explains.
As the business model in accounting practices is changing, so too are the services clients appreciate. While they acknowledge they still require services such as the preparation of tax returns, what they value is advice.
"Young practices that aren't lumbered with legacy systems and processes are more able to focus on the advice component of the services they offer," says Clatworthy, explaining that younger practices are more likely to have invested in new technologies to automate the more procedural aspects of providing accounting advice. In addition, these practices are focused on outsourcing administration, allowing more time to focus on client engagement.
"Younger advisers are much more future-focused than previous generations of accountants," he says, adding that they are more inclined to use software to produce dashboards about clients' future expenses and cash flow forecasts with which to start discussions. This effectively elevates the way they engage to the advice realm.
One practice that has successfully achieved this is technology-led accounting business mi-fi Accountants + Advisers. "I don't think of myself as a career accountant," says co-founding partner Campbell King. "We're interested in the business of accounting. We saw that the way things were being done in most practices could be done better."
King agrees an important catalyst for the shift currently taking place in accounting has been the advent of cloud-based technology platforms through which accounting practices can be run.
"We're trying to capitalise on the opportunities this delivers. Everything is changing so quickly and to be at the forefront of this is what drives us. Of course, we would much rather spend time with clients than crunch tax returns, although that's still an important part of what we do as a firm."
His advice to established businesses that want to engage their younger staff is to give them responsibility to pique their interest in taking over ownership of their firms.
"I believe that more senior partners should ask younger staff about what's changing and give them ownership over projects to modernise the firm. It's important to understand you don't have to change everything in one go. Do one part of the business at a time and see how it goes," he advises.
When King and his partners developed the business's technology strategy, they spent considerable time assessing the different options available and how they would assist the business to develop over the longer-term.
"For us, it's all about using technology to drive efficiencies and economies of scale. We decided to use a single accounting platform because we wanted consistency across our systems and procedures, rather than to have people use and learn multiple systems," he says.
King acknowledges one of his firm's biggest advantages is that it isn't encumbered by legacy systems. But at the same time, it also doesn't have the established fee base of the older firms. He also says there's a place in the market for both larger, more established firms and new upstart firms.
"The market is so big there's room for everyone. But there is a generational change happening at the moment and older firms need to acknowledge that if they want to attract younger staff," he says.
Another business run by Gen Y practitioners is Accodex. Founding partner Chris Hooper says he was fortunate in that when one of his peers acquired his father's bookkeeping firm, he was able to join the business and build an accounting practice from it. At the core of the enterprise is a commitment to being at the forefront of emerging accounting technologies. "The first mover advantage is hardwired into our DNA," he says.
Hooper says there's a real risk to businesses that don't migrate their operations to new, cloud-based technology platforms. "Firms are moving to the cloud because of client demand. Accounting practices will either adapt to this or clients will leave them to go to firms that do offer the solutions they want."
Interestingly, Hooper says it's not the technology itself, but the propensity to accept change, that's essential. "Firms need to be mindful of change management principles and use a consultant to help manage this process if necessary."
The average age of the people who work in Hooper's practice is 23 and the business has a KPI of keeping the average age of staff and partners below 30. Which means Hooper is already planning his transition out of the business. "There needs to be a constant stream of new blood to challenge the status quo," he says.
Hooper agrees with King that one of the keys to engaging younger staff is to promote them quickly. "It's important to promote people on merit; but all too often partners promote people who are like them, rather than looking for people who could add a diversity of views to the practice. It's also important to ask the next generation what they want from their careers and meet that need. Promote earlier to avoid people leaving the business in their 30s and 40s."
There is a range of different approaches more established businesses can take to ensure they are not left behind in what amounts to a revolution happening in the accounting sector. The idea is to explore the available options and start with one project that will help the firm retain younger staff and clients and remain at the forefront of technological developments.