This presentation expands on Part I providing in depth coverage on global insights, general implications for SMPs, new service offerings and practice management. Presented by Christina Foo, IFAC SMP Committee Member and Paul Thompson Deputy Director, SME & SMP Affairs at the MIA Seminar in Kuala Lumpur, Malaysia on December 6, 2013.

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Performing Audits Efficiently
and Expanding Service Offerings:
Global and Local Insights (Part II)
Christina Foo
IFAC SMP Committee Member
Paul Thompson
Deputy Director, SME & SMP Affairs
MIA Seminar
Kuala Lumpur, Malaysia
December 6, 2013

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Agenda—Sustainability of SMPs
• Global Insights
• Other Insights & Surveys
• General Implications for SMPs
• New Service Offerings
• Trusted Business Advisor
• Practice Management
• Next Steps
• References

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Global Insights—IFAC Research I

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Global Insights—IFAC Research II
• SME demand for business advice
– Growing information needs of SMEs
– Regulatory demands extending outside financial compliance
– Growing government regulation
– SMEs lack of in-house expertise
• Accountants as external advisers
– Most studies worldwide indicate accountants are preferred and
first source of advice for SMEs
– Larger the SME the more often meet their accountant

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Global Insights—IFAC Research III
• Reasons for choosing an SMP
– Recognition SMPs face similar compliance burden as SMEs
– Technical competency
– Trust
– Proximity and responsiveness
– SMEs wanting a one-stop shop

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Global Insights—IFAC Research IV
• Changing environment and challenges to traditional
provision of services
– Consolidation within the accountancy profession
– Rise in the provision of services by larger practices
– Shift in regulatory environment: fewer audits
– Shift in the nature of the SME population
– Reluctance of some SMPs to provide advice

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Global Insights—IFAC SMP Quick Poll (Recap)
• Keeping up with standards and regulation is biggest
challenge facing SMEs & SMPs (Asia – price/fee pressure)
• Accounting, compilation & other non-assurance/related
services is fastest growing source of practice revenue (Asia
– audit and assurance)
• Acquisition of new clients is main driver of practice
profitability
• Nearly 50% of practices offer sustainability services (most
common advisory) and another 25% plan to
• Main barriers to business advisory are lack of marketing
expertise and insufficient partner time

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Other Insights & Surveys I
• ACCA/IMA Report on Top 10 technologies that have the
potential to considerably reshape the accountancy
profession and business landscape
– Mobile
– Big data
– Artificial intelligence and robotics
– Cyber security
– Educational
– Cloud payment systems
– Virtual and augmented reality
– Digital
– Service delivery
– Social

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Other Insights & Surveys II
• CPA Australia Asia-Pacific Small Business Survey 2013 Key
Findings:
– The most challenging issues for all markets during 2013 were
increasing cost pressures and competition – these issues are likely
to continue to prove difficult for many small businesses in 2014.
Businesses should therefore be focusing more on business
management practices, such as cost control and improving working
capital while also prioritizing customer retention and investing in
innovation.

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Other Insights & Surveys III
• CPA Australia Asia-Pacific Small Business Survey 2013 Key
Findings for Malaysia:
– Overall, the outlook for 2014 is mainly positive for Malaysian small
businesses. With many Malaysian businesses focused on business
fundamentals such as customer retention and cost control, if the
economy performs better than expected, they are well placed to see
much stronger growth than they expect.

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General Implications for SMPs
• Consider
– New service offerings to SMEs
– Making changes to management of your practice

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New Service Offerings—Types
• Non-audit assurance (e.g., review engagements)
– New IFAC Guide (ETA Dec. 9, 2013)
• Advisory
– Compliance with regulations (e.g., HR, IT, Safety)
– Risk management
– Financial management (incl. access to finance)
– Sustainability (advisory, accounting, assurance)
– Start-ups / entrepreneurs (formation, finance, etc.)
– International development (see over)

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New Service Offerings—International Development
• 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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New Service Offerings—Country Examples I
• Ireland
– “If we do not provide bookkeeping services, we encourage the
client to purchase an accounts software package, then install it and
get it set up and then train the client on how to use it and to take
back-ups. Each year we review how they are getting on and
attend their premises to tidy up, before doing a year end
procedure. The “cloud” is the obvious next move for this service
though it is a little cost prohibitive for now. These are all value
added services which the client pays a bit more for. They are more
engaged with the financial side of the business. Equally, we are
not burdened with quality control issues over low value
bookkeeping services.”

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New Service Offerings—Country Examples II
• Sweden
– “We offer a “business check” service formed as ISRS 4400 service
in which we do a “miniature” quality control of a company’s
accounting, annual report and certain administrative questions. It
has a face value of 600-900 euros and what we hope is to also use
this service an “ice-breaker” when attracting new customers. For a
quite small amount, the client can use us as a check almost like the
mandatory car inspection. What we hope for is beginning of a
relationship motivating the client to demand more.”

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New Service Offerings—Country Examples III
• Australia
– Wealth management / financial planning to business owners
– Aged care advisory
– Pre-insolvency or phoenix services
– Business adviser / outsource CFO

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New Service Offerings—Country Examples IV
• Singapore
– Compilation of accounts
– Outsourcing bookkeeping
– Valuation services
– Advisory services
– Corporate finance
– Tax advisory / international tax
– Insolvency services

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New Service Offerings—Country Examples V
• Hong Kong
– Consulting and business advisory
– Internal control reviews
– Financial due diligence
– M&A advisory
– Business valuation
– Funding advisory
– Liquidations
– Company secretarial services
– Reporting on solicitors’ accounts

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New Service Offerings—Country Examples VI
• USA
– HR outsourcing (payroll, benefits, record keeping etc.)
– Bill management services (accounts payable)
– Trusted business advisor

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Trusted Business Advisor—What it Means
• Understanding and listening to clients’ needs
• Using our broad experience / expertise to help clients
accomplish their goals
• Creating an ongoing relationship with clients
• Providing more than core accounting services

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Trusted Business Advisor – Process (AICPA’s 2.0)
• Identify clients
• Conduct initial consultation
– Build rapport and understand client needs
• Create and deliver a proposal
– Schedule / prepare for meeting and stress value added
• Agree to engagement
– Engagement letter with timing and pricing and get client to sign
• Execute, obtain feedback and deliver
• Conduct an engagement assessment meeting

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Practice Management—General
• Marketing and pricing
• Staff
• IT
• Clients
• Structure
• New metrics

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Practice Management—Marketing and Pricing
• Marketing
– Build expertise
– Utilize website, brochures etc.
– Use social media (e.g., Twitter, Facebook, LinkedIn)
• Pricing
– Consider value over time-based

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Practice Management—Staff
• Staff are most valuable asset of professional services firm
– Key to firm success where clients met face to face (professions)
– Soft skills becoming more important than technical skills
• Develop new skills and competencies
– Soft skills (branding, marketing, presenting, negotiating etc.)
– IT (cloud computing, apps etc.)
– Advisory expertise (financial, HRM, strategic development etc.)
• Make (train existing staff) or buy (recruit new staff)

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Practice Management—IT (Geoffrey Moore) I
• Digitization (cloud computing)
– Paper to paperless to boost productivity
• Virtualization (systems of engagement)
– Physically present to virtually present to improve market reach
• Transformation (business intelligence)
– Compliance provider to trusted advisor to enhance value
– On-demand reporting, business analytics, dashboard graphics,
target market segment benchmarking and advisory services
(discussing how best to respond to revealed issues)

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Practice Management—IT II
• Some great (mainly free!) apps
– Wi-Fi Finder
– Evernote
– Feedly
– Dropbox
– Keeper
– TripIt
– AirServer

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Practice Management—Clients
• Educate
– Shift their perception of accountants
• Select
– Ensure clients are right fit / match for your firm
• Categorize
– A, B, C list
– Differentiate (like airlines!)

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Practice Management—Structure
• Specialization / niche
– Type of client
– Type of service
• Merge with another practice
• Participate in referral network

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Practice Management—New Metrics
• Important to proactively measure and spend time
planning for growth and improved revenue
• Examples:
– % of fees from new vs. existing clients
– Average fee per client
– Number of solutions each client buys

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Next Steps
• Lead through commitment and culture
• Change mindsets (your own, your staff and your clients)
• Prepare for obstacles
• Take time to develop, commit and execute a plan
• List 3 actions you will take following this workshop

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References—General
• IFAC SMP Committee website: www.ifac.org/smp
• IFAC SMP Twitter: www.twitter.com/IFAC_SMP
• IFAC SMP Community:
http://www.linkedin.com/groups?home=&gid=4542841&trk=anet_ug_hm
• IFAC SMP Forum: www.ifac.org/2013SMPForum
• IFAC SMP Quick Poll: 2012 Round-Up (Nov/Dec 2012):
www.ifac.org/publications-resources/ifac-smp-quick-poll-2012-round
• 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

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References—Business Advisory
• The Role of Small and Medium Practices in Providing Business Support to SMEs
research paper: http://www.ifac.org/publications-resources/role-small-and-
medium-practices-providing-business-support-small-and-medium-s
• SMP Committee Business Advisory Interviews (Videos)
http://www.youtube.com/playlist?list=PL38B5A23305EFBFB0&feature=view_all
• Good Practice Checklist for Small Business (Second Edition):
http://www.ifac.org/publications-resources/good-practice-checklist-small-business
• How to Build Your Business Advisory Practice article:
http://www.ifac.org/publications-resources/how-build-your-business-advisory-
practice
• Sustainability: Challenges and Opportunities for SMPs and SMEs article:
https://www.ifac.org/news-events/2013-04/sustainability-challenges-and-
opportunities-smps-and-smes

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References—Practice Management
• Guide to Practice Management for Small- and Medium-Sized Practices (Third
Edition) (incl. companion manual): https://www.ifac.org/publications-
resources/guide-practice-management-small-and-medium-sized-practices
• 7 Tips for Accountants on Supporting the Globalization of Small Business article:
http://www.ifac.org/news-events/2013-08/7-tips-accountants-supporting-
globalization-small-business
• Social Media Marketing May Be the Key to Practice Profitability article:
http://www.ifac.org/news-events/2013-10/social-media-marketing-may-be-key-
practice-profitability
• Tomorrow’s Firm and the Role of Value Pricing: IFAC Interview with Ronald J.
Baker article: https://www.ifac.org/news-events/2013-02/tomorrow-s-firm-and-role-
value-pricing

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