Since 2007 the SME business world has been going through rapid change and disruption. Emerging from the rubble are a new generation of business leaders, known as "The Millennials" - those in the 18-34 demographic.
This grouping represented 70% of the 600,000 start ups in the UK in 2015. According to a PWC report, "Millennials & Financial Literacy" * just under a quarter of this grouping indicated basic financial knowledge, being the least financially literate among all age groups. The research "has documented that the gap between the amount of financial responsibility given to young [people] and their demonstrated ability to manage financial decisions is rapidly widening,”
For the accounting profession this represents a new generation of ambitious entrepreneurs, screaming out for financial advice. However, the financial advice is of a different type to that which was required pre-2007. For example, this group has a greater need for assistance with investor documents than it does for bank loan applications. Another example is whilst previous generations needed (and valued) assistance with their accounting compliance (statutory accounts, tax returns etc) more than they did with financial analysis, this too is on the wane as governments and regulators strive to simplify and automate compliance requirements. This generation does however value financial assistance in their decision making, assistance with setting up and maintaining financial systems etc, whilst assuming that the compliance matters will take care of themselves.
These factors are what has given rise to the "Virtual CFO" accounting service that is starting to emerge from the accounting profession (albeit slowly and reluctantly).
The accounting profession will have to adjust to meet the needs of this grouping if it to remain relevant, but this too raises difficult questions for the profession. Many of these start up businesses don't have the finances to pay traditional accounting fees (at least at the start) but place high demands on the accountant, so how do we make this work profitable for ourselves? Do we look at a remuneration model of a portion of the client's equity, supplemented with a reduced fee? Moving to a position where we sell ourselves as virtual CFOs also poses a client service and management question - how do we meet the client service expectation in a way that the client time demands in turn suit our own timetable? The virtual CFO function will give rise to close relationships between a firm's accounting staff and the client, possibly closer than the relationship between the partner and the client - how will we prevent the disaggregation of all but the smallest accounting firms? And will the SME accounting profession then evolve to become more like a freelance / 2-5 person industry?
These are the questions that we are going to have to answer over the coming years, but there is no doubt that we in the accounting profession are going to have to adapt to the needs of the Millennials if we are to remain relevant.