The accounting landscapes in Singapore and Hong Kong are so disparate, yet so tied to automation and technology adoption.
In a survey of 146 of accounting and bookkeeping companies in Hong Kong and 349 in Singapore – to assess their business based on a range of areas relating to technology adoption, including their business performance – pacesetting firms claim to bring in 140% more advisory revenue at approximately HK $616,000 versus regular firms at HK$264,000.
Pacesetting firms also saw an increase in average billing per small business client from $26,800 in 2018 to $31,700 this year, and are more efficient when it comes to client servicing. It only took pacesetting firms 249 hours to serve one small business client in a year, versus 412 hours last year.
The rise of repeatable advisory services also meant that there is increased adoption of financial forecasting, budgeting, and reporting apps like Spotlight Reporting and Fathom – 13% pacesetting firms compared to 6.1% of regular firms.
The research by global small business platform Xero, aims to shed light on the best practices of pacesetting firms that make up the top 15% of the market. These firms boast high growth and revenue rates and serve as a benchmark for other firms looking to achieve success in 2020 and beyond.
Data automation tools have made firms twice as efficient
The report reveals that pacesetting accounting firms were able to cut down client servicing hours by almost 50%; from the industry average of 518 hours to 249 hours per client. Their success stems from the adoption of data automation apps, with almost half (48%) of these firms having implemented such tools in their workflow.
In addition, among the firms that have not adopted cloud technologies, the research highlights an alarming number of hours used to serve each client. This is due to the continued practice of recording and sharing financial data through labor-intensive methods such as physical receipts shared physically in bags or boxes, time-intensive spreadsheets, and journals of transactions. As much as 40% of small business clients of complex advisory firms say that they still work with their accountants this way.
Shifting from compliance to business advisory
Accountants are transitioning beyond compliance services such as auditing, and are getting increasingly involved with assisting their clients in making critical business decisions. Repeatable advisory practices that provide routine advisory services made the most revenue in the last 12 months in Hong Kong, averaging at HK$1,250,000 per month. Services that are the biggest revenue generator are tax advisory (39.2%), forecasting, budgeting, cash flow and business planning (31.8%), and startup mentoring, assistance and business development (17.7%).
The report also outlined how the Hong Kong market is more successful in its transition from providing compliance-based services to advisory services. Some 39.8% of revenue generated in Hong Kong contributed to advisory services, compared to 27.4% in Singapore.
Further growth through value-added advisory
Based on the report findings, Hong Kong accounting firms have grown their businesses at 10.3% in the past 12 months, slightly faster than their counterparts in Singapore (8.5%), despite adopting data automation apps at a similar pace.
However, when focusing on the performance of pacesetting firms, 67% of such firms in Singapore are already using automation apps, compared to just 48% in Hong Kong. As a result, these Singaporean firms are seeing an average total advisory revenue of HK$1,004,710.50 (SG$176,800), 38% more than Hong Kong pacesetting firms (HK$616,000). This shows there is an opportunity for Hong Kong firms to further grow their revenue by expanding their service offering to include more advisory work.
According to Kevin Fitzgerald, Managing Director for Asia, Xero, “Hong Kong’s economic downturn has a huge impact on SMEs, and now more than ever they are looking for advisory support to ride out the economic slowdown. This is the time for accountants to step up in their roles by utilizing data automation tools to offer advice to help clients in their business decision making. By encouraging clients to run their accounting on the cloud, accountants will be able to tap into meaningful business insights to assist their clients with planning and forecasting in a timely manner.”