Some call this post-recession era a period of economic uncertainty. Others might call it a period of economic opportunity. Often the difference between the two is just how well advised you are, which is why accounting firms are experiencing rising demand for the consulting services they can provide, as well as traditional accounting services.
According to Smart Company, such is the demand that big accounting firms in Australia are choosing to market themselves as “services firms”, illustrating to clients that their functions go well beyond being simple number crunchers. Their depth of knowledge and experience in areas such as tax and asset management has been made invaluable by issues such as:
- Carbon Tax: Implemented in July 2012, the law requires the 300 companies deemed Australia’s worst culprits in carbon emissions to pay taxes on every tonne of greenhouse gas produced (BBC news). Accounting firms are counted amongst those likely to benefit as Australia’s hard-hit mining, steel, energy and airline industries seek advice on dealing with carbon tax.
- Foreign Investment: Increasing foreign investment, particularly from Chinese companies, changes the playing field in ways that no industry can afford to ignore. Many companies are seeking professional advice in devising strategies to benefit from foreign interest.
Smaller accounting firms may not possess the connections of larger organizations, but they can benefit from providing the same services to wealthy individuals and family enterprises.
Future Looks Bright for Australian Accounting Firms
This diversification of revenue streams is the reason the Australian accounting industry is receiving positive forecasts. In early 2012, accounting recruitment firm Robert Half did a survey of 300 financial officers and finance directors and found that 82% of them were confident of industry growth for the year, and at least a third of accounting and finance firms announced that they were undertaking extensive recruitment efforts.
Prominent investment banker John Wylie, the managing director of financial advisory firm Lazard, is amongst those predicting strong growth for the accounting and finance industries in 2013, due to increasing foreign investment. This growth is expected to continue over the next five years, with revenue predicted to increase 5.5% every year to reach a total of around $20.7 billion in 2016-17. (smartcompany.com.au)
What’s more, the Corporation Legislation Amendment (Audit Enhancement) Bill 2011 allows accounting firms to extend auditing contracts with clients from five to seven years, guaranteeing them an additional two years to benefit from this increasing revenue.
Overall, things look positive for the Australian accounting industry, but especially for those firms able to take advantage of change. Revenue may be increasing but the challenge will be maintaining high profit margins, as increased demand for accounting services means price competition amongst the firms. They will have to apply their knowledge and skills on themselves in order to ascertain a means of compensating for this.
Knowledge is Power
A key factor in success will be diversity. Who will be most adept at diversifying their revenue streams by diversifying the services they offer?
Many firms will be looking outside traditional accounting areas to find the answer to this. Staying ahead in technology and gaining as much knowledge as possible, particularly in niche areas, will put them in a better position to meet the rising need for services.
China’s increasing economic influence, amongst other factors, creates a shifting financial landscape, and the most prized commodity in such an uncertain environment is knowledge. Those firms well-placed to provide this will find themselves in high demand.
Written by Matthew Flax on behalf of Now Learning, an online education portal that promotes a number of higher education opportunities, especially accounting courses, diplomas and degrees.