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Accountants are being urged to re-evaluate their metric systems and use of KPIs as the evolution of the accounting profession devalues some traditional measurement methods.
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Doubt cast over future of traditional accounting metrics
14 July 2017
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9 minute read
Yesterday, Karbon released its Metrics That Matter report, identifying 15 key metrics that will help accountants to understand how their practice is performing currently and accurately predict where they are heading in the future.
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The metrics fall into four categories; revenue metrics, return on investment metrics, scale and efficiency metrics, and client metrics.
Speaking to Accountants Daily, Karbon’s Agus Echagüe said that as the industry evolves, traditional metrics are losing their value.
“Accounting firms have traditionally focused on lag measures such as realisation and utilisation to track their performance. But these metrics, while useful once upon a time, came about in a very different age of accounting, a time when desktop software, pen-pushing and time-billing was the norm,” Ms Echagüe said.
Karbon CEO Stuart McLeod said that the most progressive accounting firms have begun to measure and track their performance in ways that give them more meaning than simple profitability.
“Forward-thinking firms are starting to realise that the focus should be on output, or the quality and value of services they deliver, instead of input, or the number of hours they spend on a specific job” Mr McLeod said.
Ms Echagüe added: “As more practices move to the cloud, more and more accountants are incorporating some of these metrics alongside more traditional ones like realisation and utilisation.”
As the industry continues to evolve, Ms Echagüe said he expects more firms to shake up their metric systems.
“Change has always been a constant in the accounting industry, but the rise of the cloud, changes in client demands and technology advancements has rapidly sped this change in recent years. We don’t see this progress slowing down in the next 12 months,” Ms Echagüe said.
“More accounting practices will move completely to the cloud, increase and diversify the client services they provide, and move to value pricing or fixed fee models. For these modern firms who are embracing change, these metrics will offer a different but vastly clearer lens to look at their firm through.”
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