The Balanced Scorecard, a concept created by Drs. Robert S. Kaplan and David P. Norton, challenged conventional financial thinking by, “….going beyond traditional measures of financial performance, the concept has given a generation of managers a better understanding of how their companies are really doing. These nonfinancial metrics are so valuable mainly because they predict future financial performance rather than simply report what’s already happened.” Almost 25-years-old now, the concept challenges financial practices to take a more strategic position in their roles as financial service providers. With expansion and market penetration a top priority for small business owners, a practice that views clients tactically - instead of in mere numbers and figures - can be an invaluable strategic asset.
With this said, let’s take a look at four traits of an effective practice and how the ideal firm can play an influential role in the success of any business.
Understanding the importance of technology
We’ve come a long way since the days of Microsoft Office and Lotus Notes. Cloud technology and internet ubiquity give accounting practices newfound agility, which allows for quick sharing of information, collaboration and eliminates time wasted when systems aren’t available. The modern finance practitioner knows that time is money – for themselves and their clients – and leverages technology smartly to enhance efficiency levels and shorten turnaround times to their customers. Here’s an insightful interview with leading accounting practitioners on the International Federation of Accounts’ website on technology’s influence on the accounting world.
An industry specialist
Effective practices do more than balance the books and offer financial statements; they understand the intricacies of running a business of a particular nature, identify ways to raise capital in that specific area and reduce expenditure. Determining an industry niche early on will build a strong reputation as a specialist and industry thought-leader. For instance, firms who focus on the property market could further hone in on property tax practices as a means of differentiation and providing their clients with specialist services. This creates a leaner practice that isn’t spreading its offerings too thin and curtailing its growth in the process.
Builds business strategy
Small business owners may have a vision for what their companies will look like down the road, but need the expertise of various outside parties if they want to have any hope of success. This is underlined by the fact that 63 percent of South African small businesses close their doors within the first two years. Sighting lack of financial planning as a primary cause of small businesses failing, competent accountants must assert their roles and influence sensible financial decision-making. The best firms know that their job isn’t to tell their clients what they want to hear – but instead give them solid, sensible financial advice. With much of success dependent on reputation in a competitive field such as financial services, firms that position themselves as strategic partners and adding value beyond standard services are able to increase revenue while building good reputations and partnerships with clients.
Runs an efficient and compliant practice
Firms that are guided by the standards and ethics stipulated by regulating bodies and their peers are likely to bring those values to the clients they serve. Malpractice suits can seriously damage both the firm and client’s reputation. Defensible or otherwise, lawsuits are expensive, time and energy-consuming, and place severe strain on client/firm relations. Also, best-practices are designed and adapted according to market and industry changes to ensure that efficiency – and transparency – is preserved within the complexities involved in an ever-changing industry. With this said, modern accounting platforms are well-geared to help accounting practices operate within the scope of the law and bring efficiency to their work processes. Many younger firms have taken an adoptive approach to new delivery platforms to sharpen their competitive edge and introduce new value-adds to clients.
Become a business partner instead of a service provider
The right practice possesses intimate knowledge of what it is that makes their clients tick, shares their vision and actively contributes to seeing their customers reach short and long term objectives. This requires accounting practices to take on more of a partnership role than merely providing financial services and mailing the bill at the end of each month. In an era where differentiation is essential, practices are continuously looking to gain an edge and the opportunities have never been greater. With disruptive technologies such as the cloud and Software as a service (SaaS) offerings in full supply, deploying the right technology is key.
As many traditional practices still mull over the merits of technology as a business advantage, new-generation firms are seizing the opportunities that come with the new digital business model – and are gaining traction fast. The question is: is your practice ready for the shift?