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Just 1 per cent of accounting firms face high to severe risk of financial failure, according to a new survey by a specialist national firm.
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1 in 5 accounting firms still at risk, survey shows
30 April 2018
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9 minute read
The Australian Accounting Industry Commercial Risk Snapshot survey by SmartFee, in conjunction with SV Partners, showed that out of over 10,000 accounting firms surveyed, 19.4 per cent were found to be in the moderate to severe risk bands.
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The results are a slight improvement from last year’s survey, which found 19.8 per cent of firms at risk.
Firms were analysed over a number of factors to frame a risk score, including credit activities, existence of default information, and serious adverse event information such as a previous external administration.
SmartFee managing director, Adrian Jenkinson, said that while the figures have remained stable, a large proportion of firms may be starting to feel pressure from future disruption.
“These are the firms that provide compliance and business advice to the majority of the SME population yet they are SMEs themselves with the same cash flow, employee and competitive pressures as their clients,” said Mr Jenkinson.
“With 42 per cent of firms in Risk Band 6 (low risk) there are a large number of firms that have the potential to be impacted the most by the disruption.
“The biggest risk right now is the optimism bias that exists. With strong revenue and stable performance many firms believe they are insulated from the full impact of automation, artificial intelligence and changes in client expectations,” he added.
“Disruption risk is real and the good news is our analysis shows that many firms are prepared and they are seeing the benefits of early adoption of cloud technologies and diversification of their service offerings.”
ProfitSee chief executive, Peter Vessenes believes smaller firms will be at risk from the growing downward pressure on fees, with larger competitors easily transitioning to more value-added services.
“Business owners expect accountants to know which value-added technologies are the right ones for their companies. This requires a lot of research in a rapidly changing field, with little, if any, consideration to the accountant,” said Mr Vessenes.
“Once the larger firms figure out that value-added services are not just a dashboard, but actually advice driven, the pressure on the smaller firms will intensify. I believe this will take place globally over the next three to five years.”
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