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Global and Regional Trends Impacting SMPs

Christopher Arnold

Technical Manager, SME & SMP Affairs

New Delhi

October 10, 2014

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• IFAC SMP Quick Poll• Insights from IFAC Research

– The Role of SMPs in Providing Business Support to SMEs

• Other Research– ACCA/IMA Digital Darwinism: Thriving in the Face of Technology Change– Edinburgh Group research, Growing the Global Economy through SMEs

• Resources

Agenda

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• Latest poll Nov-Dec 2013 attracted over 3,700 respondents

• Report at www.ifac.org/publications-resources/ifac-smp-quick-poll-2013-year-end-round

• Poll was conducted in 17 languages• Responses are heavily skewed in favor of practitioners

from Europe and Asia working in smallest categories of practice

Insights from IFAC SMP Quick Poll I

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• What is the biggest challenge faced by your SME clients?

Insights from IFAC SMP Quick Poll II

18%

15%

15%14%

13%

9%

8%

4% 3%

Economic uncertainty

Difficulties accessing finance

Pressure to lower prices of their products and services

Rising costs

Lack of demand for their products and services

Compliance with regulation

Competition

Attracting and retaining staff

Other

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• What is the biggest challenge your practice is facing right now?

Insights from IFAC SMP Quick Poll III

24%

21%

15%

7%

7%

7%

6%

5%5%

2% 2%

Attracting and retaining clients

Pressure to lower fees

Keeping up with new regulations and standards

Attracting and retaining staff

Competition

Work-life balance

Rising costs

Other

Ability to adapt to changing client needs

Keeping up with new technology

Succession planning

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• What is the fastest growing source of revenue for your practice?

Insights from IFAC SMP Quick Poll IV

33%

23%

21%

17%

6%Accounting, Compilation, and Other Non-assurance/Related Services

Audit and Assurance

Advisory/Consulting Services

Tax

Other

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• What is the main driver of your practice’s profitability?

Insights from IFAC SMP Quick Poll V

34%

33%

11%

9%

9%

2% 2%Acquisition of new clients

Better retention of existing clients

Increased productivity

Reduced overheads

Increased average fee size

Other

Better utilization of working capital and other assets

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• How does your practice expect business to be in 2014 compared to 2013?

• Next IFAC SMP Global Survey - 3 November 2014

Insights from IFAC SMP Quick Poll VI

48%

31%

22%About the same

Better than this year

Worse than this year

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Insights from IFAC Research I

• IFAC Research on the role of SMPs in providing business support to SMEs

• Extensive literature review

• Interviews with accountants across the world

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• SME demand for business advice– Owner-managers can be reluctant to readily seek advice– SMEs lack of in-house expertise– Change in enterprise or external environment– Regulatory demands extending outside financial compliance– Growing information needs of SMEs

• Accountants as external advisers– Most studies worldwide indicate accountants are preferred and

first source of advice for SMEs

Insights from IFAC Research II

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• Reasons for choosing an accounting firm, especially SMP

– Recognition—SMPs face similar compliance burden as SMEs

– Technical competency– Trust– Proximity and responsiveness– SMEs wanting a one-stop shop

Insights from IFAC Research III

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• Changing environment and challenges to traditional provision of services– Consolidation within the accountancy profession– Shift in regulatory environment: fewer audits – Shift in the nature of the SME population– Reluctance of some SMPs to provide services other

than core compliance • SMPs will have to diversify to survive as key advisers for

SMEs

Insights from IFAC Research IV

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Other Research I – ACCA / IMA

• ACCA/IMA Report on Top 10 technologies that have the potential to considerably reshape the accountancy profession and business landscape:

– Mobile - Cloud – Big data - Virtual and augmented reality– Payment Systems - Artificial intelligence and robotics– Cyber security - Educational– Social - Digital service delivery

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Other Research II – ACCA / IMA

• Research – developments in technology:– 81% expect change “to some extent” or “to a great extent” over next

decade– 18% expect “a total transformation”– 2,100 ACCA/IMA Members

• The profession must anticipate the changing needs of business

• Accountants and finance professional must be open to the changes created by the cloud, mobile and social platforms and face up to demands of cybercrime

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Other Research III – Edinburgh Group

• Edinburgh Group research, Growing the Global Economy through SMEs

• SMEs increasingly international but need more support

• SMPs can help with:

• Identifying markets

• Navigating red tape

• Facilitating finance

• Dealing with FOREX

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References—General

• IFAC SMP Committee: www.ifac.org/SMP • Follow us on Twitter: IFAC_SMP• Join us on LinkedIn: IFAC SMP Community• Global Knowledge Gateway: www.ifac.org/Gateway • Resources and tools (all):

www.ifac.org/about-ifac/small-and-medium-practices-committee/smp-resources-and-tools

• IFAC Translations and Permissions: www.ifac.org/about-ifac/translations-permissions

www.ifac.org/SMP