What should be the top priority for accountants in 2020?
Jonathan Labrey, Chief Strategy Officer, International Intergrated Reporting Council
The pressure on business to report increasing amounts of data on top of financial information has been felt around the world, including in Hong Kong. However, data is often reported without context and without real insight into how it is linked to the strategy and business model of the organization.
Academic evidence demonstrates that adopting an integrated reporting (<IR>) approach, as advocated by the International Integrated Reporting Council (IIRC), has led to companies experiencing a lower cost of capital, longer term investors and a better share price performance.
In November 2019, the International Federation of Accountants (IFAC) urged regulators and standard setters around the world to use the International Integrated Reporting Framework (International <IR> Framework) as a foundation for reporting, noting that it provides a basis for narrative information and metrics that enable organizations to more effectively communicate.
This evolution in reporting is crucial, especially given the World Economic Forum’s assessment that the most pressing risks facing businesses are not financial but social, environmental and technological.
<IR> can be a skeleton for reporting, on which the different strands of reporting organizations currently publish are placed to create a single source of truth and a coherent value creation story – creating an antidote to the confusion that can be caused by producing a myriad of unconnected reports.
Bill Thomas, Global Chief Executive Officer and Chair of KPMG recently said, “We must be really clear on what success looks like. It must not be defined solely by the number of companies that claim compliance [in reporting]. Real success can only be found in the board room when <IR> becomes embedded in the systems and the processes that underpin decision making.”
The key principle behind <IR> is the concept of multi-capitalism. That organizations have to think about and account for the natural, social and relationship, intellectual, human, financial and manufactured resources that they use, create or impact.
By managing these interconnected “capitals” effectively and efficiently, organizations are in a better place to take decisions that lead to long-term sustainable development and financial stability within the business. The International <IR> Framework offers the guiding principles and content elements for them to achieve this.
As the organization behind this movement, the IIRC is working with partners around the world, including Hong Kong, to support businesses make this transition to <IR> and take advantages of its benefits. Why not make 2020 the year your organization joins over 2,000 others, including CLP and Swire, in more than 70 markets by applying the principles of <IR>?
“Data is often reported without context and without real insight into how it is linked to the strategy and business model of the organization.”
Amanda Wu, Associate Director, Michael Page Hong Kong
With rapidly changing technology in the modern world, marketing anything has become very different. So how should accountants market themselves for better career progression?
With the pace of digitalization and attention span, it is important to stay visible by sharing insightful business-related updates on your LinkedIn or other professional social media platforms regularly. Remember that your profile appears on the newsfeed of human resources directors, recruiters and potential employers in your network. From that, hiring managers will be made more aware of your background and approach you with new opportunities.
Take courses that relate to data analytics, data management and prep yourself to be more savvy with systems and platforms. You should also attend networking events and seminars to broaden your network especially with professions across different industries. You should attend events from the Institute, professional bodies and chambers of commerce to help raise your profile and branding.
Within an organization, it is also important to strengthen your personal branding. Companies are undergoing business transformation and traditional accounting is no longer needed in first-tier cities such as Hong Kong, Singapore and Shanghai. If you are in the traditional side of accounting processes, you would need to rebrand yourself and offer more.
However, you do not have to turn yourself into another person. More critical to your growth is demonstrating flexibility to the management team. Be more proactive in participating in new projects, raise your hand to take on new roles and responsibilities, and get yourself involved in working on business process improvements for the company whenever there is a chance.
If you are already in the newer functions of the accounting process, you would also need to constantly work on your personal branding. Keep yourself ahead of the newest industry trends, pay more attention to the macro economy and identify the potential effects within your own company. Be more vocal and proactive in sharing market or industry insights, and make suggestions for continuous improvement to business processes on a company level.
“Keep yourself ahead of the newest industry trends, pay more attention to the macro economy and identify the potential effects within your own company.”
Kevin Fitzgerald, Managing Director - Asia, Xero
Hong Kong’s economic downturn means that now, more than ever, accountants are being sought out by their clients to provide services that are over and above traditional compliance support. In particular, we are seeing that small- and medium-sized enterprises (SMEs) are increasingly turning to accountants for advisory services to help them ride out the economic slowdown.
Advisory services are an incredibly valuable, and growing, revenue stream for accountants, which they need to capitalize on. We recently commissioned extensive research among accounting firms in Hong Kong and Singapore, and found that almost 40 percent of revenue in the Hong Kong accounting market was generated from advisory services.
While this is positive to see, other markets are already much further ahead. If we take Singapore as a comparison, advisory revenue is 38 percent higher than in Hong Kong. A significant difference. So, what is the reason behind this?
Leveraging the power of platforms could be one of the clear differentiators. In the business-to-business world, the rise of apps has allowed businesses to tailor a suite of tools that cater to their needs – in turn this also increases productivity and reduces costs. For example, our research data revealed that firms that are harnessing data automation apps to streamline and automate their work stream are also taking on more value-added advisory services.
Looking again at our data, we see that in Singapore, 67 percent of accounting firms are already using data automation apps, compared to only 48 percent in Hong Kong. This could in part explain the difference in revenue from advisory services.
Turning the spotlight back onto Hong Kong, our research shows that data automation has made the top performing accounting firms twice as efficient as regular firms. In fact, firms that have adopted data automation tools have cut down their client-servicing hours from the industry average of 518 hours to 249 hours per client.
Conversely, among the firms that have yet to adopt these tools, client over-servicing continues to be rife. These accounting firms still record or share financial data through labour-intensive and inefficient methods, such as storing physical receipts in bags or boxes and relying on the use of spreadsheets and journals to manually record transactions. These manual and repetitive tasks can prevent accountants from using their time to offer valuable business consultancy.
To successfully capitalize on the demand for advisory services, accountants need to upskill and leverage data automation tools to streamline their basic workflow.
“Accountants need to upskill and leverage data automation tools to streamline their basic workflow.”