The U.S. Bureau of Labor Statistics estimates that the median pay for accountants and auditors is $77,250 per year. But if you’re working at a top accounting firm, you’ll make much more. From trendsetting to improved career growth, there are many benefits to working for a Big 4 firm.
Who are the Big 4 Accounting Firms?
The Big 4 are considered the top accounting firms in the world and include names like:
- PricewaterhouseCoopers (PwC)
With headquarters in New York City, New York, PwC has amassed $50.3 billion in revenue, nearly 300,000 employees, and is located in over 155 countries. PricewaterhouseCoopers merged with Coopers & Lybrand in 1998.
Founded in 1845, Deloitte is the oldest still-existing accounting firm on the list. In 2022, they earned a global revenue of $59.3 billion, employ 330,000 people, and are located in over 150 countries. You can find their headquarters in New York City, NY.
When Arthur Young & Co. and Ernest & Whitney merged in 1989, Ernst & Young was born. Similar to PwC and Deloitte, their headquarters are in NY. They boast a revenue of $45.4 billion, 300,000 employees, and locations in 150 countries.
Formed through a merger in 1987, KPMG is the only Big 4 bank located in Culver City, California. KPMG is located in over 155 countries, has 227,000 employees, and has a 2022 revenue of $34.6 billion. They are the least popular of the Big 4.
While the Big 4 offer many of the same accounting and auditing services as other banks, what sets them apart from other businesses in their field is their power in the sector. Not only do they employ the highest number of financial professionals, but they also earn record-number profits.
Before the 80s, the Big 4 were the Big 8, but through merges, only 4 remain. Together, the Big 4 firms make almost $200 billion a year, proving their massive wealth and influence.
5 Things Everyone Should Know About the Top Accounting Firms
For most accountants, the Big 4 accounting firms don’t need an introduction. But if you’re a new graduate who’s interested in applying to one of these companies, here’s what you should know.
#1 - Top Accounting Firms are Known for Long Hours
Large accounting firms are known for their grueling hours. While this was true in the past, the work environment in these firms has improved, and they’re taking strides to be even better in the future. No one should put up with poor work conditions, even for a decent career boost.
#2 - Top Accounting Firms Expedite Career Paths
In the past, many accountants felt that the harsh work conditions were worth it because working at a Big 4 firm proves credibility. At a Big 4 firm, accountants gain experience faster and can network with high-profile clients. This can make it easier for them to find other employment.
#3 - Top Accounting Firms Only Except The Most Qualified
To get hired at a top accounting firm, you need to have a degree from an accredited program. They prefer to choose people with an AACSB accreditation, which is only available at certain schools. They may also request a master’s degree (MBA) and a CPA or CFA certification.
#4 - Top Accounting Firms Offer Professional Development
Top accounting firms intend to hire and train the best of the best, but that doesn’t stop after the employee is onboarded. The Big 4 will offer plenty of additional courses and seminars that help keep their staff up-to-date. These firms put a lot of investment into their employees.
#5 - Top Accounting Firms Offer Sky-High Salaries
All of the schooling and experience you had to obtain is more than worth it in the end if you get hired at a Big 4 company. Even associates get paid $53,000 a year at the minimum, but as you move up the ladder, you’ll earn 6-figures. Partners make a quarter of a million a year or more.
In Conclusion…
Top accounting firms PricewaterhouseCoopers, Deloitte, Ernst & Young, and KPMG are the most prestigious firms in the United States. With that status comes a high salary, plenty of connections, and impressive career growth if you manage to land a job inside their walls.
The BEIS white paper draws on the UK Government’s response to the recommendations from three independent reviews into auditing; Sir John Kingman’s 'Independent Review of the Financial Reporting Council’, the Competition and Marketing Authority’s (CMA) 'Statutory Audit Services Market Study’ and Sir Donald Brydon’s 'Independent Review of the Quality and Effectiveness of Audit'. Some of its recommendations focus on moving the audit process beyond standard reporting, by creating bespoke reports that are tailored to the business in question. Sir Donald Brydon argues that audits should be more informative and user friendly. Brydon also highlighted the need for company directors to play a more active role in the audit process, by offering insights into key areas of risk for the business and future forecasts. Making them more accountable for the audited accounts, will ensure greater sharing of responsibility with the auditor. Another significant change mentioned within the reviews is the proposed introduction of an assessment of the effectiveness of a company’s internal controls, akin to the Sarbanes Oxley Act of 2002 (SOX), which is currently in place in the US. The introduction of this measure could help to mitigate the risk of errors slipping through the system, helping businesses to identify possible insolvency scenarios before it’s too late.
Such changes could reshape the audit profession, by requiring the auditor to examine more than just numbers, broadening the scope of their activities. For example, this could possibly include the assessment of non-financial KPIs, such as a business’ environmental impact and overall resilience. As the role continues to evolve, it is also expected that there will be more of a focus on the technological aspects of auditing. The pandemic has already accelerated the development of companies’ accounting systems and as these become ever more sophisticated, auditors will need to rely on software and other technologies to automate areas of their role.
The audit industry is also facing significant challenges when it comes to recruiting new talent. While giving auditors a broader role would be positive for the profession, it would also create more work within the sector, forcing firms to go on a hiring spree. As the role of the auditor evolves, firms will need to intervene to attract more candidates and nurture development of the right skills in order to avoid a resource shortage.
A number of factors have influenced the reputation of the audit profession over the years. In particular, when corporate failures occur, the finger is often pointed at auditors, who are often scrutinised by the media. Careers in audit currently come with a high level of professional and personal risk, particularly for those in senior-level positions.
Reform within the audit profession could be a step in the right direction when it comes to boosting the industry’s attractiveness. Some of the recommendations currently under consideration could help to rebalance the personal and professional risk faced by auditors. It has also been recommended that auditing becomes an entirely separate profession from accounting. This could help to raise the profile of the profession by requiring new entrants to gain a specific, regulated audit qualification.
As their role develops and they take on a broader remit, auditors could find they are stretched too thinly, potentially leading to more errors slipping through the net. While change is vital for attracting new talent and restoring confidence in the industry, it is important that standards are not allowed to slip as part of this process.
Small business owners who have been able to survive the initial storm need to understand how the new trends are going to impact the financial structure of their companies. Here are six accounting trends every small business owner should know about in 2021.
1. AI and automation
Automation has been a familiar sight in various fields, and now it's set to improve the productivity of accountants. Artificial intelligence (AI) and automation can be used to learn case-specific tasks and automate resource-intensive, repetitive, and time-consuming tasks.
Automated tasks are streamlined for everyday interactions and it is a good way to prevent human error. A few areas that can be automated are bank reconciliations, workflow optimisation, and forecast generations. By leveraging the power of data-driven AI and robotic process automation (RPA), accountants can prioritise high-value projects, enabling firms to scale quickly.
2. Advanced accounting software
In 2021, accounting software can no longer function simply as an on-site asset. The improvement in cloud infrastructure has pushed companies to adopt flexible, cost-effective, and always-on cloud accounting solutions.
When you're working with a large amount of data and you need to constantly cross-reference them, you'd expect your numbers to be available instantly. Cloud hosting makes that happen, alongside offering you a seamless, real-time collaboration with different parties. The low cost of deployment is another advantage to hosting accounting software in the cloud. Major accounting platform QuickBooks has a host of options you can make cloud-first. Check out the best QuickBooks hosting providers to understand which one suits your business.
3. Big data
With the adoption of technology comes the ability to analyse a large volume of data. Cloud-based software and AI work with data to understand the relationship between variables, and it is up to the accountants to narrow them down to comprehensible metrics. Accountants must evolve into all-around financial advisors and help clients understand what a particular data set means for their business. Increased reliance on data analysis also puts the focus back on the need to secure internal resources and make the data cybercrime-proof.
4. Blockchain
Blockchain technology has gone from strength to strength, and in the future, it will play a pivotal role in accurate data tracking. Blockchain facilitates decentralised ledger for transparent tracking of financial data. It's still in the early stage of growth in the accounting world but financial auditors have started gaining from it. For instance, companies that use blockchain to record their transactions will be able to receive a far more accurate report from auditors than companies without it.
However, blockchain needs to be improved and regulated before its full potential can be enjoyed by accountants. As it becomes more streamlined, accountants will pivot towards validating system integrity and company policies.
5. Digital tax management
Small business owners have had to adapt to the rapid digitisation of tax filing. Accountants will assume a bigger role in guiding customers through COVID-specific policies and the impact of the revamped tax structure. Moreover, the rise of the gig economy and solopreneurs has created a further expansion of tax rules, so accountants will look for unified analytics platforms to update tax reports in a timely manner.
6. Outsourced accountancy
Going forward, companies will increasingly look to outsource a major portion of their accounting tasks to third-party vendors. Small businesses have already started outsourcing to save costs and increase efficiency, and the trend will only get bigger in the future.
The biggest push to managed accountancy services is the realisation that people can now work in remote settings and be equally, if not more effective, in terms of communication and productivity. Since cloud computing and big data will be able to handle most of the day-to-day tasks, small businesses will look to cut down on the labour costs and reinvest in core business operations. On top of that, outsourced accountancy gives business owners an opportunity to leverage industry experts at a fraction of cost.
When the world goes through major economic changes, businesses need to stay abreast of the latest trends to meet the new demands. Small businesses can avoid complacency by actively investing in the technologies that are impacting their business operations, including accountancy. Needless to say, customers will prefer doing business with the ones who have embraced change.
In the accounting market, standards such as the IFRS and whether businesses will continue to follow these will have long-term implications for investors, auditors and business leaders alike. This could make the UK more attractive to foreign investors or put firms at risk of having to follow two sets of rules if they trade continentally.
After a Parliamentary committee ordered the separation of auditing and consulting services in the Big Four firms, the FRC came under threat as the Government tried to show its teeth in governing this area.
However, with Joe Biden looking to have a closer relationship with Europe, it looks increasingly likely that to remain a globally facing country that acts as a bridge between Asia, Europe and North America, the UK Government may need to deal with the Big Four and this issue and bring governance more in-line with their European and American counterparts.
The general market will have a huge part to play on whether or not national entities decide to take action in the regulatory space. A huge part of the accounting space moving forward will be increased by Mergers and Acquisition deals, despite a relatively slow year. According to S&P Global Platts, in the US, during the first three quarters of 2020, the industry saw 81 deal announcements worth a total of US$7.75bn; this is compared to 200 deals worth US$47.05b over the same period in 2019.
Despite a bleak year, the market appears to be surprisingly optimistic. According to a poll of executives and M&A professionals, 87% of respondents said they expect M&A activity involving privately-owned companies to increase in 2021. The poll, conducted by law firm Dykema Gossett PLLC, also revealed that more than seven out of 10 respondents expect to close a deal during 2021 and 71% believe that the market will strengthen.
Part of this strengthening deal flow attitude is due to the broader economic recovery and confidence in the market as a whole. In its latest World Economic Outlook, the International Monetary Fund (IMF) predicts the global economy to experience a partial rebound to 5.2% growth in 2021. In Dykema Gossett PLLC’s survey, respondents are optimistic about the economy. Six in ten said they hold a positive view of the economy over the next 12 months; 17% hold a negative view, and the remaining 23% held a neutral view.
This is also set to be boosted by an ever-increasing promised financial stimulus from new US President, Joe Biden. In the week that Biden was announced as the winner of the 2020 election, share prices were boosted by the largest growth in two months as a Democratic President would result in a major new stimulus package. London’s FTSE 100 closed up by 131 points, or 2.33%, at 5786. Furthermore, all three of the leading barometers of US share prices – the Dow Jones Industrial Average, the S&P 500 and the Nasdaq – were showing gains on the morning of election day in the US.
These market indicators and supposed optimism for 2021 demonstrate a new market for business and, in turn, for the accountancy space. There has been a huge amount of scrutiny over auditing practices and services sold to clients that may have a conflict of interest, so for firms that can solely focus on high-value deals, the market looks bright. Despite this, there will have to be additional movement as gaps appear to vacate (especially the Big Four). For example, in mid-November, PwC sold off its FinTech business amid greater regulatory scrutiny on conflicts of interest. This could give other mid-tier and boutique firms the opportunity to gain market share, as the Big Four focus on auditing and legal services, especially in the non-auditing space.
According to Financial News, the FinTech eBAM, which has been rebranded as LikeZero, automates regulatory risk analysis for around ten of the City’s largest financial firms and is to be acquired by its management in a deal backed by two private equity firms. PwC is not allowed to sell its own technology to their audit clients as per restrictions introduced by the Financial Reporting Council. In 2016, the FRC restricted Big Four firms from providing audit clients with financial technology as part of an effort to reduce conflicts of interest within the audit sector. This deal could be the first of many as the Big Four firms leave spaces that it has previously tried to dominate.
I predict that with the FRC trying to tighten regulations in the auditing space, the Big Four will try and expand their non-auditing services such as legal and digital services to maintain their revenues, regardless of whether the FRC is successful or not. However, many mid-tier firms are already there and, in this space, so there will be more competition than ever before. This could lead to a break-up of the market and if other big-name collapses take place, more large companies in the FTSE250 space will begin to move away from the established Big Four.
Annie Button offers advice on how smaller companies can remain solvent during a uniquely tough period for business.
The COVID-19 pandemic has been a difficult time for businesses of all sizes - but it may well be the case that small companies have suffered the most. Of course, issues such as fewer people spending money and reduced footfall to physical premises have certainly hurt companies, but there are some financial challenges that have held SMEs back unnecessarily.
However, this doesn’t need to be the case. Small businesses can do many things to ensure that they are not holding themselves back. Here, we take a look at five financial challenges that have been a problem for SMEs through the COVID-19 pandemic.
1. Failing to move away from manual accounting
Through COVID-19, the rise in people working from home has been highly noticeable, and it looks like the trend will be here to stay even after the worst of the pandemic is over. But the need for remote working has created some issues for small businesses that were still reliant on manual accounting and physical documents.
“Business is moving onto the internet and has been doing so since its creation,” says Robin John of Wellden Turbnull. “Traditionally, computer-based accounting was the reserve of big business, and everyone else kept manual records in ledgers, but the advent of new technologies and software-as-a-service accounting platforms has made it possible for businesses of all sizes to operate online.”
If businesses were unable to work from their office through lockdown, it may have created a backlog in their accounts - many SMEs are still trying to recover from this. So, now really is the time to invest in a move away from manual accounting.
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2. Lack of cash flow
Certainly one major challenge for businesses over this period has been a lack of cash flow. But many businesses had their revenue dramatically reduced, while still having to pay out for all of their normal expenses.
The solution that some businesses have taken to stem the issue of lower cash flow has been to make staff redundant or make other cutbacks. But there are other alternatives. The government has made a number of schemes available, and many lenders are offering more flexible lines of credit to allow companies to continue to pay staff and suppliers while waiting for cash flow to return to normal.
3. Not spending on marketing
Now, it might seem that, given the point above regarding cash flow problems, expensive marketing could be one of the first things to cut. However, this is a mistake. At a time when companies need any business that they can get, this is not the time to be reducing marketing spend.
This is especially true if your competitors are reducing the marketing budgets - this will simply make your brand stand out even more than before.
4. Not having a solid business plan (or any at all)
Having a robust business plan with a lot of thought put into it has been an absolute essential for small businesses for a number of years. So, you might be surprised to learn that over 1.5 million SMEs across the UK have no business plan at all. This can cause serious problems.
COVID-19 has certainly caused havoc for companies - but without a business plan to assess and understand what the company needs to do to survive, many SMEs have floundered and struggled. If your small business has no business plan, now really is the time to invest in drawing one up.
Having a robust business plan with a lot of thought put into it has been an absolute essential for small businesses for a number of years.
5. Failing to anticipate expenses
It is important that companies do not live at the edge of their means. In the ideal scenario, your SME should actually keep some money back so that you can deal with those annoying expenses that come up every now and again. If SMEs fail to plan for unexpected expenses they can be left in a very tricky situation.
Final thoughts
There is no doubt that 2020 has been a tough time for SMEs, especially from a financial perspective. But if you can anticipate some of those challenges that your small company will face, it can give you the opportunity to come up with useful solutions. Ultimately, understanding where these challenges can come from gives you the chance to plan for ways to avoid them.
Automation has played a critical role in the advancement of financial technology, with tried and tested processes being replaced with modern, more efficient software. With all this innovation breathing life into businesses of all sizes and industries, the question may be asked about what role an accountant plays in the age of automation. Let’s discuss what the changes are, who they impact, and what an accountant's role looks like in the modern era.
What financial automation have we seen in the last few years?
Not surprisingly, technology has had a significant impact on accounting businesses, departments and professionals, many of which implicate an accountants role as we know it. We have seen changes to employee tax and wages occurred globally, allowing employees to report on this data more easily and more frequently, with employees accessing their own earning statements centrally and independently. These changes have led to a need for more sophisticated software, many of which feature other functions that improve efficiencies through automation. Businesses can now comply with new legislation and complete payroll responsibilities without tasking a greater number of employees to that task. Australia has even coined this legislation change ‘single touch payroll software’, capturing the ease of the automation process. Accountants no longer need to conduct manual tasks, with automation offering expense tracking, payroll and invoicing.
Bots are another automation that is rolling out to industries beyond just eCommerce, with bots able to capture and respond to a range of enquiries, allowing accountants to not be hamstrung to administrative requests. This communication method can be built into a business’ website or social media pages, but won’t be relevant for all business sizes. Outsourced accounting and payroll services are another automation that allows businesses to hand their financial responsibilities to a third party, contracting rather than employing professionals.
Accountants no longer need to conduct manual tasks, with automation offering expense tracking, payroll and invoicing.
What are the benefits of automated accounting processes?
There is a misconception that enhanced accounting services will nullify the critical element an accountant plays within a business, but this is not the case at all. These automated processes simply make operations more efficient, often adding structure and simpler frameworks where there were none. Automation also assures a certain level of accuracy that can’t always be achieved manually, and this is a significant consideration when it’s concerning payroll and business revenue.
It’s not only accountants that stand to benefit from automation, business owners are also attracted to this option. Accounting automation can reduce or manage a department/business’ headcount, and taking these tasks offsite means that employers don’t need to factor in the physical space nor the employee benefits that come with employing another accountant. Less time in the details means your accountant can be more strategic with their time, which is why outsourced options have been wildly successful.
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What’s the future for accountants with automation continuing to innovate the industry?
Despite the automation that appears to be replacing certain accounting functions, the future is still bright for accounting professionals operating in organisations of all sizes. Automation innovations simply allow existing accountants to fine-tune their practice, implementing and optimising strategies with the mundane tasks taken care of. Whether accountants choose to implement software, outsource to a team or leverage reactive bots, one or all of these automation options can harness a greater output and overall performance of your business.
Automation is not something to be feared, as embracing its benefits can propel your business forward. Take a step back and assess what the growth plans are for your business, and explore what functions can be tightened in your financial sector. If there is an opportunity to enhance productivity and support your growth plans, trial some of these functions that are working effectively for those early adopters.
Despite the Confederation of British Industry (CBI) announcing a “welcome lift in business confidence” at the start of 2020, the Government can’t afford to neglect the needs of SME businesses, the backbone of the UK economy.
We hear from Richard Godmon, tax partner at accountancy firm Menzies LLP.
With many UK businesses trading internationally, certainty surrounding future trading arrangements with the EU and the rest of the world is urgently required. However, if this can’t be delivered in the short-term, then the Chancellor must step up to the plate and provide support in the form of clear fiscal incentives and allowances, to help businesses to improve their cash position and facilitate investment.
R&D relief
Among the Budget announcements, tax specialists at the firm are urging the Chancellor to confirm that the rate of R&D relief that large companies can claim under the Research and Development Expenditure Credit (RDEC) scheme will be increased by one % (from 12 to 13 %). The Chancellor should also take the opportunity to extend the scope of the scheme to include costs for investment in cloud computing and big data analytics.
Annual Investment Allowance
Further certainty is needed surrounding the Annual Investment Allowance, which is currently set at £1 million but is expected to revert to £200,000 from 1 January 2021.
Investment requires confidence, and this can’t happen in a climate of uncertainty. Businesses need to know what is happening to the AIA so they can understand the cost of new plant and machinery and invest in their growth plans. The Chancellor could address this by either increasing the allowance or extending the current limit until at least the end of 2022.
Alternatively, if a blanket increase in the AIA limit is considered too costly, the Chancellor could select specific areas of capital expenditure, which might qualify for enhanced tax relief (say, of up to 110 % of cost) – for example, investments in robotics, AI systems, data integration, 3D printers and other value-driving tech.
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Entrepreneurs’ Relief
This Budget may see the end of Entrepreneurs’ Relief (ER), which is intended to encourage business investment by providing a favourable rate of Capital Gains Tax (CGT) to business owners on the disposal of all or part of their business. The relief, which saves business owners an estimated £2.2bn per year, may be under threat following publication of a report suggesting that it may not be boosting entrepreneurialism as intended.
This Budget may see the end of Entrepreneurs’ Relief (ER), which is intended to encourage business investment by providing a favourable rate of Capital Gains Tax (CGT) to business owners on the disposal of all or part of their business.
While it would be a big step for the Government to completely remove the idea of rewarding owners and investors for risking their capital, we may see reform of the relief, designed to reduce the tax cost. This might involve reducing the £10m lifetime allowance, or limiting access to new businesses, or those who reinvest their sale proceeds within a limited window.
We hope that any restrictions to ER will be offset by measures to enhance incentives for start-ups and growth businesses. This would continue to communicate the message that Britain is open for business, helping organisations to plan their long-term investment strategy.
Digital Services Tax
The Government is also expected to deliver a final decision regarding the controversial UK Digital Services Tax, and there is still time to soften its impact or even defer it altogether. If it goes ahead, the tax could impact UK competitiveness significantly.
It’s important to bear in mind that the Digital Services Tax would operate solely within the UK, rather than being EU-wide. As such, the UK could find itself isolated and at odds with trading partners should other countries choose not to introduce a similar tax. This could leave the UK at a considerable disadvantage when it comes to attracting international orders and so could have a negative ripple effect on UK-based SMEs. Hopefully we will see this tax deferred for a year pending the outcome of the OECD work on taxation of the digital economy, which it is hoped will reach an agreement by the end of 2020.
Housing and Property
Finally, with Brexit uncertainty still negatively impacting property sales, the Government could do more to get the housing market, traditionally a key driver of economic growth, moving and improve housing supply.
After seven years of punitive tax changes, buy-to-let property investors are hoping for a period of relative stability and maybe even a fiscal ‘escape hatch’ too.
A temporary reduction in the rate of Capital Gains Tax (CGT) payable on gains from the sale of B2L properties, made unprofitable by recent tax changes, could help to release stock onto the market. The new 30-day payment rules for CGT also means the Treasury’s coffers would feel the financial benefit immediately.
Further housing changes could see the Stamp Duty Land Tax (SDLT) threshold raised to £500,000 for all buyers, the introduction of a 3 % SDLT surcharge for non-UK resident buyers of UK property, and the expected tightening of tax reliefs on the sale of individuals’ main residences.
Cash flow, the money a business has in the tank to function, can make or break businesses. The latest MarketInvoice Business Insights explored the attitudes of UK SME owners on managing cash flow.
What is cash flow?
Put simply, cash flow is the money your business has readily available to use for day-to-day operations. Put less simply, it is whether your current assets are enough to cover current liabilities. Cash flow is also sometimes referred to as operating liquidity, working capital and current ratio.
Over half (52%) of business owners said they relied on making ad-hoc paper notes, using spreadsheets or relying on text messages from their bank to understand their cash flow position. Meanwhile, 18% reported using online accounting software to do so. Overall, 70% are taking it upon themselves to manage this. Only 30% were using an accountant to manage cash flow information.
Cash flow is clearly something front-of-mind for SMEs with almost half (45%) of business owners checking their cash flow position on a daily or weekly basis to ensure they have the means to continue the smooth running of their business.
Anil Stocker, CEO at MarketInvoice, commented: “Every business needs to know their cash flow position but the disproportionate manual focus on this can distract entrepreneurs from focussing on their business and driving growth. Managing cash flow needn’t be such a taxing affair with the plethora of online tools available today.”
Cash flow constraints mean that 87% of businesses are prevented from taking on more orders. Yet, two-thirds (67%) of business owners aren’t seeking any advice about cash flow. Of the businesses that ask for help, the majority (14%) are turning to their business bank manager. Furthermore, in shoring up cash flow, almost half (48%) of business owners reported increasing their bank overdraft facilities and one in six (16%) used invoice finance to tackle cash flow constraints.
Anil Stocker added: “It’s imperative that business owners get advice to manage their cash flow. We can’t allow UK economic growth to be stunted because of cash flow constraints. Businesses waiting on long payment terms can use invoice finance to help bridge the gap by getting an advance on their invoices and propel their businesses forward.”
Using Google and O*NET data from the past 10 years for typical finance roles, Reed Finance developed the interactive online tool on stateofskills.reedglobal.com. It found that written and verbal communication is prized by employers of finance professionals, with ‘oral comprehension’ (an understanding of what people are trying to say) and ‘written comprehension’ (understanding written ideas and information) ranked as the most valued skills. This is in comparison to traditionally assumed skills such as ‘economics and accounting’ and ‘deductive reasoning’ which are ranked as the fourth and 10th most important.
Reed Finance suggests that this is due to the future strategies of companies wishing to see finance executives take on leadership roles which entail not only technical soundness, but also an ability to inspire and work as a leader of teams – with ‘active listening’ and ‘oral comprehension’ some of the most important skills for a CFO to have.
Firms value ‘human skills’ such as communication over technical accounting skillset.
As such, ‘human’ skills are prominent in successful candidates for roles such as management accounting and FP&A management. This may suggest that these workers have the skillset to take upon more senior roles.
Securing the right talent
Reed Finance found that the level of interest from candidates for the majority of roles in accountancy and finance had been consistent over the past decade, but there are some notable exceptions.
Interest in CFOs peaked in April 2013, higher by 111% in comparison to January 2012. The trend is even starker for finance business partners. From only modest interest in October 2009 popularity has continued to increase rapidly over the decade hitting a peak in July 2018 that is almost 2500% higher. The stark rise reflects a change in the industry towards finance professionals with strong communication skills informing and guiding the business.
Interest in finance business partners has increased from near non-existence in October 2009 by 2333% to a peak in July 2018.
Rob Russell, director at Reed Finance, says: “Businesses are in direct competition for employees that can bring ‘human’ skills to the table, not just technical accounting and number crunching. The influx of AI in the workplace is helping to enhance the numerical skillsets within these teams, so there will be greater time for high-level creativity. Companies want candidates that can communicate, secure business wins and manage teams so that they perform to the best of their ability. These changes to a more fluid, creative workplace are creating great opportunities for those within the finance sector.”
Software use is essential to success but becomes less important with greater seniority
The research conducted also investigated the tools that must be mastered for success in these roles, encouraging businesses to upgrade their software where necessary.
Rob Russell continues: “Every day working with businesses we find that tech is there to enhance the performance of individuals. While candidates should endeavour to keep up with the latest accounting tools on the market, businesses are increasingly looking for those that can win new business and demonstrate a return on investment.
“For candidates, developing the ability to take complex finance information they deal with on a daily basis and using it to answer the question, ‘what does this mean for the business?’ will set them aside from colleagues. This, coupled with commercial nous, has always been an advantage, but now it seems it is even more sought after as business leaders search for the candidates that can secure the future of their business.”
(Source: www.reedglobal.com/finance)
With the enforcement of IFRS 16 ahead of us, as of January 2019, Nick Turner, Country Manager UK & Ireland at Anaplan, discusses with Finance Monthly the potential opportunities therein.
There’s nothing quite like ringing in the new year. Along with the promises of fresh starts and renewed perspectives, it’s that time of the year that we can set—and dare not forget—lofty goals to achieve in the 365-days ahead.
Effective 1st January 2019, IFRS 16 marks one of the first significant changes to lease accounting standards in 40 years.
The new year represents more than an annual reset button and it ushers in more than new beginnings. It also brings deadlines. This rings especially true for corporate finance teams this year, as the IFRS 16 deadline looms.
Effective 1st January 2019, IFRS 16 marks one of the first significant changes to lease accounting standards in 40 years. If they haven’t already made the adjustments, businesses now have a very limited time to ensure that future accounting processes will meet compliance.
Unfortunately, for companies addressing these changes through spreadsheets and aging technology, time might be ticking even faster because these manual tools can turn such operations into a lengthy, burdensome, and complex undertaking.
What IFRS 16 means for businesses
Beginning on the first day of the year, new standard IFRS 16 will be implemented by the Financial Accounting Standards Board (FASB) and the International Accounting Standard Board (IASB). This standard will impact company balance sheets and how many businesses that rent or lease will operate in the future.
The changes are designed to make it easier for outsiders to compare the performance of different companies.
The new IFRS 16 requirements will eliminate nearly all off-balance-sheet accounting for lessees. Further, it will impact commonly used metrics such as EBITDA and gearing ratios. Why? The changes are designed to make it easier for outsiders to compare the performance of different companies.
Although the changes in performance metrics will make it easier to compare and contrast, they may also affect credit ratings, borrowing costs, and even stakeholders’ perception of a company. This makes it vital that companies understand and prepare for the effects of this new leasing standard.
Technology that turns arduous into effortless
Even though time is winding down on the IFRS 16 deadline, businesses still have an opportunity to implement a solution that can quickly fulfill its requirements—and many are turning to cloud-based, Connected Planning solutions.
Adhering to the new standard with spreadsheets and legacy tools quickly turns burdensome; in contrast, Connected Planning technology supports rapid implementation, easily interfaces with existing enterprise resource planning (ERP) databases, and calculates large volumes of data in real time. Connected Planning gives decision makers instant insight into how to optimise their company’s lease management strategy in context of the new regulations.
The deadline for IFRS 16 approaches and businesses have to determine the best way to comply with the new leasing standard soon. Connected Planning technology offers a way to tackle the complexity of the standard with ease.
Following the autumn budget announcement yetrerday, Finance Monthly has heard the initial reactions from experts at top accountancy firm Crowe UK. From Corporate Finance to Small Businesses and IR35, there are tax implications for many…
Matteo Timpani, Corporate Finance partner:
Entrepreneur’s Relief (ER) remains an attractive, and essential, tax incentive that drives UK innovation and entrepreneurship. That said, it is disappointing to see amendments made to the relief which may impact the ability of certain individuals to benefit from it in the short term. There will be a number of mergers and acquisitions (M&A) transactions currently in progress which will likely be put on hold to ensure participants are able to qualify for Entrepreneur’s Relief in due course.
This change only emphasises the importance of business owners taking specialist advice, and being prepared, long in advance of the time they are considering succession and exiting their business. We await the specific details of when this change will be implemented but anyone who is considering selling their business in the next 12 months, and is unsure if they, their management team and/or other shareholders will qualify for ER, should seek advice now and consider immediately the implications of this change.
Tom Elliott, Head of Private Clients:
It is not surprising to see The Chancellor reaffirm the government's commitment to Entrepreneurs' Relief, albeit with tighter conditions (qualifying period doubled to two years). However, it might have been more effective if the minimum shareholding requirement was abolished altogether – this would incentivise all employee shareholders and not just the C-suite.
The changes to Capital Gains Tax (CGT) reliefs for the sale of main residences look like an attempt at modernisation. Lettings relief has changed so as not to apply to the AirBnB model - relief applies only for shared occupation. The shortening of the ‘period of absence’ from 18 to nine months for Principal Private Residence relief will need to be monitored closely, as any slowdown in the housing market (where it may take more than nine months to sell) may result in an overall reversal.
Rebecca Durrant, Private Clients partner:
It was pleasing to see the personal allowance and higher rate tax brackets raised a year early, but it will be interesting to see whether the Chancellor treats this as a ceiling. Rates could now be frozen for following years, which would turn the tax cut into a hike very quickly. In the mid to long-term, this may not protect the inflationary impact that a no deal Brexit may have.
Phil Smithyes, Managing Director, Crowe Financial Planning
The move to raise the personal tax allowance to £12,500 and raise the higher rate tax threshold to £50,000 from 6 April next year is a move that should be welcomed by most pensioners, making their pension savings go that much further.
Under the pensions ‘freedom and flexibility’ rules, individuals could take up to £16,666 each tax year from their pension fund before they begin paying income tax. This is achieved through a combination of 25% tax-free cash (£4,166) and the new £12,500 personal tax allowance. Careful planning will help pensioners money go that further and minimise their liabilities to tax in retirement.
Susan Ball, Head of Employers Advisory Services:
In April 2017, the government reformed the IR35 rules for engagements in the public sector and early indications are that this has resulted in an increase in compliance within the public sector. This will now be replicated for the private sector, but a reasonable implementation period is vital so the effective date of 2020, and the fact the rules will only be extended to large and medium sized private businesses, are both sensible steps. The Chancellor clearly took on board the feedback from the consultation process over the summer. Engagers should start planning now based on the experience of the public sector in order to have an effective procedure in place for the start date of April 2020.
Laurence Field, Corporate Tax partner:
The Chancellor's statement was made against a background of political uncertainty, mixed economic signals and an increasingly protectionist agenda from many of our trading partners. Tax is one of the most politically high profile things a government can do, and this was one of the most political budgets a Chancellor has had to deliver for decades.
The UK doesn't raise enough tax to keep providing public services at the current level, especially given the aging demographic. A tax system that raises more tax will need to be more efficient, perceived to be more fair and find new 'pockets' of wealth or bad behaviour that can be taxed without political risk.
An autumn budget also has the advantage of kicking the can down the road given that the majority of changes will only kick in from April next year if not later. However, this is the first glimpse we have of the type of post Brexit fiscal landscape the government wants to create.
The announcement of a potential digital services tax (DST) makes sense. Global companies need to be seen to be paying their 'fair share'. They don't have votes, so are an easy target. Playing tough with the digital services tax is politically attractive even if this causes conflicts with other tax jurisdictions. It is unlikely such measures will find much opposition in Parliament given the ground has been well prepared. How our trading partners (and particularly the US) react will be the real challenge. Retaliatory measures will not help the British economy. Therefore by outlining a timetable to introduce measures in 2020 he has provided cover for trying to get international agreement. Talking tough, but deferring action makes other parts of the Budget more palatable.
Elsewhere, plastics have found themselves in the environmental firing line and it was an easy, and politically popular decision, to try and find ways of taxing its use. Requiring more usage of recycled plastics is a way of stimulating that industry while being seen to be tough on pollution. The challenge with all sin taxes is that if they are too effective, the source of revenue will dry up. The damage that plastics can do is all too obvious, the Chancellor is no doubt sincere in his desire to reduce our use, but would no doubt be grateful if industry doesn't take action too quickly.
A traditional industry like finance and accounting doesn’t often go through many changes. However, with the rise of artificial intelligence (AI), machine learning and automation, technology is having – and will continue to have – a huge impact on every business; changing the way people work within an organisation. And, finance departments are not exempt from this change. Below Andy Bottrill, Regional VP at BlackLine, discusses the future of finance and accounting with Finance Monthly.
Whether finance departments like it or not, technology is going to become part of the accounting process. And despite 71% of workers admitting to still using spreadsheets to manually carry out month-end tasks, 80% of businesses are expected to be ready to adopt AI by 2020.
So why should today’s accountants look forward to, and not fear, the future and technology?
Automating Admin
Companies have already reported that 75% of intercompany transactions are automated, and this is only set to increase over the next 10 years; with 45% of individuals predicting invoicing will cease to exist by 2030.
Although the prospect of investing in automation may seem negative to many accountants at face value, they need to consider the long term benefits it can bring.
Workers must realise that technology will actually positively impact them. For example, removing mundane tasks such as admin data entry – automation can do this far quicker than a human, with a much higher accuracy rate. Using this technology, accountants are seeing manual admin tasks disappear, giving them time back to do tasks of greater value, such as financial analysis.
Augmenting the Accountant
A large concern around the future of finance and accounting is that robots will result in redundancies. But many fail to realise technology won’t wipe out jobs, but instead augment existing roles.
In 10 years’ time, the accountant we know today will no longer exist and instead, an accountant with a completely new skillset will have evolved. Technology is transforming employees’ roles, allowing them to transition from accountants who report last month’s numbers to reporters and analysts who deliver real-time data and predictive analytics.
Removing mundane tasks from day-to-day activities frees up time for more rewarding tasks in the finance department and others that require help – augmenting accountancy roles. Having the opportunity to work in other departments or take on other areas of expertise augments the skillset that accountants have.
Augmenting the accountant role in this way not only boosts job prospects within the workplace, but makes employees much more employable in the future. Making it an opportunity accountants should embrace.
Removing bad habits
Many organisations pride themselves on “best practices”, and don’t stray away from what they have always known. Sometimes, however, adhering to outdated traditional processes can do more harm than good and that is seen within the finance department.
Financial departments are known more than any to practice the phrase “if it ain’t broke, don’t fix it”. However, technology is changing this and removing these somewhat bad habits from day-to-day tasks and instead replacing them with new “best practices” through the use of technology.
Efficient Processing
Amid the personal benefits technology can bring to businesses, the practical savings are just as important – especially for C-suite level executives.
Imagine it’s the year 2028. The CEO questions the finance department on the likelihood of being able to acquire a desirable start up. In response, the CFO brings up real-time figures on her iPad and analyses them with her team to evaluate the potential options. She then emails the CEO their forecast: the business can afford to put in a competitive offer.
And while this evaluation is happening, the machine learning programme installed in the finance department has spotted and flagged a suspicious transaction that looks like possible fraud. The team are able to investigate this straight away, instead of waiting for auditors to discover it. Through this continuous accounting, businesses gain better insights and minimise mistakes.
Increased Sector Reputation
Whilst it’s important to look forward to the internal benefits technology will bring, it is equally important to understand the external impact.
When it comes to quarterly reporting, many finance departments have been scrutinised for incorrect data. But the technology available to finance departments today is helping reduce, if not eliminate, this from happening.
By using real-time data analysis, automation and machine learning businesses can reduce the number of reconciliations required and decrease the margin of error. As a result, more accurate financial results and closing data is produced.
This not only increases the reputation for individual businesses, but for the sector as a whole. Instead, accountants can promote their profession in a positive light. As businesses look to be the best in their industry, enhancing reputation is critical – and technology can certainly help do that.
