Finding a niche is an excellent way for accountants to unlock new, profitable opportunities. So it’s no surprise to hear that more and more practices are identifying and focusing on niche markets as a way of optimizing budgets and boosting internal efficiency.

What do we mean by a niche market?

Many firms will say ‘I specialize in SME clients’ without realizing that most other practices will say the same thing. As such, their clients have little to differentiate them from their competitors. Defining yourself as a niche firm, servicing a niche market, is a way to help you stand out from the crowd. While brand image, good marketing and so on can help you celebrate your unique selling points, perhaps one of the most effective ways is to focus on one or more niche markets, a move that brings additional advantages too.

What are the advantages of serving niche markets?

There are two fundamental advantages to serving niche markets and specializing as an accountant – optimized marketing and internal efficiency. From a marketing perspective, you can become one of the ‘go-to’ firms for clients in your sector and focus your marketing budget accordingly. This will be more effective than a general ‘scatter-gun’ approach and should bring greater success. Networking can be more targeted too. If the niche sector has conventions or meetings, you can attend these and expand your client base. Marketing via publications (such as the magazines or articles your niche uses) can also be quite focused, to make the public aware of your firm and specialization.

The second advantage is in the area of internal efficiency and will help improve profitability considerably. If you are processing accounts and tax returns for similar clients, you can use efficient processes. This should be considered carefully in your staff recruitment, operational requirements and software choices, ideally prior to marketing yourself in this niche in the first place. You should also consider informing clients in the sector of the way you want them to keep their records (to make both your and their job easier) and incorporate this into your engagement terms with them.

Are there other considerations?

If you focus on a transactional specialization (such as corporate finance or strategic tax advice – as opposed to providing compliance advice), your income may not be recurring. So you may need a good network of client providers who recognize your expertise so they provide clients referrals and ensure you have a continuing supply of new business.

Are there any disadvantages to tapping into a niche market as an accountant?

There may be, particularly with changes to tax and accounting requirements. Concentrating all your efforts in one area may also leave you vulnerable to economic change – for example, if a particular sector is hit by a recession. One particular specialization years ago (dealing with small subcontract builders) was affected quite significantly by a change in tax laws. So your niche may lead you to need to swiftly rethink your firm strategy.

How do I turn my practice into a niche firm?

Consider areas where you are technically competent or have an interest. We also recommend that you plan carefully in terms of resource and put together a strategic plan for expanding your firm. We have advised firms in this area in the past (from sole practitioners upwards) in order to ensure they plan for their futures. So consider, will you need to recruit additional staff? How senior do they need to be? Are they available or close to you?

Article published on: https://www.sage.com

In the business environment, there appears to be a widely held belief that value resides at either end of the spectrum: in the ‘Big Four’ networks offering scale and clout, or in the boutique firms that focus on a specific niche. As for the middle – well, nothing much happens there, right?

Wrong, insists Anton Colella, who was recently appointed Global CEO of Moore Stephens. In fact, with a 33 000-strong staff complement, his new home proves his point: “Moore Stephens may not be the largest network in the world, but we aim to be one of the most respected. With a growing reputation for integrity, trust and moral courage – we want to do doing things that are not just good for business, but which are good for society, too,” he says.

Those aren’t simply stirring words. Because of its size, Moore Stephens – and firms of a similar size – are able to work more closely with their clients, Colella points out. This model is of particular benefit to entrepreneurs, who often find that their businesses fail not because of a lack of demand or inferior quality products or services, but because their owners are more focused on the technical skills required by their chosen field than the general business competencies which ultimately keep a business afloat. Choosing to partner with a mid-tier firm means that entrepreneurs enjoy more access to that firm’s leadership than they would at a larger practice, and this translates into more effective business support. “A mid-tier firm will walk with you every step way on your journey to success. We’re strong on relationships; we invest in them. And this gives rise to an intimacy that provides a fertile platform for entrepreneurs to grow,” Colella maintains. This is borne out by the experience of Moore Stephens partners who have worked at larger firms. They note that, free of the additional administrative requirements of larger firms, they have far more time to be hands-on with their clients.

It is, perhaps, this proximity to entrepreneurs – and the cross-pollination of ideas and insights that results – that sees many CAs leaving the profession to become business owners themselves. This is a growing trend in Colella’s home country of Scotland but, he says, it has significance for the South African business landscape, too. “It’s no secret that the country’s economic growth relies strongly on the success of its start-ups. Entrepreneurs have the potential to make a major contribution to fiscal recovery,” Colella comments. This is where accountants have a role to play. Given their acumen and understanding of business processes, they often enjoy an advantage when it comes to establishing ventures that go onto thrive.

Not that every accountant who completed their articles at a mid-tier firm will go on to create a start-up, of course. Far from it: Colella reports that mid-tier firms produce more CAs than their larger counterparts, thanks usually to their efforts and investment in training, articles and mentorship.

“Obviously, there is place for firms of all sizes in our business environment; each has its unique strengths and can offer something different to the client. However, we believe it is time mid-tier firms took ownership of their special contribution to the growth, and health, of the economy,” Colella concludes.

Article courtesy of: https://accountingweekly.com

MPs are calling for an urgent review into the competition review into the statutory audit market, citing concerns over the lack of competitive tenders, dominance of the Big Four audit firms and an absence of independent scrutiny following the collapse of Carillion, reports Sara White, the Editor of Accountancy Daily

MPs on the joint BEIS/Work and Pensions Committee have slated the Big Four, and are calling on government to refer the statutory audit market to the Competition and Markets Authority, which would be the second time the largest UK auditors have faced a major competition probe since the crash in 2008.

The terms of reference of the new review should explicitly consider breaking up the Big Four into more audit firms, as well as looking at the effect of splitting off audit arms from the parts of firm that are providing non-audit services such as tax compliance, accounting and consultancy.

MPs are also hoping that the government’s appointment of Andrew Tyrie, former MP and influential chair of the parliamentary Treasury Select Committee, as chair of the Competition and Market Authority will give the competition regulator the necessary impetus to reopen the earlier closed enquiry or set up a follow-up.

The Department for Business, Energy and Industrial Strategy (BEIS) told Accountancy that the appointment of  Tyrie has now been fully approved by all relevant committees and ‘details of a proposed start date will be announced in the next few weeks’.

BEIS also confirmed last month that the Kingsman Review would assess the role, funding and effectiveness of the Financial Reporting Council (FRC) as the UK audit regulator.

A CMA spokesperson told Accountancy: ‘We are working closely with the Financial Reporting Council, whose role it is to regulate the quality of UK company audits, to see what more needs to be done to drive up standards.

‘As part of this, we are actively monitoring the impact of the remedies put in place following the Competition Commission’s inquiry.  The CMA remains open to looking further at the audit sector itself and will work with the FRC in support of any action it chooses to take.

The first audit market review, conducted by the Competition Commission in 2011, forced firms to tender their audits every 10 years and aimed to extend competition outside the Big Four. To some degree, the rules were watered down by subsequent EU rules brought in through the Audit Regulation and Directive (ARD).

Lack of competition

Any attempts to open up competition to non-Big Four firms to the listed FTSE market have pretty much failed with the latest figures from the Accountancy  FTSE 100 auditors survey showing that only one company, Randgold Resources, is audited by a mid-tier firm, namely BDO, and it retained the business in a recent audit retender. However, it is only a small audit in terms of value at £712,000, within a market worth £637m.

In a surprise move, the other major mid-tier audit firm, Grant Thornton, pulled out of tendering for FTSE audits in March, although it does have a strong non-audit service income stream.

Across the FTSE 250, in an audit market valued at the £192m according to the latest Accountancy research, the dominance of the Big Four is paramount at £188.7m market share with less than 2% of the market in the hands of only two mid-tiers – BDO and Grant Thornton – with eight audits between them valued at £3.5m.

Big Four and Carillion

In the case of Carillion, all of the Big Four were earning substantial fees across the board for various contracts.

KPMG was external auditor, Deloitte internal auditor and EY worked on some pre-collapse rescue advisory services. PwC was hauled in to handle the insolvency.

MPs accept that the ‘requirement for “sufficient resources”, which required large numbers of staff to start work on the insolvency within 12 hours of notification, limited the options to the Big Four accountancy firms’.

The committee report stated: ‘Despite PwC’s extensive prior involvement in Carillion, given that KPMG was Carillion’s external auditor, Deloitte its internal auditor and EY was responsible for its failed rescue plan, it was certainly credible for the Official Receiver to consider those other Big Four companies more conflicted.

‘Deloitte’s role with Carillion was not confined to internal audit. Among other roles, they acted as advisors to the remuneration committee, offered due diligence on the disastrous takeover of Eaga in 2011 and then received £730,000 for attempting a subsequent transformation programme at Eaga.

‘Such widespread involvement in Carillion was simply par for the course for the Big Four accountancy firms. Over the course of the last decade, they collectively received £51.2m for services to Carillion, a further £1.7m for work for the company’s pension schemes and £14.3m from government for work relating to contracts with Carillion.

‘EY, another member of the Big Four, were particularly heavily involved with Carillion after the profits warning in July 2017. They were appointed to oversee “Project Ray”, a transformation programme designed to reset the business.

‘Carillion paid them £10.8m over a six-month period, 385 in part to identify up to £123m of cost savings, mainly to be met through a 1,720 reduction in full-time UK employees.

‘Those savings were not achieved before the company collapsed. EY also helped negotiate the agreement with the pension Trustee to defer £25m in deficit recovery contributions and a “time to pay” arrangement with HMRC in October 2017 that deferred £22m of tax obligations.

‘As we noted earlier, EY even suggested extending standard payment terms to suppliers to 126 days.388 Their own fees, however, were not deferred. On Friday 12 January 2018, three days before the company was declared insolvent and one day before Philip Green wrote to the government pleading for taxpayer funding to keep the company going, Carillion paid EY £2.5m. On the same day, it paid out a further £3.9m to a raft of City law firms and other members of the Big Four.’

Report by Sara White

Article originally published on: https://accountingweekly.com/