Accounting’s big guns take aim at small business market

Posted on July 21, 2017 by Guy Atkinson

Two years ago, Mitchel Galvin started a fashion business from a spare room in his parents’ home, armed with £300, a handful of designs and some blank T-shirts. Now the company, Nicce London, has sales of £2.5 million, 12 staff and deals to supply Asos, Topman and more than 100 independent retailers.

Accounting’s big guns take aim at small business market

Growth at that speed is impressive — “People are shocked at how well we’ve done,” the 25-year-old says — and it has not gone unnoticed. Companies such as this have become a new arena in a battle for custom that pitching the traditional accounting choices for the country’s promising start-ups — local or mid-market operators — against the big boys.

KPMG is leading the attack. It is promising “unlimited” access to a dedicated KPMG accountant to look after all of a small company’s accounting, payroll, tax and book-keeping. It has invested more than £40 million in the subscription-based service and its prices look extremely competitive; £145 a month for a sole trader, £275 a month for a small business.

Similarly, PwC is offering an outsourced accounting service called MyFinancepartner. For everyday support, there are online tools and a call centre, but the firm is also promising that an accountant will meet customers to provide guidance on overcoming key hurdles such as attracting investment.

A start-up that needs only two face-to-face visits may pay as little as £300 a month. In contrast, small companies can expect to pay about £12,000 to a regional or mid-sized accountant, according to Kirsty McGregor, founder of The Corporate Finance Network, a membership group for regional accountancy firms. For the traditional high street and mid-tier accountancy firms that dominate the small and mid-sized company market, that’s scary stuff.

Bivek Sharma, the partner leading KPMG’s assault on smaller rivals, claims that the firm has won 2,000 customers since it launched its small business accounting division in January — and that’s scary, too.

There are several changes that have prompted the accounting giants to take an interest in relative tiddlers. Securing and keeping lucrative large company audit work has become increasingly cut-throat, because of regulatory changes designed to promote competition. In addition, market entry has been made economically viable by the rise of online, or cloud, accountancy software companies that automate many of the more straightforward aspects of an accountants’ work. Much of KPMG’s service is delivered online, which Mr Sharma says is an advantage because it means that a live, detailed picture of company’s financial position is always available.

Yet this, ironically, also is part of the case for the defence. Bobby Lane, a partner at Shelley Stock Hutter, a mid-sized accountancy firm, says that businesses will end up with a “one size fits all mentality . . . Those new to running a business need to think very carefully about the skill-set that the large firms have and whether this is relevant to them.

“When you’re growing a company, you go through all sorts of problems, many of which you rely on your accountant for help and advice on. I’ve spent years building up a network of contacts and specialists that are experts at advising small businesses. The big question businesses should be asking is what specific, relevant advice to them will they get from [large accountancy firms] who are used to dealing with huge corporations? Do they really have the experience and skills to answer questions that relate to issues of hundreds of pounds?”

From smoothing payment problems with large customers to advising on sales and marketing and providing introductions to finance providers, Mr Lane sees Shelley Stock Hutter’s role as a general business adviser rather than a mere beancounter. One of his customers is Mr Galvin, who has, for example, been introduced to a fashion industry veteran by Mr Lane to add some experience to the youthful company in a new non-executive role.

Stewart MacDonald, managing partner of Scott-Moncrieff, Scotland’s oldest accountancy firm, also questions whether larger firms will be able to compete with this kind of service. “In our experience, [customers] tend to place additional value on the personal relationships they have with their advisers, who have built the connections, networks and experience that are specific to [smaller businesses]. There has to be a concern as to whether early adopters [of PwC and KPMG’s offerings] will continue to get the level of service they require.”

Ms McGregor argues that most small accountancy firms are not providing the quality of advice they claim to. “Bobby Lane is fantastic, but most accountants aren’t like him. There are some great small accountancy firms, but also horrendous ones. Most firms say they can provide guidance and broader advice, but a lot aren’t doing it. They are generally too focused on traditional work. The bigger accountants are better at weaving other services in.”

Mr Sharma rejects the accusation that business owners will be left with a faceless, automated service. “Our network and reach means that we can help with any issue a customer has. We can provide introductions to large customers who are already our clients. We work with so many people, we will know someone and we will pick up the phone. We have done that already.”

Ms McGregor believes that small businesses shouldn’t rush to dismiss the idea of working with one of the big firms over service fears. “I think the core service will be fantastic. I don’t believe they will be able to provide additional guidance to everyone, but I’m sure they will spot the companies they want to work with and give them great support.

“This will be healthy for the sector. Smaller firms are going to have to up their game, or they’re going to lose their clients.”

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