By Ed Kless, Senior Director, Sage Accountants
*Listen to Ed Kless discuss the accounting practice of the future in the #NextGenAccounting Podcast series.
In the 1800s in northern France, weaving machines were brought into textile factories, to perform a task that had been done manually for decades. Workers were not happy, believing the machines would take their jobs and kill their craft. In protest, they destroyed the machines using wooden shoes, or sabots, and became known as ‘saboteurs’.
Fast forward 200 years and we’re seeing a similar rebellion from accountants who are worried about being replaced by bots and automation. Yet their way of protesting is not to sabotage the bots but to cling to the way they’ve always done things, which is to sell their time and bill by the hour for mundane work, even though there’s much better things they could do with their time, from a knowledge and value perspective.
Some 49% of respondents in Sage’s annual Practice of Now research, which surveyed 3,000 accountants globally, say they would automate tasks like number crunching, data entry, and email and diary management.
Yet this suggests that more than half of accountants – including seasoned professionals with decades of experience – are still charging customers for the time it takes to process receipts and balance the books. This is despite the fact that 42% of customers expect their accountant to provide business advice.
Efficiency vs effectiveness
Thanks to the cult of efficiency, we’ve become obsessed with doing more in less time. We forget that time is a rival asset, which forces us to compete on cost and pricing. You can offer the lowest rate in the industry but, ultimately, you’ll have to work harder and hire more people to meet your own targets.
This might make you efficient but are you effective? Are you creating value on both sides of the transaction? Put differently, are you helping your customers generate wealth by advising on financial strategy, forecasting and profit growth, while also generating your own wealth?
“With this model, you can only sell one hour to one customer at a time. Once you’ve sold that hour, you can’t repackage it and sell it again. It’s gone forever and, honestly, it’s not very valuable.”
This ‘positive sum game’ – where both sides benefit – will never maximize value if we continue to use the billable hours model. With this model, you can only sell one hour to one customer at a time. Once you’ve sold that hour, you can’t repackage it and sell it again. It’s gone forever and, honestly, it’s not very valuable.
Building a non-rival asset
What if, instead of billing every spare hour to a single customer, you used it to learn more and develop your skills? This is ultimately where your value lies. You should be selling your knowledge and expertise, not your hours. The more knowledge you have, the bigger non-rival asset you create, which can then be repackaged multiple times and sold to different customers at different prices without once diminishing the value to you or, almost miraculously to each customer.
With this new business model, the focus shifts from people power (time capacity) and efficiency to intellectual capital and effectiveness. You stop counting hours and start growing your knowledge and that of your team. It’s the difference between having an efficient or an effective brain surgeon when having a tumour removed. I know which one I’d prefer, even if it takes him twice as long to perform the surgery.
Sell what they’re buying
We need to shift our mindsets to prioritise effectiveness over efficiency. Simon Sinek calls this your ‘why’. Customers don’t buy what you do or how you do it, they buy why you do it, especially if those values are aligned with their own.
Customers don’t care if you used automation software to capture receipts and crunch the numbers. What they care about is the knowledge and advice you give them after those numbers have been produced. That’s their value. They pay for the ‘why.’ The ‘what’ and ‘how’ simply serve as the proof of your ‘why.’
You will not find value or purpose counting the hours it takes you to complete mundane, repetitive tasks. You’ll find value in books and seminars and online courses. You’ll find value in broadening your knowledge and perspective beyond accounting. Education does not stop when schooling stops. University will teach you how to be efficient but only you can define your value and that requires lifelong learning.
Read up on biology, on human behaviour and on the meaning of words. When you truly understand why the words ‘transaction’, ‘organisation’, ‘accounting’ and ‘auditing’ came to be associated with business, you’ll know exactly how to create true value for your customers.
This new business model dramatically changes your relationship with your customers. You will need to have deeper, richer conversations about their values and how they align with yours. Your value is not your hours. Your value is your knowledge, which can’t be tracked by the hour. Deep relationship can never be developed by looking at the clock.
There’s a problem with the current business model and the first step is to admit that there’s a problem. Artificial intelligence and automation are handing us an opportunity to change how we’ve always done things and to get better at our craft. Take the opportunity. Don’t sabotage the bots. If you do, you’ll just be sabotaging yourself.
This article was published in partnership with Sage.