IFAC President Warren Allen was a keynote speaker November 8 at the inaugural IPA National Congress.   

Note to Editors: This article is available for IFAC member organizations to publish in their journals and/or websites. Email permissions@ifac.org for access and copyright information. 

The acquisition of new clients continues to be a dominant driver of profitability for small- and medium-sized practices (SMPs). Indeed, in the latest edition of the IFAC SMP Quick Poll, the largest portion of respondents identified acquisition of new clients as the main driver of practice profitability—by a wide margin (see chart below).

While SMPs understand the importance of improving operational leverage (doing more with less), improving productivity (e.g., changing work practices or introducing technology), reducing overheads, and better utilization of assets, these are not the main drivers of profitability for most SMPs. This is not surprising given the fact that practice overheads are relatively fixed.

The poll results seem to question the wisdom of many practice management “gurus” who say that the cost of acquiring a new client is far higher than the cost of retaining, or selling more services to, an existing client. What those “gurus” may be failing to recognize is the full potential and cost effectiveness of a marketing campaign that includes low-cost social media.

This article looks at promotion and marketing and, in particular, the role of social media in acquiring new clients and driving practice profitability. 

Branding

The first step of a marketing strategy is to identify your target customers and what they need. You then have to determine how you can satisfy those needs at a profit and, at the same time, differentiate yourself from your competitors. This becomes your brand. The aim of your marketing strategy is to have people associate your brand with their needs and desires, choose you over the competition, and, if you do it right, pay a premium for your services.

Promotion and Marketing

An organic growth strategy involves leveraging promotion and marketing activities to build brand and attract new clients or sell additional services to existing clients. Remember that most businesses in the market are likely to already have an accountant. In the majority of cases, that means for you to grow your practice you will need to win clients from rival practices. And, in order to do that, you must offer a compelling reason for them to switch. This makes promotion and marketing more important than ever—and demands that practices build the capability to proficiently promote and market their brand and service offerings. You will likely be faced with the classic “make-or-buy” dilemma, that of using (and training as needed) existing staff to do promotion and marketing, or else recruiting or outsourcing for the requisite skills.

Promotion and marketing efforts are most effective when a number of activities and channels are used simultaneously: this harnesses the momentum of such efforts and is likely to be more impactful. There are many “tried and true” strategies for marketing but the newest one, social media, has already broken the mold. Social media marketing has rapidly grown in prominence and gone from marginal to mainstream in the marketing space. Social media is a low-cost channel with a very wide reach into your target market.

Social Media Marketing

Social media essentially has taken traditional word-of-mouth marketing (historically the norm for accountants) and moved it to a digital space, exponentially increasing opportunities to influence. It is one of the most powerful tools to engage customers and drive revenue growth. But according to Steven D. Strauss, small business expert and author of The Small Business Bible, while small business owners recognize how important social media is to their success, they’re not taking advantage of social media’s full potential.¹ And, chances are, the same applies to SMPs: after all, SMPs are effectively small businesses in the accountancy sector.

Getting started in social media marketing and deciding whether it can benefit your practice can be quite overwhelming—even scary, at first. Here are some steps to take when building a social media presence:

1. Set aside preconceived notions—social media carries risks but the rewards are greater: it will take time and expense to plan and execute but there are many tools, resources, and articles to help.
2. Learn about the what, why, and how—take the time to read and educate yourself about social media, including Twitter (see Twitter’s Small Business Guide), LinkedIn, Facebook, and blogging, and see what your peers are doing.
3. Check out the tools and resources available to help—there is a growing suite of tools, resources, and guidance available, for example, the AICPA PCPS has developed a number of resources, many of which are available for free, including a social media toolkit and articles.
4. Create a strategy and action plan—define goals, decide how you will measure success and allocate responsibility, then start out small by, for example, pilot testing one of the tools. See “10 Questions to Ask When Creating a Social Media Marketing Plan.”
5. Implement the plan—aim to provide content that creates conversation rather than advertises and involve staff from the millennial generation as they often have the most experience.
6. Periodically evaluate, analyze, and update the plan—track your efforts and monitor the return on investment using common metrics including likes, shares, followers, traffic, and conversions.
7. Consider the need for a policy—this can help manage the risks and reap the rewards.

Resources

IFAC’s website hosts a range of resources and tools to help SMPs grow their practices, especially the Guide to Practice Management for Small- and Medium-Sized Practices).

This article was originally published in the December 2013 issue of Chartered Accountants Journal, published by the New Zealand Institute of Chartered Accountants.

As the government's lead economic and financial advisor, the Treasury of New Zealand has a particular focus on ensuring state-level public sector performance improves living standards. Setting clear expectations and producing relevant and reliable accountability information is critical to this.

For its work in preparing fiscal forecasts and financial statements, and in assessing departmental performance, the Treasury relies on information provided by other government departments and agencies. In order to evaluate the adequacy of this information, the Treasury performs assessments to ensure that the internal controls used by information providers are operating effectively.

As the Treasury sought to refresh its approach in this area, it chose to embed the International Good Practice Guidance, Evaluating and Improving Internal Control in Organizations, published by the International Federation of Accountants (IFAC), into its internal control and financial management assessment tool, CIPFA TICK.[1] With permission from IFAC, the Treasury adapted the guidance to help departmental and agency risk committees and senior management respond to results that were outside predetermined tolerance levels. That is, the Treasury doesn’t expect perfect results but we do expect results will be within the risk appetite level of senior management.

The IFAC guidance seeks to facilitate the evaluation and improvement of existing internal control systems by highlighting a number of areas where the practical application of existing internal control standards and frameworks often fails in many organizations. Because the Treasury wants to be alert to such issues, this guidance is, therefore, very relevant for public sector organizations in New Zealand.

The Treasury tool is an electronic questionnaire that seeks assessments against each of the nine principles identified in the IFAC guidance. The survey is completed annually by approximately 500 budget holders, internal auditors, finance staff, and senior managers across New Zealand’s public sector. The first year’s results, for the year ending June 30, 2013, are publicly available online.

Although the Treasury and other central agencies have been reassured that internal control systems are currently adequate for reporting objectives, the survey results have also highlighted challenges.

• There is a low level of maturity in integrating objectives, risk management, and internal controls. Work is ongoing to develop and improve expectations and assessments of risk management.
• Updating risk management processes and responsibilities has proved a burden for departments that have been restructured recently. This has reinforced the importance of central agencies paying greater attention to departments undergoing significant change or restructuring until new performance levels are normalized.
• Delivering value for money is a common objective for many public sector organizations, but it is not easily measured. This has undermined accountability, which has led to a widespread lack of meaningful responses to substandard performance in this area. Central agencies currently have several projects in place in the performance reporting and management area. The survey has emphasized the importance of these initiatives.
• Some senior management teams lacked consistent leadership on risk management; internal control was also not always being consistently reinforced. The departmental performance assessments processes are drawing attention to these concerns.

Through this refreshed focus on assessing the effectiveness of internal controls, the Treasury has been able to collect more useful performance information for department management and achieved cost savings in the process. A summary of the survey results, as well as an analysis of the responses, can be found on the Treasury website.

Ken Warren is the chief accounting advisor at the New Zealand Treasury and a member of the International Public Sector Accounting Standards Board (www.ipsasb.org).

This article originally appeared in the China Accounting Journal, published by the Chinese Institute of CPAs.

When asked what accountants do, responses often mention roles such as tax agents and independent auditors. The functions performed by the vast number of professional accountants who work in businesses are often forgotten and not well understood.

What do the independent director, the internal auditor and the chief financial officer of companies all have in common? The individuals in these positions could all be professional accountants working in businesses. Besides these roles, professional accountants take on a vast array of other roles in businesses of all sorts including in the public sector, not-for-profit sector, regulatory or professional bodies, and academia. Their wide ranging work and experience find commonality in one aspect – their knowledge of accounting.

The importance of the role of professional accountants in business in ensuring the quality of financial reporting cannot be overly emphasized. Professional accountants in business often find themselves being at the frontline of safeguarding the integrity of financial reporting. Management is responsible for the financial information produced by the company. As such, professional accountants in businesses therefore have the task of defending the quality of financial reporting right at the source where the numbers and figures are produced!

Like their counterparts in taxation or auditing, professional accountants in business play important roles that contribute to the overall stability and progress of society. Without public understanding of all these diverging roles and responsibilities of different accounting specialists working in business, public perceptions of their value may be misinformed.

Roles of Professional Accountants in Business

A competent professional accountant in business is an invaluable asset to the company. These individuals employ an inquiring mind to their work founded on the basis of their knowledge of the company’s financials. Using their skills and intimate understanding of the company and the environment in which it operates, professional accountants in business ask challenging questions. Their training in accounting enables them to adopt a pragmatic and objective approach to solving issues. This is a valuable asset to management, particularly in small and medium enterprises where the professional accountants are often the only professionally qualified members of staff.

Accountancy professionals in business assist with corporate strategy, provide advice and help businesses to reduce costs, improve their top line and mitigate risks. As board directors, professional accountants in business represent the interest of the owners of the company (i.e., shareholders in a public company). Their roles ordinarily include: governing the organization (such as, approving annual budgets and accounting to the stakeholders for the company’s performance); appointing the chief executive; and determining management’s compensation. As chief financial officers, professional accountants have oversight over all matters relating to the company’s financial health. This includes creating and driving the strategic direction of the business to analyzing, creating and communicating financial information. As internal auditors, professional accountants provide independent assurance to management that the organization’s risk management, governance and internal control processes are operating effectively. They also offer advice on areas for enhancements. In the public sector, professional accountants in government shape fiscal policies that had far-reaching impacts on the lives of many. Accountants in academia are tasked with the important role of imparting the knowledge, skills and ethical underpinnings of the profession to the next generation.

Protectors of Public Interest

A description of the multifaceted role of professional accountants in business is not complete without discussing the duty that the profession owes to the general public. As a profession that has been bestowed a privileged position in society, the accountancy profession as a whole deals with a wide range of issues that has a public interest angle. In the case of professional accountants in business, not only must they maintain high standards but they also have a key role to play in helping organizations to act ethically.

Closely link to the protection of public interest is the notion that public accountants need to be trusted to provide public value. Accountants will lose their legitimacy as protectors of public interest if there is no public trust. The accountancy profession has wide reach in society and in global capital markets. In the most basic way, confidence in the financial data produced by professionals in businesses forms the core of public trust and public value.

Competing Demands

Accountants often times face conflicts between upholding values central to their profession and the demands of the real world. Balancing these competing demands speaks to the very heart of being a professional in contrast to simply having a job or performing a function. Professionals are expected to exercise professional judgment in performing their roles so that when times get challenging, they do not undertake actions that will result in the profession losing the public’s trust as protectors of public interest.

Ethical codes for professional accountants globally compels professional accountants, regardless of the roles that they perform, to uphold values of integrity, objectivity, professional competence and due care, confidentiality and professional behaviour. However, competing pressures can put professional accountants in challenging and often times difficult situations. These conflicts revolve around ethics, commercial pressures and the burden of regulation.

Situations may occur where professional accountants in businesses are expected to help the organization achieve certain financial outcomes. In some of these cases, the required action may risk compromising compliance with accounting and financial reporting rules. Professional accountants in businesses encounter tension in these situations. As an example, accountants in organizations may face pressures to account for inventories at higher values or select alternative accounting methods which are more financially favorable to the company. However, these actions may be contrary to what are allowable in the accounting standards or to what the professional accountant may feel comfortable with.

The Role of Professional Accounting Bodies in Promoting Professional Accountants

Professional accounting bodies globally have the important mandate of representing, promoting and enhancing the global accountancy profession. At the national level, the professional accounting body is the voice for the nation’s professional accountants; this includes all professional accountants both in practice and in business. Because they play different roles in the society, the overall status of the accountancy profession can only be strengthened when both professional accountants in practice and in business are well-perceived by society.

Because professional accountants in business are often the only members of staff who are professionally trained and qualified in accounting in the organization, they are more likely to rely on their professional accounting body for assistance in carrying out their work. They will look to the professional accounting body to provide them with the support and resources they need in doing their daily jobs and to keep their skills up-to-date. For example, professional accountants in business may look to their subject matter experts in the accounting body for advice on how to handle ethical dilemmas. They will also be dependent on their accounting body to provide continuous professional development training initiatives to keep their knowledge and skills current.

Evolving Role in an Evolving Environment

Like other professions, professional accountants are increasingly challenged to demonstrate their relevance in the capital market and their ability to evolve and face new challenges. Public expectations are high. The value of professional accountants will be measured by the extent to which they are perceived to be accountable not only to their own organizations but more importantly to the public.

Professional accountants in business are a key pillar in organizations helping to create and sustain value and growth. Their ability to continue to fulfill these roles in the face of constant environmental changes is vital to their continued relevance. Professional accountants in business are also the front runners when it comes to upholding the quality of financial reporting and providing the broader public with reliable financial information.

Professional accountants in business are an important critical mass in the global accountancy profession. The same applies at the national level. Public education on the diverse roles of professional accountants in business needs to be stepped up so as to increase the visibility of these roles. Professional accounting bodies also need to pay attention to their members in business and provide them with the support they need in order to succeed in their roles. Their voices also need to be represented. Achieving success on all these fronts will drive continued recognition by society of the value of professional accountants in business. This shapes the continued success of the accountancy profession as a whole.

About the authors:

• Len Jui CPA MBA, is KPMG Huazhen’s Partner – Head of Public Policy and Regulatory Affairs, Quality and Risk Management. He was formerly Associate Chief Accountant of the US Securities and Exchange Commission. Jui is a member of the China Auditing Standards Board and Technical Adviser to China’s Member of the Board of the International Federation of Accountants.
• Jessie Wong CPA PhD, is KPMG Huazhen’s Director – Public Policy and Regulatory Affairs, Quality and Risk Management. She was formerly Senior Technical Manager of the International Auditing and Assurance Standards Board and was also Policy Adviser of CPA Australia. Wong is a member of the Chinese Institute of Certified Public Accountants International Standards Taskforce.

La iniciativa CReCER (Contabilidad y Responsabilidad para el Crecimiento Económico Regional), creada por el Banco Mundial, el Banco Interamericano de Desarrollo, la Federación Internacional de Contadores (IFAC) y el Comité Global de Políticas Públicas (GPPC) de las seis firmas auditoras más grandes del mundo (PWC, Deloitte, Ernst and Young, KPMG, Grant Thornton y BDO), promueve una gestión financiera sólida en los sectores público y privado en Latinoamérica y el Caribe, a través del fortalecimiento de la contabilidad y la calidad de la información financiera y la auditoría. La séptima edición del evento CReCER se desarrollará en el 2013, para el cual Colombia fue designado como país anfitrión, eligiéndose a Cartagena como ciudad sede.

CReCER - sp from LCSFM on Vimeo.

IFAC, along with the World Bank, the Inter-American Development Bank, and the Global Public Policy Committee, held the seventh Conference for Accounting and Accountability for Regional Economic Growth, or CReCER (Contabilidad y Responsabilidad para el Crecimiento Económico Regional) in Cartagena, Colombia, in August 2013,  hosted by IFAC member body the Instituto Nacional de Contadores Públicos de Colombia.

Themed Integrating Approaches to Financial Reporting to Advance Regional Economic Growth: An Exchange between Public and Private Sector, the conference drew more than 350 attendees and speakers and covered important topics, such as national and regional initiatives to advance adoption and implementation of international standards; global perspectives on the evolving role of auditors and accountants; recent capital market developments to support investment; and the future of business reporting, including integrated reporting.

CReCER from LCSFM on Vimeo.

The public sector, including national, regional, and local governments and related governmental entities, plays a major role in society. In most economies, public expenditure forms a significant part of gross domestic product (GDP) and public sector entities are substantial employers and major capital market participants. The public sector determines, usually through a political process, the outcomes it wants to achieve and how it wants to achieve them. These include enacting legislation or regulations; delivering goods and services; redistributing income through mechanisms, such as taxation or social security payments; and the ownership of assets or entities, such as state-owned enterprises. Governments also play a role in promoting fairness, peace and order, and sound international relations.

Effective governance in the public sector leads to better decision making and the efficient use of resources, and strengthens accountability for the stewardship of those resources. Effective governance is characterized by robust scrutiny, which provides important pressures for improving public sector performance and tackling corruption. Effective governance can improve management, leading to more effective implementation of the chosen interventions, better service delivery, and, ultimately, better outcomes. People’s lives are thereby improved.

The International Federation of Accountants (IFAC) and the Chartered Institute of Public Finance and Accountancy (CIPFA) recently issued a Consultation Draft for an International Framework on good governance in the public sector. Good Governance in the Public Sector follows an initial review of relevant governance literature and includes input from public sector governance experts.1

This proposed Framework will be important to public sector entities, and their stakeholders, who want to improve their governance at all levels across the globe. It offers a set of core principles for good governance in public sector entities, supplemented by practical implementation guidance.

The proposed Framework is not intended to replace national and sectoral public sector governance codes. Instead, it was designed as a reference for those who develop and set national governance codes for the public sector when updating and reviewing their own codes. Where codes and guidance do not exist, the Framework provides a shared understanding of what constitutes good governance in the public sector and a powerful stimulus for positive action.

Definition and Key Principles

In the Framework, governance is defined as the arrangements, including political, economic, social, environmental, administrative, legal, and other arrangements, put in place to ensure that the intended outcomes for stakeholders are defined and achieved.

The Framework says the function of good governance in the public sector is to ensure that entities act in the public interest at all times, which requires:

A.     Strong commitment to integrity, ethical values, and the rule of law; and

B.     Openness and comprehensive stakeholder engagement.

 In addition to the requirements for acting in the public interest, achieving good governance in the public sector also requires:

C.     Defining outcomes in terms of sustainable economic, social, and environmental benefits;

D.     Determining the interventions necessary to optimize the achievement of intended outcomes;

E.     Developing the capacity of the entity, including the capability of its leadership and the individuals within it;

F.     Managing risks and performance through robust internal control and strong public financial management; and

G.    Implementing good practices in transparency and reporting to deliver effective accountability.

These core principles for good governance in the public sector are high level and bring together a number of concepts.

Presentation given by Stathis Gould, IFAC senior technical manager and head of Professional Accountants in Business (PAIB), on the roles and expectations on professional accountants in business during an Association of Chartered Certified Accountants (ACCA) USA chapter meeting that featured delegates from the Shanghai National Accounting Initiative (SNAI). The presentation includes how IFAC supports the significant PAIB sector of the accountancy profession, areas of focus for the IFAC PAIB Committee, and specific initiatives.

IFAC recently convened the first-ever meeting between the issuers and users of risk management and internal control guidelines, including representatives from the Committee of Sponsoring Organizations of the Treadway Commission (COSO), CPA Canada’s Risk Oversight and Governance Board (RGOB), Federation of European Risk Management Associations (FERMA), International Federation of Risk and Insurance Management Associations (IFRIMA), International Organization for Standardization, and Risk Management Society (RIMS).

During the event, Alignment of International Risk Management Guidelines, representatives from participating organizations presented their latest work and future plans, including: 

• Dave Landsittel, COSO
• Gigi Dawe, CPA Canada’s ROGB
• Julia Graham, FERMA and IFRIMA
• Vincent Tophoff, IFAC
• Jan Mattingly, International Organization for Standardization’s TC262 on Risk Management
• Carol Fox, RIMS

The presentations were followed by a panel discussion that reinforced the need for further international collaboration and alignment in the area of risk management and internal control. Participants decided to use the momentum from this meeting to initiate a series of collaboration projects.